On Philanthropy: Startups include philanthropy in their DNA

From The Chicago Tribune

By Bruce DeBoskey

Many entrepreneurs think of philanthropy as something to consider way off in the future when their businesses are mature and profitable. There is a better approach. Philanthropy works best when it is included in a company's business plan from the very start, growing and prospering over the years as the company itself grows and prospers.

Each month, more than 500,000 people create new businesses in the United States. Some founders dream that their ventures will become high-tech giants like Google or Facebook, while others pursue more modest goals. At the very least, they all hope to make a living. At the very best, they hope to strike it rich.

By inserting philanthropy into the very DNA of a startup, entrepreneurs make community engagement an organic part of the organization. This simple step enhances recruitment, productivity, sales and ultimately the bottom line. At the same time, it builds stronger and healthier communities in which to live and work.

"Business is the only force on the planet large enough to correct the environmental and social justice problems we created in the last century," said Ryan Martens, chief technology officer of Rally Software. He encourages startups to commit from the very beginning, when their shares are worth little, rather than waiting until an exit is near.

"New companies should put a stake in the ground from the very start," said Seth Levine, managing partner of Foundry Group. "Company-building does not happen in a vacuum. Rather, a company's success results in part from the health of the community in which it operates."

Pledge 1% is an organization that helps startup companies leverage a small portion of their future success to support nonprofits in their communities, making them stakeholders in the business and vice-versa. The organization helps companies pledge 1 percent of equity, volunteer time and/or products in support of their communities.

The Telluride Foundation takes a somewhat different approach with its Venture Accelerator, which uses its donations and grants to help fund startups with a $30,000 "investment" in return for 5 percent equity or debt in the form of a loan that may convert to equity. Then, using a typical business accelerator model, it provides mentorship, coaching and other tools to help these startups succeed. If the company achieves success, the money earned becomes available to the community foundation to fund additional startups.

Since 2012, 18 startup companies have graduated from the Telluride Venture Accelerator program, raising over $1 million, relying on the assistance of more than 90 mentors and creating 87 jobs.

"If the philanthropic community is serious about systemic change, it needs to look at more than grant-making and advocacy, and make some riskier venture philanthropy investments," Telluride Foundation President and CEO Paul Major said. "Such social investments have real potential to create self-sustaining economic ecosystems bringing innovation, jobs and ideas to communities."