I have attended a few social impact conferences recently, where the discussion has focused on “reimagining philanthropy,” yet the ideas swirling about have often been surprisingly unimaginative.  

In my previous article, I introduced the idea of reimagining philanthropy’s role as risk capital. One way the sector can do this is by embracing a willingness to fund failure. I know what you are thinking – fail on purpose? Why would we do that? Here’s why: philanthropy won’t unlock its full potential until failure becomes a meaningful aspect of our work. 

Failure As Data, Not Disgrace  

What if failure were a key performance indicator that we intentionally measured? This isn’t a novel idea. Most fields of innovation embrace failure as part of the equation. Venture capitalists expect anywhere from 80% to 90% of their investments to fail. According to Embroker, a start-up founder has an 18% chance of success, while serial entrepreneurs who have failed before have a 20% chance of getting their next start-up right.  While the U.S. Bureau of Labor Statistics tells us that over 20% of businesses fail in their first year, and nearly 50% do by year five.  

Philanthropy, too, fails, but you would scarcely know it because the sector rarely wants to talk about what didn’t work. When philanthropy is functioning as risk capital, it is uniquely positioned to fund uncertainty and experimentation. Failure provides critical signals and insights that help accelerate us toward the interventions and strategies that work, while also enabling us to abandon the approaches that cannot or will not deliver the positive impact our world needs.  

Failure, By Design.  

At this point, some funders might be saying, “That’s not what we do – we don’t fund risk or innovation; our job as grant makers is to de-risk funding opportunities.” Embracing failure as part of the grantmaking design is not about a reckless attitude that leads to funding incompetence, poor execution, or worse. It’s about deploying philanthropic capital with multiple aims in mind.  

 Think of it this way: not all funding needs to chase scale. Some capital should be exploratory — used to test unknowns and generate insights. Some should be validating — used to pressure-test assumptions and reveal flaws before they become costly. Yes, everyone wants to fund the next breakthrough. But we can only scale what we first allow ourselves to explore. 

The “Epic Fail” Leaderboard  

It’s true, some funders, donors, and grantees are already talking about failure. But most are not.  It is natural to feel reluctant to publicize failures. There is tremendous pressure to be a “good steward” of the money. But are we truly stewarding resources well when we lack the courage to try new ideas that could change the world for the better? When we avoid sharing valuable learning insights that might help the field on the journey to getting a solution right? Imagine the potential if we freely shared what didn’t work, if we chose to encourage and enable nonprofits to take calculated risks, and all learned and adjusted together.  

If we truly want to treat philanthropy as risk capital, we need to share evidence of risk taken. Consider including these KPIs in your impact reporting: 

• A measurable percentage of initiatives that fail  
• A clear articulation of what ideas were tested  
• Evidence that failures informed subsequent grantmaking, program design, etc. 

Absence of failure is not evidence of success; it is evidence that risk is being avoided. The beauty of philanthropy is that we can take risks and we can afford to fail and learn.  All we need is the courage to imagine our work differently.