Charitable Giving Over the Internet
The Internet provides great new opportunities for philanthropy:
- Individuals can identify charities to which they want to give.
- Individuals can connect to specific charities as donors, volunteers, members or clients.
- Nonprofit organizations can promote their effectiveness and efficiency to the donor community.
- Charitable giving becomes easy and efficient.
After extensive research in Spring/Summer 1999, we recognized that several groups, both commercial and nonprofit, were developing charity portals. We decided that we did not have to develop our own site -- something we seriously considered doing -- if what was important to us was already being addressed. We had the following criteria:
- Charities should receive 100% of every donation made over the Internet.
- Commercial fundraisers should be registered as such with governmental institutions that require it.
- You should be able to donate to any 501(c)(3) charity in the U.S. (at a minimum) through the site.
- You should be able to identify charities by geographic location and by the type of work they do.
- The site should consider donors its primary customers and respond to their needs.
Between October 1999 and April 2001, we partnered with CoreMatter (formerly known as AllCharities.com) and helped establish the use of the Internet as a charitable giving vehicle. We mutually decided to terminate the partnership when CoreMatter moved into a different niche in the Internet giving marketplace and we determined that our institutional support was no longer necessary. Subsequent to that termination, CoreMatter ceased operations. We were pleased, however, to have been in the vanguard of Internet-based charitable giving.
United Way Silicon Valley
Steve Kirsch announcing
gift to United Way.
Steve and Michele Kirsch took unprecedented initiative in May 1999 when Silicon Valley faced its biggest charitable crisis in over 20 years: a $15 million shortfall at the United Way of Santa Clara County (now known as United Way Silicon Valley.)
The $15 million funding deficit, due to poor financial management by the organization, meant that the 100-plus local nonprofit agencies partially dependent on United Way financial support would lose that funding for more than a year. This lack of funding would have dramatically impacted residents who depend on services provided by these United Way-funded organizations.
Because they focus on preventing -- not simply treating -- problems, the Kirsches had never given much financial support to United Way. Even after reading about the crisis on May 1 on the front page of the San Jose Mercury News, they didnt feel that a donation would be necessary. "We thought people who already were United Way donors would respond to the crisis and quickly flood United Way with donations and support," they said. "With all the wealth in this valley, we thought the problem would quickly be solved and maybe even by a single donor."
But after almost two weeks during which nothing happened, Steve and Michele realized that if something were going to happen, it would have happened already. It was also clear that if the money were to be raised quickly, it would have to be raised in large chunks. On May 13, Steve and Michele Kirsch announced that they would provide a $1 million grant of emergency funding for United Way, so that local organizations -- and the individuals they assisted -- did not suffer. As leaders in the community, they wanted to set an example for other Silicon Valley leaders to follow. They also wanted to show that the local high-tech business world was committed to the community.
But Steve didnt just sit back and wait for his wealthy colleagues to join him by making donations. "I wondered who would step up," Kirsch said in a Christian Science Monitor article, "and thought, how about you?" Steve personally sent emails urging 65 of his fellow entrepreneurs and business leaders to help out in this crisis. And the donations started to arrive, from individuals such as Gordon and Betty Moore and Bill Gates (through the William and Melinda Gates Foundation), as well as organizations, such as the eBay Foundation, Hewlett Packard Company Foundation, The David and Lucile Packard Foundation, Intel Foundation, Peninsula Community Foundation, and the Health Trust Fund. As a result of the Kirsches initiative and efforts, and the support of other high-tech contributors, funding was restored to United Way-supported agencies.
According to Steve, his and Micheles reason for giving so visibly to United Way is simple: "I tend to focus on what the result of the giving is, not what the recognition is or whether I get recognition
in the United Way crisis, would it have been more effective to have given anonymously? I cant imagine how. If you have a charitable cause, which is supported by Anonymous, and a cause supported by all your peers, which cause is likely to attract your attention more?"
Steve and Michele Kirsch proved, through the United Way situation, that donating in a time of crisis is rewarding, but more importantly if one sets a positive example, others will follow.
Former Investment in Learn Now, Inc.
LearnNow, Inc. was a for-profit education management organization (EMO) operating charter and contract K-12 public schools that was acquired by Edison Schools, Inc., in July 2001. We had made a $250,000 private investment in LearnNow in April 2001 as part of LearnNow's Series C financing. This was the Foundation's first investment in a private company and reflected our founder's commitment to reforming K-12 education.
LearnNow's mission was to build local institutions of high achievement specifically public Community Academies focused on math, science, technology, and literacy. In collaboration with community-based organizations and educators, LearnNow was preparing students to become successful college students and leaders in the 21st Century.
In our initial due diligence about its educational policy and approach, LearnNow had several key distinguishing characteristics when compared to other commercial charter school enterprises, including Edison Schools, Inc.:
- A standards-based curriculum specifically designed to prepare students to be successful in today's knowledge economy. This included intense focus on math and literacy (two hours/day, regardless of grade), using the America's Choice curriculum. LearnNow had secured the exclusive license, among EMOs, from the National Center on Education and the Economy for America's Choice. America's Choice was one of a handful of design models identified/chosen in the federal Obey-Porter legislation that provides funding grants to school districts for comprehensive school reform.
- LearnNow schools had a longer school year and school day that resulted in approximately two extra years of class between kindergarten and twelfth grade (when compared to current "standard" public school hour requirements.)
- Involvement of local community groups in the success of each school. LearnNow was tailoring each school's curriculum to meet the unique requirements of a given community. For example, in the Hmong refugee community in Minnesota, LearnNow hired Hmong educators who understand the culture and can work both with children and adults.
- Requirement for students to successfully complete a "knowledge-work" internship with a high-tech or professional employer as a means to connecting academic studies and work life.
- Development of a scalable business model and significant investment in technology infrastructure. LearnNow invested heavily in technology and in partnerships to assure that its students become part of the knowledge economy.
- Significant initial funding ($4M) from New Schools Fund, Knowledge Universe and Pennsylvania Early Stage.
In an education environment where many reform efforts are underway, we believed that this particular organization, with its use of the America's Choice curriculum, deserved the opportunity to participate in the shaping of the U.S. educational system for the long-term. We believed our investment would help LearnNow to make the best possible case for its approach to K-12 education.
We were disappointed to find out that LearnNow had agreed to be acquired by Edison Schools, Inc., but understood the financial situation that drove LearnNow, Inc., to accept Edison Schools' offer. In that process, the Foundation's private investment in LearnNow was converted to shares of Edison School common stock. We had hoped that LearnNow's curriculum would be the standard one adopted by Edison Schools but since it has not been, we have sold the majority of our holdings in that stock and will divest ourselves of the residual as soon as regulations allow.
Investment in Targesome
Steve and Michele Kirsch's commitment to curing medical diseases, including cancer, led them to make an investment in a biotechnology company from their personal fortune, not their charitable endowment. We have included it on the Foundation's web site because the Kirsches saw this investment as "charitable" in two ways:
- They viewed the $2 million Series A equity financing as a charitable contribution towards cancer research and expected no monetary return. As Steve stated: "If they (the company, Targesome) fail, I will have felt fine about having made an intelligent contribution to cancer research." The Kirsches did not invest in Targesome to secure a specific financial return, which guides their other investments.
- They planned to donate any profit that they made from the company back to charity.
Targesome was a biopharmaceutical company engaged in the development of proprietary receptor-targeted agents to treat and diagnose cancer and other diseases. The company's initial focus was on diseases where vascular-targeted therapeutics could have been important (e.g., oncology, ocular diseases, cardiovascular diseases, rheumatoid arthritis, and infectious diseases).
When Steve Kirsch first learned about the company and its planned research in 2000, he was excited about the possibilities inherent in Targesome. He conducted due diligence and discovered that venture capitalists were "passing" on the investment due to the long payback period for drug development and the weak initial public offering (IPO) market at the time, not because they questioned the science.
With the money secured from the Kirsches, Targesome performed key experiments that validated the original proof-of-concept. This led to a major funding round by professional venture capitalists, allowing Targesome to continue its work.
Because Steve was willing to fund Targesome quickly, the company was able to start on its experiments immediately, significantly accelerating its research schedule.
This is the only commercial investment in medical science with charitable intent that the Kirsches have made. Due to the illiquidity of investments in privately-held companies, the Foundation will not pursue or consider commercial medical science investments.
Update for 2002
Targesome initiated a project with Merck KGaA of Darmstadt, Germany, that was expected to result in the two companies entering a co-development agreement to advance a cancer treatment to the clinic.
Further validation of the Targesome nanoparticle system was demonstrated when it was successfully used for anti-cancer gene therapy. This work was published in the June 28, 2002, issue of Science magazine, with a Targesome co-founder, Dr. Mark Bednarski, listed as co-author.
Unfortunately, due to the significant market turndown in 2002-04, the company was unable to continue operations and folded.
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