Oregon is awash in new tech money. What does this mean for charitable giving?
When Jive Software went public in 2011, the Oregon Entrepreneurs Network got a big gift — $100,000 in shares pledged in 2007 by the company founders, CTO Matt Tucker included.
Baking philanthropy in during the company’s early days made sense to him, Tucker says. “It’s easy to carve 1% out of nothing.”
Ten years later, charitable giving still aligns with his business philosophy. Tucker, 38, is back in Portland with a new software startup, Koan, and a founder’s pledge to donate 2% of any personal exit proceeds to nonprofits.
He isn’t sure where that potential pot of money will land. Maybe education-focused charities; maybe the environment, but, he says, “probably not Portland tech entrepreneurs.”
Tucker also has personal money to distribute: $1 million earmarked from his share of Jive’s $462 million sale this year. He and his wife, Gretchen, see the windfall as an opportunity to have local impact.
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This money and his mission put Tucker in a new class of Oregon business leaders: the entrepreneur philanthropist.
As the state’s tech mecca grows, the region's few but substantial exit events have yielded riches for founders and investors. Eric Rosenfeld, co-founder of the well-established Oregon Angel Fund, estimates that companies backed by OAF have minted between 40 to 60 new millionaires over the past decade. Other investment funds are injecting new money into the startup ecosystem.
A pipeline of new wealthy individuals should be good news for the state’s nonprofits.
Big names, after all, can usually be counted on to shell out big money.
Phil Knight, for instance, donated around $500 million to OHSU and another $500 million to the University of Oregon. Harold and Arlene Schnitzer gifted more than $80 million in their day to local causes like the Portland Art Museum. The iconic financial services company, The Standard, continues its giving, distributing $4.2 million to community partners this year.
But the new, tech-based cohort operates differently than the entrepreneur/philanthropists of old.
Their priorities push them toward market-oriented solutions, re-investing (as Tucker did with OEN) more into new startups than their predecessors ever did. Or they are focusing on philanthropy writ large by targeting world-size problems — climate change, global poverty — over homegrown issues.
Or they are simply peripatetic. Tucker and his wife, for example, spend half their time in Portland; the other half in Silicon Valley, so “local” impact isn’t necessarily limited to the Rose City or Oregon. “We love the places we live,” Tucker says, “but Palo Alto is home.”
Oregon’s crop of tech leaders are also laser-focused on building their business, almost to the exclusion of everything else. For nonprofits hoping to reap their largesse, the hurdles are numerous.
“The challenge for nonprofits is understanding who this new guard is and gaining access to them,” says Chris Otis, executive director of SMART, a Portland education nonprofit.
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Looking for “Portland’s Bill Gates” may be a fool’s errand, anyway.
Sure, some longtime Intel, Tektronix and Lattice Semiconductor employees have done quite nicely over the years, but it’s chump change compared to the mega wealth generated by the Knights or Schnitzers of the world.
And Portland has yet to spawn the deep-pocketed new economy companies populating Seattle: Starbucks, Microsoft and Amazon. In fact, the Emerald City claims the fifth largest concentration of rich millennials in the U.S.
“The wealth created to date [in Oregon] is not at that scale,” says Rosenfeld.
That doesn’t mean nonprofits aren’t finding success tapping homegrown philanthropists.
Stephen Beaudoin, the outgoing executive director of PHAME, an organization that serves developmentally disabled individuals, grew its budget from $95,000 to $940,000 in seven years, 83% of which came from contributions. Most of that, 75%, was donated by individuals.
But for the most part, these local philanthropists made their fortunes in old-school industries that are connected to place: property development, manufactured home construction, breweries and wineries.
Stephen Beaudoin, outgoing executive director, Phame
Tech entrepreneurs are glaringly absent. As Beaudoin puts it:
“Someone has to explain the philanthropic impact of Airbnb to me.” He understands that tech-and web-based businesses like Airbnb offer unique employment opportunities that benefit the state. But do they play in local philanthropy? “I don’t see it,” he says.
Victoria Frey, executive director of the arts organization PICA, agrees. She’s witnessed many business bubbles and bursts since joining the development staff in 2001. These new entrepreneurs, in her eyes, are different.
“Yes, more people are coming to Portland,” she theorizes, “but they can live and work anywhere, so they’re less engaged in Portland.”
Conversely, legacy families like the Schnitzers are planted and have been for decades. “Second- and third-generation philanthropists understood their role,” Frey says.
The same could be said about legacy companies with large, Oregon-based workforces and customers.
Businesses that have weathered economic ebbs and flows and bounced back from workforce reductions understand the power of their human resources and their connection to local clients.
“When corporate leaders have kids in schools and see issues like addiction and homelessness first hand, it inspires them to give locally,” says Jim White, executive director of the Nonprofit Association of Oregon.
Portland’s tech ecosystem may be young (most of the newly-minted millionaires are under 50), but the payout potential is staggering, even when considering that many of the city’s tech investors are from out of state.
The 55 local startups that the OAF and other funds invested in have a combined market value of $1.4 billion today, according to Rosenfeld.
Much of that wealth, he reports, has yet to be realized. TIE Oregon, another angel investment group, received handsome payouts after several of the startups it backed, among them GlobeSherpa and Geoloqi, were acquired. A number of companies seeded by the Portland Incubator Experiment have created a small amount of wealth for the founders and returned capital to investors, said PIE founder Rick Turoczy in an email.
“That said, to date we haven’t been involved in any of the ‘10x exits’ upon which the folklore of the startup and VC worlds are based,” he said.
“When corporate leaders have kids in schools and see issues like addiction and homelessness first hand, it inspires them to give locally." — Jim White, Nonprofit Association of Oregon
There are other reasons nonprofits should not count their potential gains yet.
The very concept of philanthropy is eroding out from under them and being replaced with for-profit social enterprise. The national trend was noted recently in Fast Company, which reports that nonprofits are having a hard time recruiting talent, driven in part by the growth of “purpose-driven business.”
Tech entrepreneurs today are likely to frame their products, not profits, as game-changing cures for society’s ills. Koan, for instance, doesn’t simply make front-line management software but “a way to help managers be the best versions of themselves,” according to Tucker.
And if you believe algorithms can change the world, then funding more innovation is not just a savvy investment. It’s charity. This philosophy is an extension of, well, capitalism.
“[It’s] fair to say that, of the wealth that’s been created by young entrepreneurs, more dollars have gone into more startup investing than into philanthropy,” says Rosenfeld. “This benefits the state [more innovation, jobs, wealth creation], but in a different way than philanthropy would.”
If the gamble pays off, the rising tide of wealth promises to lift all boats, including the next class of service professionals.
“Someone has to explain the philanthropic impact of Airbnb to me.” — Stephen Beaudoin, PHAME
Johanna Thoeresz, chief development officer of the Oregon Community Foundation, is targeting these young lawyers, doctors and accountants for donations. But since 2008 the OCF also invested more than $7.6 million in venture capital funds.
“We see the tech sector, and we want to support it,” says Thoeresz. “We recognize that that sector is a big player in terms of the economic future of this state.” It’s a virtuous circle. Tech entrepeneurs — David and Christine Vernier of Vernier Software, for example — have donated to OCF’s Oregon Impact Fund, which in turn invests in (mission-driven) startups.
Oregon is not pioneering this movement. Silicon Valley’s entrepreneurial class has long been disrupting philanthropy.
A 2015 op-ed in The New York Times quotes tech entrepreneur-turned-philanthropist Sean Parker, who made his billions as the co-founder of Napster and president of Facebook.
He sees traditional philanthropy as “a strange and alien world made up of largely antiquated institutions.” His own $600 million foundation, according to the piece, strives to spur more daring research that “retains the intellectual and creative spirit that got us this far.”
"No Money, No Mission"
Jill Nelson, Ruby Receptionists
Of course, it’s possible to support new startups and old-style charities at the same time. After Ruby Receptionists’ $38.8 million partial buyout in 2015, founder and CEO Jill Nelson contributed to the OAF and Elevate’s Inclusive and Capital Fund. She also wrote a $500,000 check to the Unity Center for Behavioral Health and has a classroom space named after her.
“I am drawn to the things that have touched me personally,” says the 51-year-old Tigard native.
Personal connection also drives Jason Bolt’s philanthropy. The 34-year-old CEO of Revant Optics has pledged 1% of his company’s revenues to three nonprofits: Outdoors for All, Two Feet Project and Warfighter Made. All fall under the umbrella of empowering disadvantaged individuals, a personal cause of Bolt’s. None are based in Oregon.
"Capitalism stabilizes our state’s communities, creates jobs, lifts people out of poverty, and empowers them to fulfill their dreams" —Eric Rosenfeld, Oregon Angel Fund
Bolt does think locally when giving his time; he’s vice chair on OEN’s board. Other young entrepreneurs also bequeath what they can to homegrown causes. Many sit on boards, give employees paid days of service or offer space to programs. Ruby hosts many events in their offices, including the Beaverton Education Foundation’s phone-a-thon and App Camp for Girls.
No one can argue with giving time, expertise and services.
But PHAME’s Beaudoin requotes an old nonprofit maxim, “no money, no mission.” Fortunately for nonprofits, that money is coming in. SMART’s total assets, for instance, went from $2.9 million in 2012 to $4.6 million in 2016. But the terms and conditions attached to that money feel different, nonprofit executives say.
“New philanthropists aren’t demanding a return on investment, per se,” says PICA’s Frey. But she does sense an “if you want my help, you need to take my advice” attitude.
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Otis is embracing that attitude. At the urging of SMART’s newer-guard board members, the organization is more data driven, more forward thinking than ever. “We’ve translated private sector-oriented thinking to our nonprofit,” she says.
This means moving from traditional markers like monthly financial statements to forecasting year-end goals, and a stronger emphasis on quantifying behavior and social changes.
Otis admits that implementing this different way of thinking was very laborious at first and, frankly, “painful.” But ultimately the move sharpened their game. “Fundraising has always been a mix of art and science. Now we’ve put more science behind it,” she says.
No discussion of Oregon’s new philanthropists would be complete without mentioning Sam Blackman, the late CEO of AWS Elemental. The 41-year-old Portland native’s commitment to local philanthropy is well documented, from the company’s investment with the OCF to his own involvement with Portland’s education, homelessness and hunger charities.
Blackman was scheduled to contribute to this piece before his tragic and unexpected death in August.
But a 2015 interview with Oregon Business reveals his thoughts on philanthrocapitalism.
Blackman knew tech companies live and die by their ability to attract the best talent, so creating a vibrant Portland was key to Elemental’s ongoing success. He likened the relationship — in which Portland’s success feeds Elemental’s success, which feeds Portland’s success — to a flywheel. “Elemental … will continue to invest in the community, and all of a sudden, that flywheel becomes very virtuous and the economic strength of the region grows because of it.”
Blackman was certainly a vocal leader for the new philanthropic charge.
But there are other voices joining the chorus as well. Last year, the Meyer Memorial Trust followed in OCF’s path and invested $2 million in the Elevate Capital Fund. It’s yet another example of philanthropy’s seismic shift, in which startups morph into for-profit philanthropic organizations and philanthropic organizations turn around and invest in startups.
For investors like Rosenfeld, the evolution is a natural one.
“Capitalism is increasingly condemned by the young as an elitist system that enriches a few at the expense of the many,” he muses. “Why do the young reject capitalism yet celebrate entrepreneurs and free enterprise? The disconnect is troubling and confusing to me. Capitalism is the lifeblood of our economy. Capitalism stabilizes our state’s communities, creates jobs, lifts people out of poverty, and empowers them to fulfill their dreams..”
OAF, he says, “is on a mission to promote local innovation and create local wealth and quality jobs through the application of conscientious capitalism.”
Where do traditional nonprofits fit in that tidy circle? For SMART’s Otis, it’s the same space as always. “You have to find folks that are interested in what you’re doing and make a connection,” she insists. “Some things about philanthropy don’t change.”
A version of this article appears in the October 2017 issue of Oregon Business.