I still don't understand the difference between venture philanthropy and the regular kind, except that it is younger, whiter, and has much cooler clothes.

Alexander Russo, This Week in Education, May 9.

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After roughly ten years in the field, does the new philanthropy matter to the school improvement industry?

In the end, not much, except that: 1) its grantees' shortcomings tend to be transferred to the for-profit school improvement industry, while their successes are more likely to attributed to "the nonprofit spirit," and 2) CMOs have been following EMOs like lemmings down that path ending at the edge of the cliff.

Still, they are in the k-12 neighborhood and it's worthing knowing a bit about them.

Problogger Alexander Russo’s This Week in Education is the only k-12 blog your editor follows daily because its coverage is more like a newspaper than the rest, and Russo takes no prisoners in his commentary.  Russo has been posting his observations on the New Schools Venture Fund’s (NSVF) annual meeting, admirably held this year in New Orleans.

In this case Russo and your editor are on the same wave length.

In the interest of full disclosure, your editor both:

• Presented to the NSVF meeting twice while he was President of the Education Entrepeneurs Fund (unlike “venture philanthropy,” EEF made no grants, just very risk loans, equity investments, and joint ventures with small for and nonprofit school improvement organizations) and

• Was unceremoniously exiled from the new philanthropy club as the first elected head of a national membership-based charter schools organization in 2003.

After raising its first money from John Doer, Brooks Beyers and other Silicon Valley zillionaires in 1998, NSVF and its founder (Teach for America alum) Kim Smith quickly moved to the center of venture philanthropy. Today, the movement encompasses grant makers like Gates, Broad, Fischer, Stupski and Walton; financial intermediaries like NSVF and Venture Philanthropy Partners; and policy wonk shops like Andrew Rotherham’s EdSector and Ted Kolderie’s Education Evolving. Its grant making focus has been concentrated on charter schools and, since the turn of the century, especially on Charter Management Organizations like KIPP, GreenDot and Aspire. Nevertheless it's generousity extends to the projects of Teach for America alumni, and political entrepreneurs like New Leaders for New School’s founder John Schnur.

But the venture philanthropy movement is probably best understood as a network of folks who were “30-Something” when that was a television show, and who now earn pretty nice livings ($100K plus) doing “God’s work” managing heavily subsidized k-12 nonprofits. For that crowd, NSVF's annual meeting remains a hot ticket and Kim Smith has done a very good job of maintaining its aura of exclusivity.

Russo is not far off comparing it to Davos or Sundance, although your editor thinks it's closer to the Clinton era's Renaissance Weekends. They all share a county club atmosphere of comfortable people who went to the right schools, know the right people, and worked with other right people on the right causes, plus the minumum acceptable spattering of outsiders who don't quite fit that profile but make it politically correct - but who are really all tied together by money - having high-minded conversations at an event that costs several times what it would if it were held on a college campus instead of an upscale hotel.  Anyone attending any of these events fresh "from the field" inevitably wonders aloud how much good the extra funds might have done "in the field"  This is something of a faux pas.

(Your editor's experience as a grants officer at New American Schools and an investor at the Education Entrepreneurs Fund left him with one strong impression. When capital is "free money" with no strings attached, management tends to give creature comforts much more emphasis than when it is their own money, a loan. or real investors' money. Ironically, on the whole, new for-profit k-12 ventures seem to spend more on "the mission" than their nonprofit counterparts.)

As with the "old philanthropy," the basic question for the new philanthropy is “so what?” And for the new philanthropy – with its MBA-speak, like “Return on Investment” and the slippery "Social Return on Investment," it’s not just “what have you accomplished?” but “has the nation received the highest and best use of  taxpayer dollars that enable wealthy individuals to avoid taxes through ‘charity’? (Remember, when someone donates to charity and takes a tax break, you and I pick up the tab for the government services the donor was excused from paying.)

The old philanthropy built much of the human capital for school reform, but for all its ideas and talent, it has lacked the political will to make any real change in public education. In the view of your editor, the new philanthropy did help make one important change, but has since pursued a strategy designed to kill the goose that laid that golden egg.  As refected in Russo's description of arguments the new philanthropy has played with since its birth - quality vs. scale, charters as a reform lever or an escape valve, etc., it is incredibly weak in the areas of ideas and human capital.  Momentum is easily confused with direction.

There is no doubt that venture philanthropy has political will and self-confidence aplenty. The charter movement does owe its very life to the Walton Foundation (something of a double-edged sword as early local charter movement entrepreneurs like Eric Premack (California), John Ayers (Chicago), and Shirley Monestra (DC) might tell you). Without Walton’s cash, schools started by literally thousands of local entrepreneurs who really did put their social “lives, fortunes and sacred honor” on the line against great odds in their communities would have failed. Because of that cash, there is a "live option" for policy types to exploit.

Where the new philanthropists in outfits like New Schools Venture Fund went wrong was in deciding that to take the charter movement to scale, they should "improve upon" (abandon) their de facto bottom-up strategy based on homegrown entrepreneurs. But, like the goose of the fairy tale, the local entrepreneur was not invented by venture philanthropy - it was found.  Venture philanthropists forgot this fact, and misinterpreted local entrepreneurs' ingenuity as their own. So they were and remain confident in their judgment that an elite of recent MBAs and other friends with impressive resumes, and armed with substantial grants, will create top-down school networks on a massive scale.

Notwithstanding the considerable failure of their for-profit counterparts – the Education Management Organizations, the new philanthropy has thrown its weight behind the Charter Management Organization. Ironically, the exception that proves the rule of CMO folly - KIPP - was long controlled by its founders, tested for some years and then scaled - it is arguable more like the entrepreneurship of old.  In most cases, CMO business plans call for instant management, undeveloped school models and "build outs" from scratch. As Erik Robelen of Education Week and your editor have written, so far most CMOs have a lot less to show for all that they promised.  It takes an incredibly insular culture to pretend the model has been a success, but the new philanthropy wants to take it to New Orleans.

In the end, the new philanthropy and the old share a fatal flaw.  (At least until NCLB) like the school system they hope to change, the old and new philanthropies are completely lacking in accountability. They give money away, so there is no financial return on investment. They won’t reveal the cost structures and financial performance of their grantees, so there is no way to judge how efficiently they allocate money. They are not exactly helpful in providing student performance, so it’s hard to estimate social return. The program officers and managers can make good investments or bad investments - no one knows, so no one can be held accountable.  But there is no doubt that if you are on the management team of one of venture philanthropy's grantees, you have a pretty nice situation.
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Regarding the comment below of Mike Klonsky, Chicago small schools advocate and editor of the blog Small Talk, - a fellow whose editorial approach makes that of edbizbuzz downright anyodyne, your editor isn't quite sure what think when a market advocate and a market-hater agree on the new philanthropy. The most favorable interpretation for your editor is that it is  confirmation of his assertion at the start of this posting that venture philanthropy combines the least favorable featutes of for- and nonprofit  finance or, if you are a member of that club, that you must be doing something right. It would be good to see others weigh in.

One point on Klonsky's posting on the NSVF meeting - your editor does not share his strongly negative feelings on the grantees. They are in over their heads in terms of what they've promised. Still, it's hard to blame folks for going along with whatever vision grantors have, promising more than can be delivered etc, in order to get the grant. That's pretty much been the standard practice in k-12 philanthropy since at least the early 1990's when your editor joined the game. Funds have always been dispersed on factors other than demonstrated objective results in student performance, the ability to turn research into sustainable practice, or their potential for scalable effect (however disseminated). They've always been relationship driven and covered in some thin veneer of policy.

John Schnur, Nelson Smith, the founders of KIP, Green Dot and Aspire, are all very good, capable people. More important, eventually their outfits will either become financially sustainable at some size or run out of cash and shrink or die.

The fault of the new philanthropy lies with the venture philanthropists who justify their investment in these organizations on their promise of quality at scale (and so justify their decisions not to invest in more promising decentralized means to that goal) with very little objective backing for the rest of us to look at before or during the investment - but who will not be held accountable in any meaningful way if their investments turn out to be failures. Real venture investors eat what they kill - or get killed and eaten.

Maybe it would have been better to start this posting by modifying the twist on Kennedy's statement about Washington to "venture philanthropy combines the humility of venture capital with the accountability of philanthropy."