Are venture philanthropists ready to embrace digital transformation?

"It’s not a question of if – it’s a case of when." At the European Venture Philanthropy Associations (EVPA) Annual Conference Tris Lumley warns that without more specialist digital venture philanthropy or social investment funds the social sector as it stands today is at risk of becoming irrelevant as its "replaced by digital ventures and initiatives that leapfrog our existing services, products, and bureaucracy".

In the course of two years exploring the potential for digital technology to transform the social sector, I have to say I’ve swung wildly between untethered optimism and bleak despondency. 

The opportunity is undeniably huge, and in many ways the transformation is inevitable. It would take a great deal of arrogance to believe that the social sector is impervious to the forces that have been tearing through every other field and industry over the last generation. Digitally fluent citizens will ultimately expect to interact with digital services and products from charities and social enterprises. 

The demand is there. It’s not a question of if—it’s a case of when.

But my occasional despondency stems from an apparent lack of recognition from charities and social enterprises, funders and investors, that transformation won’t happen on its own. And if we don’t get our act together, the danger is that we simply become irrelevant in the digital future, replaced by digital ventures and initiatives that leapfrog our existing services, products, and bureaucracy. There’s a window of opportunity to invest in transformation now, but it won’t be open for ever.

If there’s anyone who understands the potential of digital transformation, it’s the tech investors (and entrepreneurs) who have led successive waves of wealth creation in Silicon Valley. These days those waves crash across Europe and the rest of the world, too. So you might expect that venture philanthropy and social investment, with their close ties to their for-profit cousins, would be the first to embrace digital transformation in the social sector.

And yet, my read is that venture philanthropy and social investment are not yet at the races when it comes to tech for good. 

Sure, lots of funds are investing in tech for good startups and digital ventures within existing charities and social enterprises, and some of this is deeply impressive. One only needs look at an initiative like I Got Garbage in Bangalore, where garbage pickers mix old networks and new tech by organising into franchises using an online marketplace, to bid for work divided-up according to the city regions in which they work. As a result, more than 2,600 tonnes of waste has been recycled for nearly 7,000 households. 5,000 people have increased their livelihoods working in the system.

But what I’m not yet seeing is a real focus on digital as a specialism that needs to be understood, inhabited, lived and breathed to find the breakout social returns. There are very few (if any) digital venture philanthropy or social investment funds. Specialist investors or funds with deep knowledge of both digital and sub-sectors are similarly scarce, though I met one – Smarter Futures – with an intriguing focus on digital in health and social care.

Why does this matter? Because digital transformation in the social sector needs investment not just in organisations, but in projects to shape the market and the infrastructure. We need to be building platforms, marketplaces, open standards, APIs and service integration and value chains – this should all come before the apps and other glossy ad-ons. 

Specialist investors will see these market-level opportunities, and are well-placed to invest in organisations and ventures that can deliver on them, with a deep understanding of both the market and the tech needed to deliver on them. The apps will come later.

Venture philanthropy is built on the premise that money and support can together deliver scale. If there’s any approach that might actually have the potential to deliver on that promise, it’s technology. In fact, it might well be the only realistic route to delivering social impact at scale – the scale needed to address a much broader level of need. 
Venture philanthropy and social investment may not be quite ready yet to embrace digital transformation, but I have a feeling that can all change pretty quickly. I’ll be back at the EVPA conference next year to see if I’m right.


Photo credit: Johan Larsson