When is it Time to Say Goodbye?

Exit Strategies and Venture Philanthropy Funds

In the emerging practice of "venture philanthropy" (VP) (or engaged grant making), one of the most interesting and least understood pillars of the approach is the "exit strategy." Why has this idea of exit strategy generated such debate and rancor within the philanthropic sector? Why have so many commentators flatly rejected the notion of exit and therefore VP altogether?

We acknowledge from the start that the foundation community has always exercised a pseudo "exit strategy" with nonprofits they fund. Funders typically only make grants to nonprofits over a specific time period. These time periods are usually not determined in collaboration with the nonprofit and have little to do with the nonprofits' ability or capacity to achieve desired results, but are instead driven by the funders' guidelines. While some foundations and governmental organizations make longer-term grants, many grants are provided for simply a one or two-year period.

Regardless, there is usually a stated end point to the grant, beyond which the grantmaking entity has no further commitment to provide support to the nonprofit. The implicit "exit strategy" in these cases is that the nonprofit is free to apply for additional funding from other sources in the future. This type of exit strategy occasionally results in closing good programs and often prevents nonprofits from building the capacity to achieve a long-term vision. Responsible VP should not practice this type of arbitrary, solely short-term, time-based exit strategy.

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