The Bill and Melinda Gates Foundation recently announced it’s going to use a philanthropic vehicle called program related investments (PRI) through the creation of a $400 million fund. PRIs are new and largely unused investments that allow a philanthropy to achieve its charitable mission.

The other part of the story is about L3Cs, which are a type of “low-profit” LLC that has a charitable mission. It also qualifies as a PRI for foundations.

This essentially means that if Bill Gates is giving his blessing to PRIs, he is also, by extension, doing the same for L3Cs. And that could mean that 2010 will become the year when L3Cs really start to gain momentum.

Although the $400 million program-related investments fund is dwarfed by the $3.5 billion in grants made annually by the Gates Foundation, the fact that the world’s largest foundation is dipping its big toe into the world of venture philanthropy may accelerate a nascent trend in philanthropy.

So, what is venture philanthropy, and how do program-related investments play a key role in it? The phrase “venture philanthropy” was coined in the 1960s as an alternative strategy to merely having foundations write grant checks and hope the recipients (usually public charities) would use the money wisely. The concept is borrowed from venture capital, and uses loans and equity investments along with ongoing management and strategic assistance as a way to help the recipient organizations become self-sufficient.

In my opinion, the $400 million commitment to program-related investments by the world’s largest foundation supported by the two wealthiest men in the world – Bill Gates and Warren Buffett – should be just the kick in the pants needed to bring program-related investments into the mainstream of foundation philanthropy.

View a previously written post by Mouli Cohen about philanthropy