The phrase “entrepreneurial philanthropy” gets used loosely across foundation annual reports and impact investing conferences. It has come to describe everything from donor-advised funds to startup accelerators run by family offices to impact-linked bonds structured by development finance institutions. What it originally meant, and what it still means in its most rigorous application, is something more specific and considerably more demanding than any of those things.
The Distinction That Matters
The most important difference between conventional philanthropy and its entrepreneurial variant is not the size of the gift or the sophistication of the measurement framework. It is how risk is handled.
Conventional philanthropy transfers money to an organisation and, largely, transfers responsibility along with it. The donor gives; the recipient decides how to deploy the funds within the terms of the grant. Evaluation happens after the fact, if it happens seriously at all. The relationship is essentially transactional, and the donor’s exposure to failure is reputational rather than financial.
Entrepreneurial philanthropy, in its original sense, involves the donor in the problem itself. The foundation takes genuine risks. It provides capital early, in conditions of uncertainty, with the intention of demonstrating that something is possible, and then steps back once a sustainable model has been established elsewhere. The goal is not to be the permanent funder of a successful programme. It is to be the first mover who creates the conditions for others to fund it.
That distinction matters most in the earliest stages of any initiative. Most foundations, including well-resourced ones with progressive grant-making philosophies, avoid the early stages of social or environmental programmes because the failure rate is high and the measurement of success is difficult. Founders who have built and restructured companies tend to have a different relationship with early-stage failure. They understand it as a feature of the learning process rather than an indicator of fundamental error.
How Avina Applied the Model
The Avina Stiftung, established by Swiss entrepreneur and philanthropist Stephan Schmidheiny in 1994, was built around this logic from the beginning. The foundation’s operating approach centred on providing seed capital specifically to demonstrate that a social or environmental initiative was viable, with the explicit expectation that once viability was demonstrated, Avina would reduce its involvement and allow follow-on funding from other sources to take over.
Schmidheiny’s view, developed through decades of building companies in distressed situations and restructuring industrial operations across multiple continents, was that sustainable organisations require sustainable funding models. Dependency on any single funder, including Avina itself, was a structural weakness to be designed out of every initiative the foundation supported. The goal was to create organisations capable of continuing without the foundation’s ongoing involvement, not organisations that would collapse the moment Avina’s attention moved elsewhere.
This required a particular kind of institutional discipline. The temptation for well-funded foundations is to expand involvement in the organisations they have backed, to become operational partners rather than catalytic funders, to treat the organisations they support as programmes rather than independent entities with their own governance and funding strategies. Avina’s design explicitly resisted this.
The Fundes Example
The Fundes initiative, which Schmidheiny co-founded in 1984 with Marcos McGrath, then Archbishop of Panama, applied the same logic to small business development across Latin America. The programme worked to strengthen entrepreneurial capacity in small and medium-sized enterprises across twelve countries, on the theory that durable economic development is a function of entrepreneurial density, that communities with more viable small businesses are more resilient, generate more employment, and develop more sustainable economic bases than those dependent on large employers or government transfers.
The co-founding relationship with McGrath was itself characteristic of the entrepreneurial philanthropy approach: bringing together an industrial perspective and a social justice perspective to address a problem neither could fully solve alone, and building an institution capable of operating independently of both founders.
Where the Approach Has Spread
Other practitioners have arrived at similar conclusions through different routes. The Skoll Foundation, established by eBay’s Jeff Skoll in 1999, focuses specifically on social entrepreneurs, individuals already building solutions at scale, rather than organisations waiting for funding before they act. Skoll provides unrestricted, multi-year funding on the theory that removing conditions and timelines produces faster iteration and better outcomes. The portfolio evidence broadly supports that theory.
The Omidyar Network, Pierre Omidyar’s philanthropic vehicle, treats grants and equity investments as interchangeable tools depending on what a given situation requires. If a for-profit model would reach more people more sustainably than a non-profit one, Omidyar invests rather than grants. The flexibility reflects the same underlying conviction: that the distinction between commercial and philanthropic capital is less important than whether the model is effective and sustainable.
Blue Meridian Partners addresses a different part of the problem. When an intervention has been proven at small scale, the challenge is typically not evidence, it is growth capital. Blue Meridian aggregates funding from multiple major donors to provide the scale of capital that growing proven models requires, positioning itself explicitly as the funder that enters after the seed phase has worked.
The Limits of the Approach
The sceptics have a legitimate case. Not every social problem is an entrepreneurial opportunity. Some require policy change, sustained public funding, and political will that no foundation can manufacture or substitute for. Treating everything as a startup problem misses the structural nature of many of the challenges that philanthropic capital is directed toward. Entrepreneurial philanthropists sometimes exit too quickly, moving to the next interesting problem before the organisations they have seeded have built genuine durability.
But the core contribution of the approach is real and not easily replicated by other philanthropic models. The willingness to provide capital in conditions of genuine uncertainty, to be the first commitment that makes a project credible enough to attract the next one, is a service that conventional grant-making rarely provides. The organisations that exist because someone was willing to fund them before the proof of concept was established are, in many cases, the ones that changed something at scale.
The Measurement Problem
One persistent challenge for entrepreneurial philanthropy is demonstrating what it has achieved in forms that conventional evaluation frameworks can capture. Grant-making philanthropy measures outputs: number of people served, funds disbursed, organisations supported. Systems change is harder to measure, and the contribution of any single funder to a change that took a decade to materialise and involved dozens of actors is nearly impossible to attribute cleanly.
This measurement difficulty is not unique to entrepreneurial philanthropy. It is endemic to any approach that tries to change the conditions under which other actors make decisions, rather than delivering services directly to defined beneficiaries. The organisations that were seeded before anyone else believed in them are now part of landscapes that are taken for granted. The counterfactual — what would have happened without the seed capital that made them possible — cannot be observed.
What can be observed is that the organisations exist, that they operate at scale, and that the problems they were created to address have attracted the mainstream institutional attention that their founders hoped for. Whether that constitutes proof of impact is a philosophical question as much as an empirical one. The practitioners who built these approaches — Schmidheiny among them — were generally more interested in the outcomes than in the attribution. That orientation is itself characteristic of the approach.
