At our great universities, scholars concern themselves with the habits of honeybees and ancient Egyptians. But for the presidents of those universities, a top priority these days is the detailed study of two somewhat distinct cultures roughly centered around Palo Alto, Calif. and Greenwich, Conn.
Silicon Valley’s high-tech entrepreneurs and hedge-fund managers in their plush satellite communities around Wall Street have become used to frequent visits from university presidents, museum directors—indeed, anyone charged with fundraising for a nonprofit.
The two groups, the twin engines of wealth-creation in our time, both donate substantially. But these rich are different from Fortune 500 CEOs. Hedge-fund and tech-sector donors aren’t content to write checks for established programs, says Bruce Flessner, a principal at Bentz Whaley Flessner, which advises non-profits on how to score grants. Rather, the hedgies and techies look for non-profits that are as inventive as they are. “They give to change the world.’ Flessner says.
As much as hedge-funders and tech entrepreneurs are unlike other donors, they are also different from each other. Each individual donor has his or her own favored causes and methods, but a look both sectors generally reveals different patterns in how, and to whom, the two clans tend to give.
Not surprisingly, each group deploys the skills that have worked in their businesses, even as they interact with non-profits. “The hedge fund crowd is obsessed with metrics and high performance,’’ said Bradford Smith, president of the Foundation Center, which compiles data on grant-makers. The number crunching that helps hedge-funds maximize profits are also used to predict the maximum impact of each possible charitable donation.
Tech millionaires, meanwhile, tend to look for insanely great ways to shake up philanthropy itself. “The Silicon Valley crowd is obsessed with innovation, connection, and social entrepreneurship,’’ Smith said.
Stanford University grad Matt Flannery was a programmer at Tivo in 2004 when he and activist Jessica Jackley founded Kiva, a website that crowdfunds microloans to help the poor set up small businesses. Flannery soon drew grants from foundations run by eBay founder Pierre Omydar and eBay’s first president, Jeff Skoll.
On the East Coast, Robin Hood Foundation, whose mission is to reduce poverty in New York City, is a much-admired example of canny hedge-fund philanthropy. Founded by Paul Tudor Jones II of Tudor Investment Corporation, Robin Hood uses a quantitative system to determine where grants can be applied most effectively, and sometimes counterintuitively.
Robin Hood is more likely to focus on a high school that graduates a low percentage of its students, rather than rewarding one where 84 percent graduate, according to executive director David Saltzman. Though the better performing school may be a safer bet, raising graduation rates from 10 percent to 35 percent at the lower-performing school gets a better return on Robin Hood’s investment.
Robin Hood typifies the hedgies in another way: The foundation fits into a long-established East Coast culture where business and moneyed society intertwine to support hospitals, schools and other traditional philanthropic targets.
By contrast, the young tech entrepreneurs who made their fortunes in the dot.com boom of the mid-1990‘s had few established cultural grooves, according to a 1998 study by the Community Foundation Silicon Valley.
Even when they give to a conventional cause like medicine, the techs tend to focus on cutting-edge research. Earlier this year, Microsoft co-founder Paul Allen gave an additional $300 million to the brain-science center in Seattle that already bears his name.
When they support education, it is often to institutions of higher-learning. “If there’s a temple at which they worship,” says Flessner, “it’s the university.”
Many of these Internet pioneers were Bay Area newcomers without ties to local non-profits; they were also working for new companies that had yet to establish the traditions of charitable activity seen in the East. For people in their 20’s or 30’s, often with first-generation wealth, the world of philanthropy was unfamiliar.
Laura Arrillaga-Andreessen a well-placed West Coaster (she is the wife of Netscape founder and Facebook board member Marc Andreessen) came up with a strategy to get young tech moguls started. In 1998, Arrillaga-Andreessen, who founded the Silicon Valley Social Venture Fund, or SV2. The group embraces an approach dubbed “venture philanthropy.’’ Just as venture capital firms nurture tech startups, SV2 looks for promising non-profits with proven methods that are ready to scale up and expand their impact.
In keeping with the collaborative spirit of tech start-ups, SV2 invites donors to pool their contributions and decide together which causes to support. The group also encourages non-profits to share tactics with each other — even their competitors for grants, says SV2 board vice chair Nancy Heinen, formerly general counsel at Apple, Inc . “It’s totally Web 2.0,’’ Heinen says.
In addition to funding, SV2 donors provide non-profits with expertise in areas such as business management, law, and marketing, said Lindsay Louie, SV2‘s executive director. That hands-on engagement often spurs donors to make private contributions that exceed the donors’ annual commitments to SV2’s pool of funds.
SV2 gives out about $500,000 a year, but in 2011 members gave an additional $850,000 to non-profits that applied for funds. “It creates a ripple effect across the donor community,’’ says Louie.
Like Silicon Valley itself, SV2 is an interlocking network of networks. Members find promising non-profits through their own contacts, while SV2 taps its network of fellow grant-makers to find partners in bigger funding projects.
Kathleen McCarthy, director of the Center on Philanthropy and Civil Society at The City University of New York, said the hedge and tech tribes are both adapting time-honored philanthropic practices. But Silicon Valley’s innovation, she says, is slowly effecting a sea change.
Funders like The Omidyar Network are blurring the lines between non-profits and for-profits, investing in businesses that can yield public benefits. Omidyar, started by eBay’s founder and his wife Pam, invests in mobile technology companies to expand communication and markets in underserved nations such as Zambia.
McCarthy said Silicon Valley’s use of technology is stretching the boundaries of charitable giving. This can be as simple as sharing of photos from disaster areas taken with mobile phone cameras by relief workers. “It’s enabling people to re-imagine what we mean by community,’’ McCarthy said.
It’s inevitable, perhaps, that the techs’ bent for upsetting expectations will lead to some surprises. Facebook founder Mark Zuckerberg’s first major donation, of $100 million, was not only given to a traditional cause — Newark, N.J.’s public schools — but in the hedgies’ backyard.
As the two donor pools find success, they are smart enough to watch what the other is doing. Both Robin Hood and SV2 have been instrumental in helping small non-profits to become multi-state organizations, guiding them up the ladder of larger and larger grant-making institutions, increasing the scale of their funding. Robin Hood donors, like SV2 members, contribute their professional expertise to grantees, and both groups invite donors’ children to get involved in their projects.
“We’re all learning from each other,’’ says Robin Hood’s Saltzman.