February 09, 2014

Donors in Silicon Valley Want Flexibility in Their Giving, a Nonprofit Finds

Peter DaSilva/The New York Times/Redux

Chris Larsen created ripples, a virtual currency, at his company Ripple Labs. The Silicon Valley Community Foundation agreed to accommodate his wish to make a contribution using ripples, impressing the donor.

Silicon Valley’s community fund didn’t become the nation’s wealthiest just by taking cash donations. It also did it by accepting “ripples.” Created by entrepreneur Chris Larsen, ripples are a from of virtual currency, much like better-known bitcoins.

Last May, Mr. Larsen called the Silicon Valley Community Foundation to ask if he could make a personal donation using his San Francisco start-up company’s product.

The foundation quickly told him it could, demonstrating one of the key reasons it is raising record amounts: It has worked hard to develop a deep understanding and responsiveness to Bay Area entrepreneurs who are making fortunes in technology.

Mr. Larsen says he was impressed that the fund worked so quickly to examine all the legal issues involved in determining what to do with the virtual currency. The fund learned that it could liquidate the donation just as easily as the 36 million Facebook shares it received from co-founder Mark Zuckerberg and his wife, Priscilla Chan.

“They were among the first to be very open to new technologies that allowed us to give donations in ripple or bitcoin,” Mr. Larsen says. “They’re in synch with the culture in the valley.”

Open to Complex Gifts

Foundation officials say that openness to ideas from entrepreneurs like Mr. Larsen has been essential to its rapid expansion.

“You have to be fearless to work with someone like that and say, 'OK, we’ve never done that before. I don’t even know if that’s legal,’” says Mari Ellen Reynolds Loijens, the foundation’s chief business, development, and brand officer.

Some nonprofits might be uncomfortable with prospective donors looking to give in new ways, and walk away from a big gift. “It’s easy to be afraid and therefore not be willing to be able to listen to the donor,” Ms. Loijens says.

Besides knowing how to handle ripples, the foundation has figured out how to process other complex gifts that entrepreneurs are likely to want to donate, including pre-IPO shares from start-up companies, large blocks of publicly traded stock, and real estate.

Tailored Giving Plans

Mastering and marketing such skills and being open to working with donors on their giving ideas has given the foundation a steady stream of new clients, many that have come from referrals.

Emmett Carson, the foundation’s chief executive, did not reveal how Mr. Zuckerberg chose the foundation, saying only that their interest was mutual. But he says tailoring giving plans to each donor’s preferences—building a donor’s own style of giving—has given the fund a reputation for flexibility.

Leigh Stilwell, the foundation’s chief donor experience and engagement officer, said her staff works from the get-go to pair donors who are entrepreneurs with nonprofits that welcome interaction and assistance. The foundation arranges meetings with executive directors to determine how these highly curious donors can contribute beyond making cash donations. Many donors end up volunteering their time, technology skills, or strategy suggestions.

That’s a smart way to get wealthy people to make a gift, says Jennifer Ratay, executive director of the Silicon Valley Social Venture Fund, a grant-making group.

“The younger donors in our area are more interested than donors in the past with being hands-on and more involved” with the groups they donate to, Ms. Ratay says. “It’s not the model of writing a check at year’s end, the solitary pursuit of philanthropy.”

Recognizing this, the community foundation appeals to that ethos by placing executives and employees of their corporate partners on the boards of nonprofits.

Kate Vizza, a manager of StubHub’s corporate social responsibility program, said that the fund has helped it place several employees and executives of the ticket-seller on the boards of San Francisco Bay Area nonprofits and groups in London and New York. “It’s been very successful,” Ms. Vizza said.

Clear on Limits

While it is good to be flexible with entrepreneurs, the foundation has also learned to be clear with donors about the legal limits of suggested giving plans, according to an analysis that Mr. Carson and Ms. Stilwell have written about entrepreneurs as philanthropists.

Limits are crucial when it comes to Internal Revenue Service requirements, they write.

“Any organization who seeks to work with these often fast-moving donors should be prepared” to provide clear guidance on what gifts qualify as charity, the analysis explains. Entrepreneurs are “comfortable working at the edge of what the law allows,” they write. “Their engagement with philanthropy is no different.”

Among the other suggestions for working with entrepreneurs, offered by Silicon Valley Community Foundation officials:

  • Be prepared to hear entrepreneurs expressing libertarian opinions about society, especially about how government is more of a “hindrance than a help,” they write. Withhold judgment or avoid branding their views with political labels such as liberal or conservative.
  • Remember that most entrepreneurs undertake philanthropy to help fix problems with the money, expertise, and “uniquely optimistic” passion that worked in building their businesses.
  • “They believe with their input they can change the world,” Ms. Loijen says.

  • Keep in mind that entrepreneurs have built strong business networks. Allowing them to brainstorm ideas about a nonprofit’s programs may reveal a technology or partnership that could enhance a group’s performance or provide efficiencies that a nonprofit may not have identified. (Plus, those networks could bring more donors.)
  • Take advice from entrepreneurs. “With people who have invented things I could never conceptualize,” says Mr. Carson, it’s unwise to ever start with the idea “that we’re the smartest people in the room.”
  • Advertise your failures. “Entrepreneurs have gotten to where they are because they have failed,” Ms. Stilwell says. “They understand that risking it all is part of the process.”

Send an e-mail to Doug Donovan.