No matter what size the foundation, there are always too many grant requests, too much need, and too little grant money to give to the problems a charitable foundation would like to address. Venture capital investment has resulted in mission impacts that many charitable foundations would like to achieve, including sustainable economic growth, jobs and employment, and new medical breakthroughs that have saved lives or improved quality of life for large numbers of people. Yet at best, only 2.5 percent 1 of the $590 billion2 of U.S. charitable foundation assets are estimated to be invested in the venture asset class today.3 This disconnect has developed because venture capitalists do not understand the unique pressures under which charitable foundation trustees and management operate, and in turn, foundation representatives do not understand what the venture asset class can do for them in terms of achieving mission goals without jeopardizing the financial stability of endowments.

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We are right at the tipping point: mission-related investing is gaining traction in the foundation world, much as the heavily-private-equity-weighted Modern Portfolio Theory of Investing with a higher risk allocation became standard after the Yale Endowment proved it to be superior.4 The traditional asset allocation model for foundations is about to be disrupted. For charitable foundations this will mean dedicating resources to explore alternative investments, as well as reviewing existing endowment investments for their ability to survive public scrutiny. For venture capitalists, this will mean potentially a new pool of limited partners.

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