Venture philanthropy

Venture philanthropy takes concepts and techniques from venture capital finance and business management and applies them to achieving philanthropic goals.

The Centre for Effective Altruism spun off a venture philanthropy project in 2014, called Effective Altruism Ventures. Other examples of this type of venture philanthropy are New Profit Inc. in Boston, the Robin Hood Foundation in New York City, Tipping Point Community in the San Francisco Bay Area, The Research Acceleration and Innovation Network (TRAIN) initiative from FasterCures, the Asian Venture Philanthropy Network (AVPN), and the European Venture Philanthropy Association (EVPA).

In the late 1990s the Bethesda-based Cystic Fibrosis Foundation, wanting to take more direct action toward finding treatments for cystic fibrosis beyond its traditional approach of funding basic research at universities, invested in a small California biotechnology firm to help fund the discovery and development of the drug that twenty years later was approved as Kalydeco. Unlike other drugs that were available that just address symptoms of CF, the drug candidate was intended to address the underlying cause of CF. The company in which CFF invested was Aurora Biosciences; CFF provided $30 million for Aurora to identify and develop up to three drug candidates. The unusual nature of the arrangement was widely noted.

In 2001, Aurora was acquired by Vertex Pharmaceuticals, but CFF continued to fund development of the CF drug candidates. That funding eventually grew to $150 million, much of which was raised for the CFF by Joe O’Donnell, a Boston businessman whose son died of CF.

When Vertex started selling Kalydeco, it priced it at about $300,000 a year and promised to provide it free to anyone in the US who was uninsured or whose insurance wouldn't cover it. It justified the price - one of the highest in the world for any drug - by explaining that on the one hand, that it can only treat about 4% of CF patients, or about 3,000 people worldwide; as it was only approved for adults and children six and older, there are only about 2,400 people eligible to receive it; with that few people, it needed a high price in order to pay for the research to create it as well as its other programs, which include a drug candidate that could treat many more people with CF. It also pointed out the strong efficacy of the drug, and laid out the costs of managing CF that would be saved for people that the drug could treat; those costs include repeated hospitalizations and lung transplants.

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