Venture Philanthropy

This variation of philanthropy has taken hold in California, and its most valuable contribution to philanthropy is the focus on results, or seeing a social return on a social investment.

This article from Philanthropy examines it’s manifestation in Silicon Valley.

An excerpt.

“For the wealthy of Silicon Valley, if you want to make serious money in venture capital and make a serious impact when you give it away, it is all about getting into the right networks.

“Silicon Valley has produced some of America’s richest people and biggest philanthropists of the last 30 years. Early information technology pioneers like Bill Hewlett and Dave Packard waited until they had retired before getting serious about their giving. Today, the trend among a new generation of donors, such as Pierre Omidyar and Jeff Skoll of eBay, has been to get moving on their philanthropy a lot younger. Men like Packard and Hewlett must take some of the credit for making philanthropy just as much a part of the tech entrepreneur’s way of life as starting your business in a garage. Now, the new generation’s enthusiasm for giving has also been a product of the success of California’s venture capital business in growing companies quickly, allowing entrepreneurs to turn their ideas into serious wealth at an early age through an IPO.

“The movement we have described as “philanthrocapitalism” is all about harnessing the best techniques in business for doing good. In the venture capital world of Silicon Valley, one of the leading examples of this movement is Legacy Venture, a Palo Alto–based venture capital fund of funds. While venture capital continues to thrive in Silicon Valley, not all funds are equal. Success breeds success, so a select few venture capital firms get access to the best deals, and those firms can pick and choose their investors—if you want to make serious money you have to get in the right fund. The thing that sets Legacy apart from other Silicon Valley venture funds is that every dollar it earns for its investors will go back to philanthropy. It is this commitment to giving that helps Legacy gain access to the best funds that offer the biggest returns—itself a form of philanthropy by the funds that take its money.

“Legacy was the brainchild of venture capitalist Jim Anderson, who founded it in 1999 with Russ Hall, one of his associates a decade earlier at venture firm Merrill Pickard Anderson & Eyre. Together they raised $40 million from individuals willing to commit that every penny the firm makes for them by investing in the top Silicon Valley venture capital funds would go to philanthropy. They could hardly have picked a worse time to start, just before the dotcom bubble went pop in 2000. Yet Legacy has gone from strength to strength, investing in start-ups that have become some of the hottest companies, like YouTube and Netflix. Hall and his fellow managing partner, Alan Marty, who joined the firm in 2008 from NASA, predict that investors in the first fund, which is already distributing profits, will easily return their money and then some. (Legacy’s third managing partner, Chris Eyre, who also co-founded Merrill Pickard Anderson & Eyre, is currently on an extended sabbatical.)”