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Transformed Fund Reaps Windfall

Strategy to tap entrepreneurs and high-tech companies pays off

By  Doug Donovan
February 9, 2014
Thanks to a $1-billion gift from Mark Zuckerberg and Priscilla Chan, Emmett Carson’s Silicon Valley Community Foundation is now the nation’s largest community foundation.
Edward Caldwell, for The Chronicle
Thanks to a $1-billion gift from Mark Zuckerberg and Priscilla Chan, Emmett Carson’s Silicon Valley Community Foundation is now the nation’s largest community foundation.
Mountain View, Calif.

The conference room buzzed with the pep-rally clamor of nearly 100 employees gathered for the Silicon Valley Community Foundation’s first staff meeting of 2014, held to tout last year’s big numbers.

Everyone was well aware that 2013 was a stellar year, capped by the $1-billion donation that made Mark Zuckerberg and his wife, Priscilla Chan, the biggest donors in America last year. The contribution also gave the charity’s employees their own bragging rights: They now work for the nation’s largest community fund, with $4.7-billion in assets.

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The conference room buzzed with the pep-rally clamor of nearly 100 employees gathered for the Silicon Valley Community Foundation’s first staff meeting of 2014, held to tout last year’s big numbers.

Everyone was well aware that 2013 was a stellar year, capped by the $1-billion donation that made Mark Zuckerberg and his wife, Priscilla Chan, the biggest donors in America last year. The contribution also gave the charity’s employees their own bragging rights: They now work for the nation’s largest community fund, with $4.7-billion in assets.

But amid the impressive statistics tossed around at last month’s staff meeting, the names Zuckerberg and Chan barely surfaced. Foundation executives suddenly fall silent or cite “donor privacy” when asked about “the gift,” as many staff members here reverently call the enormous donation.

Toward Reinvention

Emmett Carson, the foundation’s chief executive, is clearly sensitive to any suggestion that the fund could be defined by one gift, out of the 4,200 received last year. “It’s not about how one relationship happened,” he says.

Or, as Thomas Friel, chairman of the foundation’s board, puts it: “This is not the Mark Zuckerberg foundation.”

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That major gift, they say, is the capstone of a long-term strategy to reinvent the foundation in a way that makes it as cutting-edge as the ventures of Silicon Valley’s high-tech donors. Similar calls for modernization are being made across the country as community funds mark the 100th anniversary of the first one—created in Cleveland in 1914.

But as with any change, the approach the Silicon Valley fund has taken to transform itself has attracted criticism. Detractors say the foundation has sacrificed its allegiance to Silicon Valley’s needy at a time when tensions between rich and poor sectors in the Bay Area are escalating.

Some $170-million, or 45 percent of the foundation’s grants, was distributed to groups outside the Bay Area last year, including $13-million overseas. And an online giving system was recently unveiled that makes it easy for anyone to give to groups outside the United States.

Mr. Carson says he is well aware that not everybody likes the foundation’s direction. But he is optimistic, he adds, that such criticism will be overcome in the next year as local residents come to understand the philanthropic power behind a donor network built of wealthy tech-oriented individuals and their corporations or small start-ups.

By customizing each client’s charitable-giving plan, foundation staff members are generating new revenue while steering resources from the nation’s wealthiest zip codes to provide important community needs as well as supporting national and global causes, he says.

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“What makes us worth watching isn’t that we have an asset size, it’s the influence and the advocacy work we now get to leverage,” Mr. Carson says.

Broad Outreach

One of the key elements of the foundation’s strategy is catering to Bay Area corporations, not just wealthy individuals. Doing so not only generates corporate consulting fees but also gives the development office a way to reach the people who are founding businesses that could grow up to become the next Google or Apple.

Most tech companies are run by entrepreneurs who “really believe they can change the world,” says Mari Ellen Reynolds Loijens, the foundation’s chief business, development, and brand officer.

Such executives and their employees work long hours on corporate campuses in Silicon Valley where they also eat, exercise, and socialize.

“We want people to care about their community beyond their corporate campus,” she says. “You have to engage corporations to do that.”

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The recession in 2009 helped spur the foundation’s corporate strategy. As they laid off the people who used to oversee their giving departments, companies began to hire the foundation to take over the process of making grants. Ms. Loijens’ staff started devising big-picture strategies for corporate giving, managing employee volunteer events, placing executives on nonprofit boards, and providing other “customized philanthropy services.”

In July 2012, the foundation accelerated the growth of its business-services division by taking over the Entrepreneurs’ Foundation, a Bay Area nonprofit with affiliates in several states and three nations (Israel, Ecuador, and Ireland). The acquisition increased the number of corporate clients to 100.

Doing so put the foundation in a position to advise newly successful business founders on how to structure stock donations of companies that were not yet listed on stock exchanges.

The foundation was no stranger to such work. It had arranged such donations of pre-IPO stock from eBay, the online auction site whose co-founder Jeff Skoll is a major donor to the foundation.

Several corporations—Hewlett Packard, Juniper, StubHub—require members of Ms. Loijens’ team to set up part-time offices at their corporate headquarters. And the foundation is now hiring a new “corporate philanthropy manager” who will work a majority of days at the Yahoo Employee Foundation in nearby Sunnyvale.

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Fees from such consulting brought in $537,000 in 2013. That’s not a huge amount, but such fees have grown from $45,000 in 2009, and executives expect the amount to double this year and to bring in 12 percent of the community foundation’s revenues by 2017, says Vera Bennett, the foundation’s chief financial officer.

New revenue like this means the foundation doesn’t have to rely so much on getting paid a percentage of the assets it manages, a sum that fluctuates with the stock market.

The growth in consulting fees is expected to be driven by what Mr. Carson calls a “game-changing” partnership with YourCause, a Dallas firm that manages employee grant matching and volunteer programs for nearly 100 companies. The foundation will earn fees for processing all the paperwork associated with grants and provide YourCause with its streamlined system for managing international grants.

The foundation hopes YourCause clients such as JC Penney will hire Silicon Valley for its customized philanthropy services.

Back-Office Work

The managerial expertise Mr. Carson’s staff has developed in working with corporations is also being put to use in another way. The foundation is taking over the back-office work of the Santa Barbara Foundation, a $299-million organization. If the deal goes smoothly, Mr. Carson says he and the board could seek more such deals, which experts say offers an additional way for small organizations to save money and steer more resources toward grant making.

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“That’s a great idea,” says Phil Lakin Jr., chief executive of the Tulsa Community Foundation, which until last year’s Zuckerberg gift to Silicon Valley was the nation’s largest community foundation.

Mr. Lakin—who is looking forward to “poking fun” at Mr. Carson for being No. 1 now—says his foundation does not provide similar corporate or foundation services. He was especially impressed that Mr. Carson has built an international grant-making system that makes sure overseas groups are eligible to receive U.S. donations.

“We’re not as international a city as some places on the coast,” he says.

Mr. Carson says being able to provide international advice to clients was part of what the Silicon Valley Community Foundation’s two predecessor organizations wanted to do when they merged in 2007.

Last month, the foundation unveiled a database that allows anyone to make online donations to hundreds of international groups (for a 10-percent transaction fee). The foundation verified the legitimacy of each group in the database. That’s what attracted YourCause, which says the companies it serves have many employees who want to give to projects abroad.

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The foundation also provides research on international groups and trends for countries that interest people who have created 1,650 advised funds at the Silicon Valley fund.

For example, the foundation produced research on a new law in India that requires companies to give a percentage of profits to charity. It published a detailed analysis of Bay Area donors from India and from China. In addition, the foundation supports a donors circle for people who want to learn about giving to groups in Africa.

Since 2007, the foundation has awarded $63-million in grants to groups in 63 countries. Those grants grew to $13-million last year, enough to register the group in the Foundation Center’s top 15 international grant makers.

At the same time, the group gives more in the Bay Area than any other community foundation.

Mr. Carson says that Silicon Valley’s vast network of businesses and community groups allows the foundation to seize opportunities it otherwise might not have been able to identify. For example, in 2012 the foundation gathered dozens of experts to devise a plan to help San Mateo County’s coastline prepare for the possibility of a tsunami.

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“If people think we’re just about getting the biggest bragging number around, they’re kind of missing the point,” says Mr. Friel, the foundation’s board chairman. “Even if you wanted to be the biggest, baddest community foundation, how could you do that? By doing a better job.”


Behind Silicon Valley’s Growth in Donations

Major gifts to the foundation have always come from a few big donors--eBay’s Jeffrey Skoll, the Sobrato family real-estate fortune, and, in the last two years, Facebook’s Mark Zuckerberg and his wife, Priscilla Chan.

2007: $292-million, 49% from 3 donors

2008: $190.9-million, 45% from 2 donors

2009: $237.6-million, 47% from acquisition of a supporting organization

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2010: $155.6-million, No major contributions

2011: $472-million, 61% from 3 donors

2012: $992-million, 70% from 3 donors

2013: $1.4-billion, 71% from 2 donors


A Community Fund Ascends to Ranks of America’s Wealthiest Foundations

After only seven years in operation, the Silicon Valley Community Foundation has assets that are now on par with those of some of the nation’s oldest private foundations.

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Bill & Melinda Gates Foundation $34.6-billion
Ford Foundation $10.9-billion
J. Paul Getty Trust $10.5-billion
Robert Wood Johnson Foundation $9.5-billion
William and Flora Hewlett Foundation $7.7-billion
Lilly Endowment $7.28-billion
W.K. Kellogg Foundation $7.25-billion
David and Lucile Packard $6.3-billion
John D. and Catherine T. MacArthur Foundation $5.9-billion
Gordon and Betty Moore $5.6-billion
Andrew W. Mellon Foundation $5.5-billion
Silicon Valley Community Foundation $4.7-billion
Bloomberg Philanthropies $4.2-billion
Helmsley Charitable Trust $4-billion
Tulsa Community Foundation $4-billion
Read other items in this Tapping Into Silicon Valley Philanthropy package.
We welcome your thoughts and questions about this article. Please email the editors or submit a letter for publication.
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