Veteran Silicon Valley executive and business mentor Nicholas Zaldastani has seen it happen many times. Start-up companies get sold or go public, and the founders are besieged by people who want to help them spend their new wealth.
The rush of suitors means fundraisers are lucky to get an email returned. “When people get into that level of wealth,” Mr. Zaldastani says, “they have to put up walls because so many people are after them.”
Charities’ difficulty in accessing tech-boom dollars troubles the Duke University alumnus, so he set out to help fundraisers at his alma mater get in on the ground floor, before the payout arrives and the walls go up. They created DukeOne, a pledge program in which start-up executives promise to donate 1 percent of their venture’s equity to the institution if it is sold or offers stock through an IPO.
Just 18 months old, DukeOne is one of several new giving programs that put a twist on the Giving Pledge started by Bill Gates and Warren Buffett in 2010. These programs similarly encourage entrepreneurs to give while living, but they go one step further, targeting donors even before they strike it rich.
The idea works, fundraisers say, because it’s rooted in the start-up mind-set. Traditional fundraising, with its annual-giving drives and wine-and-cheese gatherings, doesn’t square with the culture of entrepreneurs or the way they make money.
“Tried-and-true methods simply don’t meet entrepreneurs where they are,” says Dee Dee Mendoza, who has just launched a pledge program at Dartmouth College. “You have to think in a more user-centric way. You have to think like a start-up.”
Nonprofits as Investors
Some of these programs are launching at colleges. Others are the brainchild of entrepreneurs who want to nurture the philanthropic impulse among their peers.
Ms. Mendoza created one of the most successful pledge programs three years ago, when she was a fundraiser at the University of California at Berkeley. It has raised about $30 million from 254 members. That’s not a huge sum for the university, which collects upwards of $350 million a year from donors, but it could rise quickly, and exponentially, if more entrepreneurs hit it big.
One pledge member, Kevin Chou, the 36-year-old founding CEO of the mobile-gaming firm Kabam, sold the bulk of the company last year, netting as much as $800 million. Months later, he and his wife, Connie Chen, committed $15 million to Berkeley with provisions for an additional $10 million.
Traditional fundraising, with its annual-giving drives and wine-and-cheese gatherings, doesn’t square with the culture of entrepreneurs or the way they make money.
Berkeley’s pledge program grew out of Ms. Mendoza’s conversations with alumni entrepreneurs who wanted help with their new ventures. Stanford and a handful of other universities invest in companies started by students and graduates, but Berkeley opted not to become a de facto venture capitalist, in part because it concluded it didn’t know the market well enough.
Ms. Mendoza felt the university could instead invest time and resources to help founders get their businesses off the ground. Alumni might in turn make a gift of their choosing when the company scored a sale or IPO — a gift akin to the payout that follows an equity investment.
Because start-ups need talent and mentors, the university created opportunities for entrepreneurs to speak to students, work with faculty, and tap into job fairs and networks of student associations. An email newsletter brings profiles and news about Berkeley graduates’ start-ups to more than 200,000 alumni and others connected with the campus, giving entrepreneurs visibility they need to attract talent and investors.
A lot of the programming is relatively inexpensive, says Jill Malko, Berkeley’s senior director of Bay Area leadership gifts. Regular informal get-togethers gather entrepreneurs and some investors in a particular field — say, the life sciences. “They don’t want a big catered event,” Ms. Malko says. “They want a small place where they can get to know each other. We don’t even have to do content, like a speaker.”
Another fruitful idea: setting up a showcase for pledge members to pitch their product to administrators who control parts of Berkeley’s billion-dollar budget, including the chief procurement and information-technology officers.
One company founder at the showcase wasn’t on the development-office radar as a major donor; he was young and gave less than $1,000 a year. But one day he called Ms. Mendoza to declare that he was ready to make his big gift: A major tech company had just bought his business.
“I’ve never had a prospect come to me and say, ‘I made a lot of money today, and I’m excited to give you some of it,’ " she says.
‘I Win, You Win’
Babson College, a small Massachusetts institution with a top-rated undergraduate entrepreneurship program, recognized in the late 1990s that it had to work differently with start-up execs. Timothy DeMello, a 1981 graduate and serial tech entrepreneur, wanted to make a big gift but didn’t have the ready cash. He proposed giving the college stock in his newest venture.
“He said, ‘When I win, you win,” recalls Diana Prescott Zais, Babson’s vice president of development.
DiMello became the first donor to Babson’s Founder’s Fund. The fund has no complementary programming like Berkeley’s, Ms. Zais says, but its 38 members have donated more than $6 million.
At Duke, fundraisers see their pledge program as an extension of planned giving. “Entrepreneurs have a positive income maybe one out of five years, sometimes less,” says Jim Ruth, Duke’s director of development. “The idea of giving every year is not really a model that fits with them.”
The pledge is not binding, but like a bequest, it’s a statement of intent that often leads to a gift. “Once something is spoken, it becomes more real,” Mr. Ruth says.
Philanthropy in Their DNA
Pledge programs outside higher education don’t aim to benefit a single organization; rather, they hope to persuade businesses and executives to fold philanthropy into their DNA. In some cases, they try to persuade donors to adopt a particular strategy of giving.
Many of these pledges have roots in practices popularized at Salesforce. When the cloud-computing company launched in 1999, founder Marc Benioff famously committed it to “1-1-1 philanthropy” — a promise to annually earmark 1 percent of its equity, products, and employee time for charity.
Pledge 1%, a campaign to promote the Benioff model worldwide, rolled out in 2014. The effort, led by Salesforce and two other tech companies, now has more than 1,800 signatories, including start-ups but also mature businesses.
Amy Lesnick, CEO of Pledge 1%, says the group aims to replace old-style business philanthropy in which doing good is largely outsourced to an in-house foundation or corporate-social-responsibility program. “Millennials and the work force of the future expect profit and purpose to be intertwined,” she says.
A Founders Pledge effort in San Francisco targets the same sort of start-up entrepreneurs as Berkeley. Operated out of Full Circle Fund, a nonprofit started by entrepreneurs, it asks executives to commit 1 percent of their company’s equity to charity.
Because Silicon Valley entrepreneurs are often criticized for limited giving locally, Full Circle encourages pledge members to back area groups working on education, the environment, health care, or economic-opportunity issues. It runs a slate of programs aimed at teaching the megarich of the future about the Bay Area’s needs and how best to give away money.
“Our goal is to educate the next generation of philanthropists,” says Jay Hirschton, Full Circle’s CEO.
Because start-ups need talent and mentors, University of California at Berkeley created opportunities for entrepreneurs to speak to students, work with faculty, and tap into job fairs.
Founders Forum, an international group of digital and tech entrepreneurs and investors, is rallying start-up execs behind a pledge to give away at least 2 percent of their equity after an initial public offering or sale.
The forum’s pledge organization, based in London and also called Founders Pledge, is itself a charity and helps administer gifts, even holding money for donors until they’re ready to give. Its conferences and dinners for members aim to encourage them to take up data-driven giving.
“In the same way you wouldn’t invest in a company without a lot of research, you shouldn’t do that with charities,” says Thea Thorsen, a spokeswoman for the London Founders Pledge.
In less than two years, the organization has won commitments from 700 companies worldwide. More than 20 entrepreneurs have made gifts worth a combined $18 million to charities, including to data-driven organizations like GiveDirectly.
A Long Play
Because most pledge programs are young, it’s not yet clear whether they can be more than a sidelight in fundraising. Devoting development resources to start-up entrepreneurs is a long play, as many businesses can take years to reach a sale or IPO, if they ever do. Ms. Mendoza, who has made a study of pledge programs, notes that several such efforts at colleges have shuttered.
DukeOne so far has only six members, but Mr. Zaldastani, the Silicon Valley veteran, predicts there will one day be thousands of programs like it nationwide. Fundraising, he says, is only just beginning to adapt to the burgeoning class of entrepreneurs.
“We are becoming a country of entrepreneurs,” he says. “Can you imagine if CEOs of today’s biggest companies had already pledged to their alma mater?”
