Among philanthropic funders, there’s been an emerging interest in so-called “innovation funding”: the seeking out of riskier ideas with transformative potential for society.

Deloitte’s Gabriel Kasper and Justin Marcoux remind us, for example, that our national 911 system was implemented 40 years ago thanks to regional pilots supported by the Robert Wood Johnson Foundation. But they also warn that over the years, philanthropic funding has become too comfortable, focusing on lower-risk ideas that also have less potential for change.

Innovation funding and venture capital differ only in that the former is aimed at social returns, the latter on financial returns. Both are investment strategies in high-risk, high-return opportunities.

For example, someone’s promise to deliver 100 mosquito nets is probably more feasible than someone’s promise to breed malaria-resistant mosquitos, but if the latter works, the impact would be enormous.

Innovation funders frequently compare themselves to venture capitalists in order to explain their new approach, but I haven’t seen many VCs compare themselves to innovation funders. I thought I’d take a moment to highlight some key concepts that both types of investors can learn from each other.

What can philanthropic funders learn from VC?

Not every individual investment needs to be a winner. In the social sector, funders expect that each of their investments can show evidence of success (i.e. impact). This expectation leads to investing in lower-risk, but smaller opportunities. VCs, by contrast, structure their portfolio knowing that not every company they invest in will be a winner. But the ones who do win, can pay off their losses many times over.

It can take years to see results…and those results may not be linear. The average time to exit for a VC-backed tech company is 4-7 years. VCs spend a lot of time waiting and not knowing whether a portfolio company will become a success or failure. By contrast, funders in the social sector would find it ludicrous to wait 4-7 years to know whether their grant was put to good use. But high-risk investments may not show results for a long period of time.

The nature of the beast is to swing for the fences. VCs understand that investing in a lot of medium-return companies might be a safer bet, but would totally defeat the purpose of venture capital. The point of VC is to swing for the fences and potentially generate unnatural returns. There will always be a need for funders who invest in safer bets, whether in tech or the social sector, but we also need a place for funders who are willing to take a chance on the unknown.

What can VC learn from philanthropic funders?

Portfolio companies breed externalities. Funders in the social sector recognize that change happens in an ecosystem, not a silo. If you give free shoes to a village, that might put the local cobbler out of business. It might also make it easier for a child to walk to school, so that you’re not just affecting her clothing, but her education. Similarly, some companies have the effect of creating new markets, new businesses built on their platform, or encouraging new trends. It’s not just about whether that one company does well, but how they affect everything else around them.

Embrace the double bottom line. Just as funders in the social sector have learned to embrace financial returns in addition to social returns, so should VCs recognize there’s social value embedded in their investment strategy. Creating and nurturing the next big thing in the world is exciting, and a big reason why VCs are in the business. If they were purely interested in finance, they would probably pursue opportunities that outperform the stock market. Whether VCs acknowledge it, or perhaps just call it by a different name, they’re in pursuit of non-financial returns as a secondary metric.

The parallels that can be drawn between innovation funding and venture capital serve as a reminder that the ecosystems we create to effect change are similar, no matter the sector they tackle.