Overview

A technology entrepreneur creates a philanthropic structure that reflects the business that made his fortune.

The entrepreneurs of the tech boom are changing the face of philanthropy in many ways. There is the sheer size of their assets: the $30 billion Gates Foundation is the most obvious example. But in addition, these new philanthropists are interested in using the ideas that made their fortunes to help change the world. And they are doing it now, rather than waiting for their old age.

A number of these newer philanthropists also use their charitable foundations to give as much money as they feel is necessary to advance the mission they have chosen, rather than being constrained by a set payout percentage. Such foundations may be almost entirely spent out each year, and replenished from other personal sources. For example, in 2005, Lawrence J. Ellison, founder of the Oracle Corporation, put $36 million in cash and stock into his Ellison Medical Foundation, which is focused on the biology of aging. The foundation spent $26.3 million in grants that year.

Pierre Omidyar, 39, the founder of eBay, is especially interested in microfinance, the concept that very small loans given to individuals who would not normally qualify to borrow money can lift people out of poverty. Much of the work in microfinance has been done through non-profit entities, but Omidyar became persuaded that for-profit investment in this area could drive the field further. He had set up a charitable foundation, but in 2004, he came up with a new structure for his social impact charitable giving and investment that would reflect his ideas about how to best pursue this mission.

This new entity, the Omidyar Network, an LLC, is "the organization responsible for defining, managing, and executing the strategy to advance our mission," according to Iqbal Paroo, until recently its president and CEO. It has a number of subsidiaries, two of which hold funds to be invested in non-profit organizations and for-profit companies. Each was set up with $200 million, but additional funds are added annually. "We take a cross-sector, market-based approach," Paroo says. "We define the area aligned to our mission of economic, social and political self-empowerment - for example, access to finance. We map out that space, and we figure out which projects require non-profit dollars and which ones require for-profit dollars. We are mindful that using non-profit dollars, where private capital would be appropriate, distorts the market, and that there are other situations where private capital wouldn't be appropriate and the right dollars are charitable ones." A third area of investment, now being developed, is public policy, influencing individuals and government.

Omidyar Network invested approximately $60 million in 2006, its third year of operation, with about $30 million each in non-profit and for-profit organizations. Neither the amount nor the split was prescribed: Omidyar invests based on opportunity rather than a set number. The payout for the charitable entity was about 12% in 2006, but Paroo points out that the Network is not tied to any particular payout number. "The floor is 5%, but if through the strategic plan we find opportunities to invest our charitable dollars, we don't say `We've reached 5%.'" The fund also receives annual contributions from Pierre Omidyar, so it is not dependent on its own investment income. Nor are administrative expenses charged to that entity: the Network has a separate entity, Omidyar Network Services, that pays rent, utilities, salaries, etc. for all its operations.

Omidyar Network's mission is empowering individuals to make life better for themselves and their communities through the sharing of information, resources, and tools. Its model is eBay itself - a commercial enterprise that links individuals into a network, enabling the sharing of information and goods through the building of trust. Its main areas of concentration are access to finance (particularly microcredit), philanthropic markets, open innovation (largely geared towards sharing scientific data), and participatory media.

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  Resources

• Executive Summary
• Full Report
• Order Print Copies

  Report Contents

• Introduction
• Focus: The Whitaker Foundation and the Helen F. Whitaker Fund
• The Learning Curve: The Beldon Fund
• Retooling for Spend Down: The Atlantic Philanthropies
• Giving While Living: The Richard and Rhoda Goldman Fund and the Lewis B. and Dorothy Cullman Foundation
• Quick Spend Down: The Haigh-Scatena Foundation
• Raising the Payout: Evelyn and Walter Haas, Jr. Fund
• Giving 5.5%: The Lynde and Harry Bradley Foundation
• More than Investment Returns: The Needmor Fund
• Ramping Up: The HKH Foundation
• Using All the Models: Endswell Foundation / Renewal Partners
• A Different Strategy: Omidyar Network
• Conclusion
• Selected Bibliography
• Resources
• List of Profiled Foundations
• Acknowledgements

  Upcoming Events

• November 29
  10am - Noon
  NCG Family Philanthropy Exchange and the Stanford Center on Philanthropy and Civil Society are hosting a discussion of Beyond Five Percent: The New Foundation Pay out Menu. This funders only event is free for members.
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  Supporters of
  “Beyond 5%”

• Beldon Fund
• French American Charitable Trust (FACT)
• Quixote Foundation

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