Silicon Valley Shakes Stingy Reputation With Increased Philanthropy

January 28, 2000

SAN JOSE, Calif. (AP) – High tech entrepreneurs are finally shaking their stingy reputation, giving away their Silicon Valley millions at an unprecedented rate. Recent high profile donations – including billions for education and health care from Microsoft Corp.‘s Bill and Melinda Gates, $150 million to Stanford University from Netscape founder Jim Clark and another $100 million to University of Mississippi from former Netscape CEO Jim Barksdale—are setting examples for young high tech entrepreneurs.

“ Many of these young people are very idealistic, but until recently they’ve had few examples of how to give,” said Peter Hero, who heads the Community Foundation Silicon Valley. “Now we’re seeing them applying the same creativity they used to build their businesses to charitable giving.” The Community Foundation received more than $75 million in cash and stock gifts between July 1 and December 31, 1999, an all time high in the organization’s 45-year history. They expect donations to double this year.

Other Silicon Valley nonprofits are enjoying similar new waves of generosity- donations were up 23 percent at the Second Harvest Food Bank last year, which had the largest holiday food drive in the nation with 1.7 million pounds of donated food and another $1.9 million. And the YMCA of Santa Clara Valley recently surpassed its capital campaign goal of $7 million by raising almost $10 million, the most money ever raised by the 132-year-old local association.

“We were really surprised and pleased. For a long time ago the amount of wealth being accumulated in this region was completely out of balance with the philanthropic giving,” said Robb Hermanson, vice president for development. “It’s been wonderful to see that change. Donors are now coming to us at an unprecedented rate.” The result: new children’s programs, health facilities and swimming pools for local families.

It’s no coincidence that technology stock prices are soaring at the same time as charitable donations. In many cases, the donations come in the form of tech stocks – which rose an average of 130 percent last year. As the stocks go up, so does the monetary value of the gift. For example, before online auction house eBay went public in 1998, the founders established a charitable fund with 107,250 shares of stock in June, 1998. When the company went public a few months later, shares were priced at $18, making the donation worth $1.9 million. Since then, eBay’s shares have soared as high as $234. Last week, they were trading around $150 a share, bringing the value of the original shares of the fund to $16 million. “At eBay, they had the vision to set their own philanthropic foundation early on, creating a model of giving that is quickly being emulated by other Internet companies,” Hero said.

Pastor Ronald Bailey at the Southbay Christian Center in Mountain View said he’s seen a recent upsurge in stock option donations, which provide a tax advantage to members of his clergy. The Community Foundation is one of several well-established philanthropic groups which have served the area since it was a farming region. Others include the $13 billion Packard Foundation, established in 1964, and the Tides Foundation, established in 1976, that has given away more than $100 million.

But more than a dozen groups have been created in the last year to help techies give. One is the New Schools Venture Fund,created by venture capitalists and entrepreneurs, which plans to give millions to between 10 and 20 of “the most promising, scalable education ventures in the country.”

“The New Schools Venture Fund is a big, bold idea. It builds on the innovation and passion of a new breed of pioneers – education entrepreneurs,” said cofounder John Doerr, a high-tech investor whose venture capital helped start many major companies, including, Netscape and Sun Microsystems.

Catherine Muther, who spent 1989 through 1994 as a senior marketing officer at Cisco Systems Inc., launched the Three Guineas Fund last year with $2 million of her own money. Muther plans to help women start successful technology companies and then teach those women to contribute some of their earnings to philanthropic endeavors. “I’m interested in bringing philanthropy into the new economy,” she said.

The philanthropic efforts mark a significant change for the booming high tech industry, which was chided by President Clinton in October during a White House conference on philanthropy. “Silicon Valley and the whole venture capital, high-tech community needs to be at the forefront of what we’re doing because of the same reason Willie Sutton robbed banks,” Clinton quipped. “That’s where the money is.”
Silicon Valley deserves to be nagged. The region,stretching south from San Francisco, has one of the highest per-capita incomes in the United States. However, it falls well below national averages when it comes to sharing the wealth. About one-third of Silicon Valley households earning more than $100,000 per year give $1,000 or less to charity, according to a 1998 Field Research Corp. survey. The study also showed that almost half of the region’s wealthiest households are very low givers in relation to their net-worth: 45% of the wealthiest contributors give just $2,000 or less annually to charity. And only 48% “planned to donate more to charity when they get older.”

Maury Kendall, spokesman for the Emergency Housing Consortium of Santa Clara Valley, said his agency received a few unusual, and extremely generous, donations around the holidays. But there hasn’t been a notable increase in
individual donations in recent years. At the same time, the numbers of homeless people – especially families-has increased. There are currently about 1,500 homeless people a night in San Jose, he said.

“Their homelessness is directly attributable to the skyrocketing costs of housing in the Silicon Valley,” he said. Since 1992, Silicon Valley has created 250,000 jobs, but fewer than 50,000 housing units. As a result, home prices and rents are rising much faster than incomes, making it the most expensive region in the country, according to the Silicon Valley Manufacturing Group. Kendall said his biggest challenge is educating high tech workers how tobe philanthropists.

“I think the reluctance of new money to donate to charity in general may be based on an unfamiliarity with charitable giving,” he said. Hero said he’s optimistic that the next survey of high tech giving will reflect the recent changes. “It is our hope that Silicon Valley will soon be known as much for its generosity as it is for its technology,” he said.