Tech's new entrepreneurial approach to philanthropy

Jon Swartz, USA TODAY, @jswartz | USATODAY

SAN FRANCISCO — It was the philanthropic pledge heard around the world of charity.

Facebook CEO Mark Zuckerberg was giving $500 million worth of his stock to the non-profit Silicon Valley Community Foundation, which helps donors manage and identify charitable funds that are in line with their philanthropic passions.

While it underscores a recent surge in charitable giving by high-tech iconoclasts — eBay founder Pierre Omidyar, Google co-founders Larry Page and Sergey Brin and Oracle CEO Larry Ellison donated about $900 million last year — it also highlights the intersection of technology and philanthropy, which is being reshaped by some.

As Zuckerberg made his biggest donation to date, a small-but-gritty operation called REBBL, run by beverage industry veterans, signed an agreement for retailer Whole Foods Market Northern California to this month start carrying its herbal drink, also named REBBL, in a growing movement of for-profit partnerships in philanthropy.

The for-profit beverage concern REBBL came to fruition from Not For Sale, an anti-human-trafficking and anti-slavery non-profit backed by Path, Causes.com and Omidyar's organization Humanity United. What they are doing is nothing short of reinventing the way traditional non-profits operate — even survive — with the backing of some of the best entrepreneurial minds.

REBBL is just the start. NFS has plans to develop for-profit products such as soup, denim jeans and a phone that would theoretically pump revenue back into the non-profit.

Sales of REBBL could pump close to $50,000 into NFS in its first year, and more than $775,000 annually later.

Some call the movement "philanthrocapitalism," a natural evolution in global philanthropy.

"We want to reinvent philanthropy," says NFS co-founder David Batstone, a former entrepreneur and author who wants to change the contours of non-profits — with the aid of such tech heavyweights as Google, Juniper Networks and Humanity United, run by Omidyar and his wife, Pam.

"We're a social enterprise and action think tank," says Batstone. "We hope others follow our lead. Intellect and social capital are as important as money. It drives ideas."

NFS, a model of the Omidyars' brand of philanthropy, is based loosely on a venture-capital firm's approach. And it is quickly becoming a powerful agent for social change, as eBay was for commerce.

The unconventional approach, which is sure to ruffle the feathers of traditional charities that depend on financial donations, is gaining steam — ironically — among some old-school non-profits. With money tight in a tough economy, they may have no choice but to generate their own revenue to sustain operations — and some are.

CARE, a non-profit created after World War II to offer U.S. aid to Europe, is also dipping into social enterprises, "because we needed to be more strategic and financially viable," says Francois Jung-Rozenfarb, senior director of social enterprises. CARE Enterprises, a subsidiary that functions as a for-profit to ensure CARE's long-term success, is involved in several projects, including a network of community shops in Bangladesh.

"It will be incredibly strong, and this is only the beginning," says Daniel Lurie, CEO of Tipping Point Community, a San Francisco Bay Area organization that supports poverty-fighting groups.

Silicon Valley's givers

Charity has deep ties here. The Valley's biggest givers — Zuckerberg, Ellison, Brin, Page and Facebook COO Sheryl Sandberg — have been the most-high-profile faces of a recent upswing in Silicon Valley and nationally.

Local charities say it isn't just billionaires who are increasing their giving: They say rank-and-file employees whose wealth is rising are generous, too.

Nationally, donors gave nearly $300 billion to charity in 2011, up slightly from 2010, according to the Giving USA Foundation. In the Bay Area, foundations increased giving 77%, to $3.1 billion, from 2000 to 2009, the most recent year for which those figures are available. Eight of the top 10 tech-related donors gave more in 2012 than they did in 2001, says Equilar, which tracks executive-compensation data.

"Companies are beginning to understand their power in leveraging their assets to non-profits," says Suzanne DiBianca, co-founder and president of Salesforce.com Foundation. The philanthropic arm of Salesforce.com has contributed $40 million in grants and nearly 500,000 hours in service to youth causes. "It's not just throwing a check over a wall. That is the old model."

The Salesforce.com Foundation donates 1% of its equity, 1% of annual profit and 1% of employees' paid time (six days a year) for volunteer work.

Google donated more than $100 million last year — $250,000 of which went to NFS, says Jacquelline Fuller, director of charitable giving and advocacy at Google. "We look for people who are nimble, tech-savvy and innovative," Fuller says. "NFS does that."

NFS held an event in the Bay Area, she points out, that was an "impressive mix of smart people" — business leaders, a World Series-winning pitcher, lawyers and venture capitalists — that came up with the REBBL concept.

"They require you to be proactive, rather than ask you for money," says San Francisco Giants reliever Jeremy Affeldt, one of 22 Major Leaguers who donate money to NFS based on in-game performance (strikeouts or home runs).

Likewise, a Who's Who of Silicon Valley — LinkedIn co-founder Reid Hoffman, Twitter co-founder Evan Williams, and venture capitalists Bill Draper and Steve Jurvetson, among others — appeared at Google's headquarters on a recent Saturday to discuss the intersection of innovation and social change. The diverse philanthropic-minded group spanned CARE CEO Helene Gayle to Giants pitcher Barry Zito.

NFS' support network even extends to royalty.

Sarah Ferguson, the Duchess of York, praised the group's project in Amsterdam, where trafficked women are being taught cooking skills alongside professional chefs. "Imagine what hope this must give these vulnerable women — knowing they do have a future," Ferguson said in an e-mail.

Philanthropy's long dance with tech

Corporate philanthropy was the province of financial icons Carnegie, Rockefeller and Vanderbilt for decades before Hewlett-Packed entered the picture in the 1960s.

HP co-founder William Hewlett and his wife, Flora, set up a private foundation, the Hewlett Foundation, in 1967. It's now one of the largest grant-giving entities in the USA, with assets of more than $7 billion. The David and Lucile Packard Foundation, named after HP's other founder, David Packard, started in 1964. It has assets of $5.4 billion.

In 1994, Microsoft co-founder Bill Gates and his wife, Melinda, created the Bill & Melinda Gates Foundation, which now has an endowment of $36 billion for health, education and development causes.

Tech's legacy lives on through entrepreneur Steve Kirsch and such CEOs as LinkedIn's Hoffman and Amazon.com's Jeff Bezos. In 2010, Zuckerberg donated $100 million to Newark Public Schools, a struggling district that could use the money to become a laboratory for reforms.

It was no surprise, then, that when Warren Buffett, the Gateses and others asked some of the nation's wealthiest individuals in mid-2010 to give at least half their fortunes to charity, Ellison, Microsoft co-founder Paul Allen and Silicon Valley venture-capital legend John Doerr were among those to pitch in.

"More tech entrepreneurs are getting engaged," says Jay Banfield, founding executive director of Year Up Bay Area, which places high school graduates in internships at Facebook, Twitter, LinkedIn and elsewhere.

Roots of the new philanthropy go back more than a decade to Draper Richards Foundation (now DRK Foundation), a spin-off of the venerable venture-capital firm that doled out $300,000 grants to non-profits with strong entrepreneurial spirit. Some 30 to 40 ventures have been funded through the years, including Kiva, an online lending platform, and Room to Read, a literacy program.

"They started it all," says Howard Hartenbaum, general partner at August Capital and a former general partner at Draper Richards, where he was the founding investor in Skype.

Indeed, the entrepreneurial, can-do attitude of organizations like NFS "appeals to tech types," says James Higa, a former chief strategist at Apple and aide-de-camp to Steve Jobs for years. "They (NFS) reach out to the tech world. Not many non-profits do."

"Zuckerberg and Omidyar embody the new philanthropy: They want to give to philanthropy but see things change," says Batstone, who got involved with his book, Not For Sale: The Return of the Global Slave Trade — and How We Can Fight It. "They're bringing the same sensibility they brought to their start-ups."