Executive giving, 12/27/99

Not long ago, United Way of Santa Clara - which services some 100 nonprofit member agencies in Silicon Valley - announced it was closing its doors. An $11 million deficit seemed insurmountable. And with costs rising every day, the charity decided it was useless to go on.

The decision stunned the affluent Valley community, so much so that a white knight in the form of 42-year-old Infoseek founder Steve Kirsch quickly appeared on the scene. His $1 million check was just the beginning of an extraordinary campaign that saw others rally this spring to make up the shortfall in a few weeks - with a couple extra million tossed in for good measure. It's a great story, and one that is becoming increasingly familiar.

"There's been a stereotype of the Valley as the land of $5 million homes and five-car garages, but the level of philanthropic giving is increasing dramatically. For example, 91% of those aged 35 to 44 here give to charity," says Peter deCourcy Hero, president of Community Foundation Silicon Valley (CFSV).

Some say an unseemly gap remains between what today's tech millionaires are worth and what they've given. According to a CFSV study, 43% of the area's rich ($100,000+ annual income) give less than $2,000 annually (the national average for that income level) to charity. In Washington state, the tech-rich Puget Sound region boasts 74,000 households with a net worth of more than $1 million, yet the state ranks low in giving.

Experts cite the folly of youth as a primary reason. The young cyber-rich, they say, may need to be taught about philanthropy because it isn't even a blip on the radar screen of the average 29-year-old.

Take Microsoft Chairman and CEO Bill Gates, the prototypical slow learner in this respect. Although Gates created a foundation in his name in 1994, only lately has he been steadily filling its coffers. Today, the newly consolidated Bill and Melinda Gates Foundation has assets of $17.1 billion, making it the world's largest foundation. Cynics might see the sudden generosity of Microsoft's head honcho as an attempt to polish a tarnished image. But others might believe that as the 44-year-old ambles into middle age, he's done buying toys, finished building a family, has the wonderful house, and is now ready to start thinking about old age and what his legacy will be.

Like Gates, the young and newly rich may require a different kind of courting. Many foundations and nonprofits are trying to tackle the problem. They're commissioning studies, conducting seminars, forming initiatives and pursuing new ways of reaching this elusive sector.

Some of the appeals are amusingly practical. Not giving is "crazy from a tax point of view, if nothing else," CFSV's deCourcy Hero says.

"Getting involved at an early age allows you to make a difference while you can actually see it," Infoseek's Kirsch points out. Kirsch is certainly a great role model (he and his wife maintain a $50 million fund at CFSV), as are a few other stellar persons, including Dell Computer Chairman and CEO Michael Dell and AOL Chairman and CEO Steve Case.

But the cyber-rich haven't really had many leaders to follow. Only three tech millionaires (er, make that billionaires) appear on a recent Fortune list of the 40 most-generous Americans: Microsoft co-founders Bill Gates and Paul Allen, and PeopleSoft Founder David Duffield. (In contrast, some 70 computer, Internet and network leaders are listed on the latest Forbes "400 Richest Americans" list.) Many tech companies do their best, however, to encourage philanthropy through workplace drives, their own well-endowed corporate foundations, and special events such as Cisco's recent Netaid concert and AOL's Fall launch of helping.org, a philanthropy portal.

And whether individual giving is at the level it should be, nonprofits in tech regions are enjoying unparalleled success. In Austin, Texas, for example, the number of people who have donated stock options (an imaginative new way to give that's tailor-made for this sector) to the local United Way rose from 12 in 1996 to 111 in 1998, representing an increase of $600,000. In the Valley, CFSV's assets have grown from $7 million in 1988 to $350 million in 1999, and in the past five years the group has doubled its number of funds to 475.

Washington state now has 300 more private foundations than it did 10 years ago, and the United Way of King County, which covers Seattle and its environs, reported an increase of almost $9 million in the past year alone. This United Way also reports more people at the $10,000-plus giving level than any other, despite the relatively small population from which it draws.

Rick Rafael, spokesperson for United Way of King County, credits a concentrated effort to better reach these potential donors. "A few years ago, we noted the disparity and started formulating a strategy specific to this market," he says. "We've learned that high-tech donors tend to be much more interested in the results generated by their contributions. We've also seen that they're much more hands-on - we see a lot more volunteerism coming out of the high-tech sector."

One of his generous donors agrees. "We're active," says Dave Chase, a 34-year-old Microsoft product unit manager. "Whereas previous generations may have passively written a check, our generation wants to more closely scrutinize where our money goes, since we realize some nonprofits are more effective and efficient than others. We'd also like to see that there be more leverage in the money we give."

Aside from their relative youth and a quite literal need for interactivity, the cyber-rich differ in another significant way: Much of their wealth remains in stocks. "That's where the real gap lies," CFSV's deCourcy Hero says. "A quarter of the people working in Silicon Valley are receiving stock as some form of compensation, and only 3% are giving stock. There's a vast, untapped pool of resources that's not finding its way into charity."

He cites eBay, an early options-giver, as a great example of what can happen. "It gave us 100,000 shares before going public, and today those are worth $40 million," deCourcy Hero says.

Such donations are part of a new kind of giving known as "venture philanthropy." Based on a model that every high-tech employee understands - venture capital - this system encourages "partners" to invest in innovative and needy charities. The idea is for them to nurture their financial investments with guidance, resources and quite active participation - just as real venture capitalists do.

The first such effort, and now a model itself, is the Seattle-area Social Venture Partners (SVP), founded in 1997 by former Aldus President Paul Brainerd. To date, nearly 200 partners have signed on, each donating $5,000 and bringing foundation assets to $1 million.

"The required donation certainly represents a fairly nominal sum of money to the people we're trying to attract, but the point is not so much the money: It's about establishing a connection between the donors and the recipient organizations. "That's the real leverage - when these highly intelligent, talented people become truly involved with making a nonprofit organization more successful," says Scott Oki, an SVP co-founder and former Microsoft executive who has joined 20 nonprofit boards since his retirement eight years ago at the age of 43.

Helping children in need is one of the most popular causes for SVP and other donors in the high-tech sector. For example, Microsoft's Chase has committed to giving the United Way of King County $250,000 over five years, with a request that the money be distributed to kids' organizations. "My wife and I are also very interested in environmental causes that help ensure that kids will have the same kinds of beauty we enjoyed growing up," he says.

Chase says, "We hope we can be an example to our peers so they accelerate their giving, too."

Others prefer lesser-known, more-focused causes. Randy Baker, a 55-year-old executive vice president at Oracle, is dedicated to Alliance for Community Care, a San Jose organization that serves the severely mentally ill. "I give money and consult on the agency's business issues, but perhaps the most important contribution I've made has been informally talking about mental illness and its effect on society as a whole," he says.

Baker provides but one example of the giving style of this group: individualistic, focused and dedicated. It's just one more product of those who have created a new industry and risen to its pinnacle.

Related links

Vint Cerf profile in giving

Jim Clark profile in giving

Larry Ellison profile in giving

Benefit from giving
Charities benefit from more than just money
Network World Fusion, 2/24/99.

Info on the William H. Gates Foundation
with links to press releases and the annual report

Basic facts on the United Way

Who is the CFSV?
Learn more about the foundation and investment options

Sharing of the green
How millionaires can share their riches

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