News and analysis
October 25, 2016

Silicon Valley Donors Ignore Local Needs, Report Finds

Kathy Eriksen, Somos Mayfair

Children from East San Jose in Silicon Valley, served by community nonprofit Somos Mayfair, gather to celebrate the legacy of neighborhood hero Cesar Chavez.

Silicon Valley philanthropists, it turns out, are ignoring their neighbors.

That’s the takeaway from a new study that found that only about 7 percent of all giving by private foundations in Silicon Valley — $94 million out of a total of $1.2 billion — went to local nonprofits in 2013. Just 3 percent went to community-based organizations, defined as small nonprofits addressing local needs.

The authors of the report, titled "The Giving Code" and published Tuesday by consulting firm Open Impact, said the data makes plain a serious, long-discussed problem plaguing the region’s social-service charities: They are suffering from soaring demand and insufficient resources, despite the vast wealth generated by nearby technology companies.

Interviews with more than 300 donors and nonprofit leaders in the region show that Silicon Valley philanthropists prioritize innovation, personal connections, and getting the biggest possible bang for their charitable bucks, according to the report. The result of this so-called "giving code" is that many people in need in Silicon Valley are being left behind in the technology gold rush.

"On the one hand, there’s a lot to celebrate, there’s big increase in philanthropy in Silicon Valley," said Open Impact co-founder Heather McLeod Grant, who co-wrote the report. "On the other hand, not a lot of this money is making its way to local nonprofits and community-based organizations."

The study proposes several solutions to the problem: Nonprofits must communicate in language that appeals to business-minded donors and collaborate to avoid redundant efforts. Donors must accept the importance of building organizational capacity. And leaders on both sides must meet and build empathy.

"There’s a real need for everyone to come together," Ms. McLeod Grant said. "You’ve got to start creating a dialogue rather than writing each other off."

High Need, High Potential

In a region where nearly a third of residents receive some form of public assistance or charity, tech firms have created windfalls for their founders and employees — with unfortunate ripple effects for other residents, who must grapple with increasingly unaffordable housing prices and dense traffic.

The growing disparity has given Silicon Valley the country’s largest income gap, according to the report: In 2015, high-skilled workers earned an average of $121,638, while low-skilled workers earned an average of $26,624.

Local nonprofits are also suffering from high property prices that are displacing clients, employees, and entire organizations. According to the report, 80 percent of community-based nonprofits in San Mateo and Santa Clara counties say demand for their services has increased in the last five years, and more than half say they can’t meet it.

In 2015, the $7.3 billion Silicon Valley Community Foundation reported disbursing $479.7 million from donor-advised funds and discretionary grant-making programs. About $75.4 million in donor-advised fund grants went to nonprofits in Santa Clara and San Mateo counties. According to the foundation’s searchable grant catalog, that included gifts such as $1 million to the local Boys & Girls Club and $2 million to Across the Bridge Foundation, which prepares first-generation college students for higher education.

Twenty-one percent of grants given through donor-advised funds at Schwab Charitable and Fidelity Charitable by people who live in San Mateo and Santa Clara counties stayed in the region ($91 million out of $432 million). Of that $432 million, 14 percent went to community-based organizations.

The proportion of corporate giving to local community-based organizations decreased from 8 percent to 6 percent from 2006 to 2013, although overall corporate giving in the region increased four and a half times, the study found. Corporate foundations are increasingly focused on programs that align with their business goals, according to the report.

‘A State of Mind’

The attitudes of Silicon Valley donors help explain this discrepancy, the report says. Their goals, preferences, and work culture have gelled into an unspoken code that governs how they spend their charitable dollars.

Many are not originally from the area so may not have strong feelings about supporting local causes. Some are new to charitable giving and start by supporting causes that are familiar: universities, hospitals, their children’s private schools, or nonprofits with national brands.

Philanthropists who subscribe to the tenets of "effective altruism," seeking to effect the greatest possible change with each donated dollar, often prefer to give to communities in developing countries, where even modest sums can dramatically alter people’s lives.

There may be another, less-personal factor hampering progress: geography.

"None of us agree on where Silicon Valley starts and where it ends," Emmett Carson, chief executive of the Silicon Valley Community Foundation, said through a spokesperson. "There is no mayor, there is no city council, there is no police or fire department of Silicon Valley. It is a state of mind across many different communities that encompasses urban, rural, farmland, and coastal areas. We need a definition of local that encompasses this reality to solve the regional problems that we face."

Speaking a Different Language

The report’s authors, consultants who live and work in Silicon Valley and who are partners in the Silicon Valley Social Venture Fund giving circle, were inspired to do the study after years of observing the divide between newly wealthy tech tycoons and small nonprofits tending to less-fortunate residents. Their goal, they say, is not to assign blame, but to educate donors and nonprofit leaders alike about how they might better work together to strengthen the region for everyone.

They’re optimistic that change is possible. In discussions with more than 100 high-net-worth individuals, the authors said they observed a lack of awareness about local social and economic issues. But when donors heard about those problems, "they were motivated to understand it more," said Alexa Cortés Culwell, co-author and co-founder of Open Impact.

That suggests that nonprofit leaders who learn to speak in terms that donors understand may be able to better solicit gifts. Many Silicon Valley philanthropists demand a rigorous devotion to measurable results and don’t understand the value of social-service group that claim to "build community" without clearly explaining why that matters.

"These nonprofits speak a social-justice language, a moral language, and describe programs rather than speak in financial terms," Ms. Cortés Culwell said. "It’s hard for donors to understand it."

Mr. Carson agreed.

"A more compelling argument for donors is to talk about how a nonprofit can be effective at meeting their charitable interests, rather than basing it on a shared neighborhood geography," he said. "While this may be a challenging idea for some, the old axiom that in business that the customer is always right also applies to the nonprofit sector."

He also recommends asking donors to focus not just on the two counties that encompass the physical Silicon Valley but on the broader Bay Area, all of which has changed dramatically thanks to the burgeoning technology sector.

"We have found that this approach has yielded interest and participation by many of our donor families, and we have seen giving increase in the nine-county Bay Area," he said.

Send an email to Rebecca Koenig.