Valley Legend's Biggest Road Show Ever

Venture capital icon Gib Myers is rallying support for an audacious new project: getting start-ups to give time and equity to non-profits -- before those start-ups have even made a dime themselves.

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Is it crazy for promising venture-backed start-ups to commit time and stock to nonprofits even before making money themselves? Former VC Gib Myers doesn't think so

Making the rounds on Sand Hill Road in 1997, Gib Myers sounded more like a supercharged entrepreneur than the soft-spoken venture capitalist most people knew him to be. For 27 years, as a partner at Silicon Valley's Mayfield Fund, Myers had championed investments in early-stage companies. Now, for the first time in his life, he was rallying support for a start-up of his own. And unlike the companies in Mayfield's portfolio, Myers's new business had no designs on profitability.

Practically overnight, Myers had become consumed with the idea of transferring his venture-financing know-how to the nonprofit sector. He had hit on an audacious -- albeit noble -- idea: he would ask entrepreneurs at early-stage companies to buy into a "venture philanthropy" foundation. The foundation would be funded with donations of pre-initial-public-offering stock and fueled by entrepreneurs' hands-on involvement with nonprofits.

It wasn't just that nonprofits had long struggled to survive from one funding infusion to the next -- or that they typically lacked the resources to strengthen their own management and grow their operations to better meet their missions. As Myers surveyed the 36-city Bay Area -- where nonprofits were wrestling with everything from sheltering the homeless to improving school test scores -- those problems were obvious and compelling enough. But what really moved Myers was the potential to mitigate those problems by redirecting some of the enormous wealth and talent he saw all around him.

"We've got this huge entrepreneurial sector that's been so successful, but by and large they're not participating in the community," says Myers, 59. "My goal, the real ultimate vision, is to change the culture, change how the entrepreneurial sector thinks about the community. They're all heads down, thinking about their companies, which is kind of what they should do. But what we're trying to say is that even when you're in the trenches, you can integrate a community culture and begin to demonstrate that as a value early on."

Thus inspired, Myers christened his fledgling venture the Entrepreneurs' Foundation (EF) and began peddling his influence in Silicon Valley to open up some doors to the idea. "You could feel that he was genuinely charged up and excited about this," remembers Jeff Brody, a partner at Redpoint Ventures who met with Myers. "He was feeling the entrepreneurial fervor."

From his fellow VCs Myers sought not money but rather a line into the entrepreneurs whose companies they financed. Who else, after all, was better positioned to suggest that a start-up donate $100,000 worth of equity and companywide volunteer time to Myers's new foundation? "The VCs were the leverage," says Myers, who also made a point of personally courting entrepreneurs.

Some, like Emil Wang, the 49-year-old CEO of Latitude Communications Inc., had already made community involvement a priority at their start-ups. Myers convinced them that joining EF would be an important additional step. "As he laid out his vision I could see a whole different approach to venture philanthropy," recalls Wang. "One of the secrets to Silicon Valley is the infrastructure -- the network of VCs, lawyers, and bankers who all get it and who know how to help entrepreneurs. For young companies EF is the equivalent to that infrastructure for community service. It provides an analogous network for philanthropic activity."

The 73 start-ups that have so far joined EF not only have begun to make community involvement a core value in their businesses but also have forged a tie with Silicon Valley's top-tier elite. Thanks to Myers's recruiting abilities, EF's board reads like a veritable Who's Who of the valley. It includes Kleiner Perkins Caufield & Byers partner Brook Byers and Silicon Valley Bank chairman John Dean. That one-two punch of power and influence gives EF a running start at becoming a model for giving among early-stage companies.

In an interview in EF's spanking new offices, in Cupertino, Calif., Myers candidly admits that for most of his working life he embodied all the traits he now seeks to change in Bay Area entrepreneurs. "I'm typical," he says. "I spent all my time at Mayfield, head down, doing Mayfield work and taking care of my family." His limited outside involvement was with his grad-school alma mater, Stanford University. As chair of the Venture Investment Group there, Myers led seven other area VCs in investing small amounts of the school's money -- $10,000 to $25,000 a shot -- in venture deals.

That strategy generated returns to Stanford of more than $100 million and informed Myers's thinking about how to structure EF. Instead of tapping into start-up growth potential by buying into the venture deals, however, EF would get in on the action through gifts -- warrants for $100,000 worth of early-stage stock -- from each participating company. Liquidity events, such as an IPO or a sale of the company, would enable the foundation to sell shares and invest the proceeds in growth- oriented nonprofit organizations. "Stock is kind of our currency out here, so I thought, 'Why can't we take this magic of stock and make it work for the community?" says Myers.

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