The first venture philanthropist

A social entrepreneur, a woman, is taking shape in the form of a young nurse who, after witnessing the mistreatment of children in an orphanage, begins to teach nurses out of her home. Soon, she moves to a slum, so she can more easily treat families who live nine or ten to a tiny room for diseases that should have disappeared long ago. She scrapes together funds for a small group of nurses to visit the slums alongside her, providing critical basic care.

She gets the attention of a successful businessman, who sees her commitment and effectiveness, and begins to support her, first modestly, and anonymously. But he demands accountability, requesting receipts for all expenses, and going to the slums himself to see the work of the nurses and their impact on the community.

Eventually, he helps her scale her solution based on the clear evidence he sees of her accountability, efficiency, and results.  He donates large sums of his own money, investing as he would in a business venture, based on performance and track record. To many, putting such sums into an organization run by a woman, a social worker, would seem ludicrous, but he is only focused on results, and the potential upside of this particular investment. This all happened over a hundred years ago.

Jacob Schiff’s investment was a well placed bet. The entrepreneur was Lillian Wald, who in 1893 founded the Henry Street Settlement, which now has 11 facilities and serves tens of thousands of people every year with a budget of $31 million. She also created the practice of visiting nursing based on her own experiences visiting the homes of Jewish families, recent immigrants living on the brink of survival in the ghetto of the Lower East Side. This led to her starting the Visiting Nurse Service of New York, which is now the largest not-for-profit home health care provider in the nation.

She is the hero of this story and a true innovator. But Jacob Schiff, the philanthropist who funded her, represented a powerful innovation in giving. His support for Wald exhibited an approach to giving that didn’t really hit its stride until a hundred years later, when philanthropists began to recognize their potency as individuals capable of taking calculated risks through significant contributions and highly engaged relationships. Venture philanthropy is now a recognized field within philanthropy, emerging in the 1990’s through the actions of successful tech entrepreneurs who wanted to get more actively engaged in philanthropy and support innovations in the social sector.

By identifying an individual, a high performer with the creativity and dedication of an entrepreneur but the passion of a social change agent, Schiff was actually seeking a prototype that is now widely recognized. By demanding accountability, both in terms of financial management and results, he was raising the bar for philanthropy. While Rockefeller and others who institutionalized philanthropy in America were building a movement towards efficiency, Schiff had the foresight to recognize the power of the innovative social entrepreneur.

This is a risky approach, but to mitigate this, he did what many venture philanthropists do today. He got engaged, bringing the knowledge that had made him successful to his philanthropic choices. Donating over $100,000 to one person, a female nurse at a time when women didn’t even have the right to vote, would be like handing $3 million to a well-meaning social worker with a handful of nurses at her side today. But he made this contribution, having tracked her management of costs and operations, and having personally visited the slums where she worked.

I heard this story recently on a program called Jewish Americans, and was struck by how similar the inner cities of NY were in the late 1800 to the slums I have visited in Mumbai and Nairobi. Though they each have a completely different context, it struck me that some things are the same. There is still this opportunity, and this need, to link venture philanthropy to social entrepreneurship, and to do so in settings where the risks are great, but the potential impact is vast. Times have changed, but they have not changed enough. We are proud to be inheritors of the traditions that people like Jacob Schiff and Lillian Wald started.