Building on the literature on hybrid organizations, this manuscript explores the relationship between the organizational activity of social enterprises backed by venture philanthropy investors and income inequality. Using Ashoka’s portfolio of Indian social enterprises as empirical context of Western venture philanthropy investing activity, our results suggest that Indian municipalities with social enterprises that have received venture philanthropy investments experience a decrease in income inequality level and when these social enterprises are dominated by a collectivistic organizational identity orientation the effect is (...) stronger. Our findings have implications for the research on hybrid organizations, financing of social entrepreneurship and grand ethical challenges. (shrink)

Philanthropic venture capital, like traditional venture capital, provides funding and value-added services to a portfolio of entrepreneurial firms. However, TVC differs from PhVC, as the primary goal of TVC is to maximize the economic return of its investments. In contrast, PhVC firms expect their portfolio companies to perform well in terms of both social and economic returns. Using both American and European firms, this paper explores and compares the human capital in PhVC and TVC firm founders. Our results show that (...) there are key differences in both general and specific human capital between these firm types. While both TVC and PhVC firm founders have high levels of commercial experience, TVC firm founders tend to hold degrees in science, engineering, business, and law more frequently than PhVC firm founders. PhVC founders also differ from TVC founders by having greater work experience in the social sector. (shrink)

Philanthropic venture capital (PhVC) is a financing option available for social enterprises that, like traditional venture capital, provides capital and value-added services to portfolio organizations. Differently from venture capital, PhVC has an ethical dimension as it aims at maximizing the social return on the investment. This article examines the deal structuring phase of PhVC investments in terms of instrument used (from equity to grant), valuation, and covenants included in the contractual agreement. By content analyzing a set of semistructured interviews and (...) thereafter surveying the entire population of PhVC funds that are active in Europe and in the United States, findings indicate that the non-distribution constraint holding for non-profit social enterprises is an effective tool to align the interests of both investor and investee. This makes the investor behaving as a steward rather than as a principal. Conversely, while backing non-profit social ventures, philanthropic venture capitalists structure their deal similarly as traditional venture capital, as the absence of the non-distribution constraint makes such investments subject to moral hazard risk both in terms of perks and stealing and social impact focus. (shrink)