"Why can't we take this magic of stock and make it work for the community?" Myers asked himself.
The foundation has specifically targeted nonprofits whose missions serve children and education, and it seeks out leaders who show a desire and an ability to grow their operations. Julien Phillips, the executive director at San Francisco-based Partners in School Innovation, clearly fit that profile. A management consultant with McKinsey & Co. for 20 years before founding his nonprofit education venture in 1993, Phillips had long sought to run his outfit as a business, not a charity. By 1999 he'd deployed his method of monitoring and improving teacher and student performance in 8 Bay Area elementary and middle schools, and though expansion had leveled off, he'd mapped out a plan for increasing the number of schools to 17 by 2004. "That seemed like the maximum we could expect to achieve with the funding we believed to be feasible," Phillips says.
Then, midway through 1999, EF approached Phillips. Only 40 companies had so far signed on with EF, and just 5 had gone public, but Myers was none- theless eager to try out his model. Having heard about improved test scores at the schools Phillips had worked with, Myers conducted a bout of VC-style due diligence on Partners in School Innovation. His conclusion: if money weren't a constraint, the nonprofit program could easily be expanded to many more schools. For the 1999-2000 school year EF cashed in some of its stock donated from start-ups and put $325,000 to work for the nonprofit.
With support from EF, Phillips spent that first round of financing recruiting a new senior-management team (paid at competitive Bay Area rates), expanding the rest of his professional staff, and refining his business plan. Phillips also relied on two EF-supplied start-up consultants to hammer out what he says are "more concrete and tangible" goals. Now, he says, Partners in School Innovation is on track to more than triple the number of schools it works with, from 8 to 27, by the 2003-2004 school year.
It's much too soon to assess whether the increased capabilities that EF has afforded Partners in School Innovation will in fact improve the nonprofit's influence on education. Nonetheless, flush from a second round of EF funding for the 2000-2001 school year -- $750,000 -- Phillips bets the venture- philanthropy model will yield results.
Although Partners in School Innovation marks EF's first significant foray into venture philanthropy, Myers intends to hold it up as an example in encouraging traditional foundations to shift their focus to nonprofits' long-term management and infrastructure needs. And some leaders in the nonprofit sector wager that Myers has a shot at shaking things up. "This could really change the way the nonprofit sector works," says Bill Shore, founder and executive director of Share Our Strength, an antihunger and antipoverty organization in Washington, D.C. "It's an opportunity to create a responsive philanthropic marketplace...to provide incentives and enable high-performing nonprofits to scale up."
The hands-on involvement required of all EF participating companies -- an overlay that Myers added at the suggestion of Kirk Hanson of the Stanford Graduate School of Business -- could also take hold as participating companies mature and become role models for others. "We have a tremendous potential to create a new mind-set among start-ups," observes Mayfield managing partner Kevin Fong, who has personally referred half a dozen companies to the foundation. "We want them to make community involvement a habit."
As of this writing, however, EF's phones aren't ringing wildly with calls from companies eager for nonprofit involvement. For all EF's high-level support among area VCs, only Mayfield has made it a policy to encourage entrepreneurs to sign up for the program. And as the market turmoil that began in April 2000 dragged on toward year's end, many entrepreneurs politely stalled when asked to donate the stock and time that EF requires. Redpoint's Jeff Brody estimates that one in four entrepreneurs he's recommended to the foundation has joined.
Even among some of the companies that have signed up, the dramatic downturn in tech stocks has drained some energy from volunteer work. "So," says Neela Benjamin Gentile, a former nonprofit executive director who now builds the outreach programs and coordinates nonprofit assignments among EF companies, "we have to start small and be really creative."
To assess volunteers' interests and try to spark their participation, Gentile visits each EF participating company and personally surveys its workforce. Although EF invites participating companies to come up with their own choice of causes, Gentile more typically brokers a relationship between a company and nonprofits that she believes can offer assignments that will be consistent with the company's corporate image and will appeal to its employees' interests.
After meeting with the human resources director at EF member Nuance Communications, for example, Gentile introduced that company to the nonprofit village banking institution FINCA, which is launching an international microlending program for poor women. Nuance is developing plans to donate its wireless-communications technology and services to the bank and its customers.
Usually, Gentile steers her start-up companies to volunteer projects that yield concrete results: painting a wall with Habitat for Humanity, for example, or sorting through barrels of donated canned goods. Such basic assignments are typical of what EF describes as the first phase of community involvement, the phase at which two-thirds of its participating companies stand right now.
The EF model calls for companies to progress through four phases within a two- to four-year time frame, making community involvement an integral part of the corporate culture and strengthening ties with particular nonprofit organizations at each step. Along the way, EF hopes to teach member companies to pursue nonprofit projects on their own. EF's contracts also allow each member company to set aside up to 50% of its equity contributions for its own philanthropic investments.
In the long run, that aspect of EF may shape management strategies on both sides of the profit line. "It's small entrepreneurial organizations dealing with small nonprofit organizations," observes Dave Anderson, a managing director at Sutter Hill Ventures and an EF board member. "There's an awful lot of knowledge transfer going on there."
Although no company has yet to move beyond EF's second phase, some have begun bonding with nonprofits. What began in mid-2000 as a single food drive by software developer Keynote Systems, for example, is now a weekly routine. Every Thursday morning, six Keynote staffers volunteer for three hours, manning the kitchen and serving meals at the Samaritan House soup kitchen in San Mateo, Calif. Similarly, Latitude Communications has built on its sponsorship of a triathlon that raised $19,000 for a nonprofit called VIA, which provides rehabilitative services for disabled children and adults. Five months after the triathlon (in which 30 employees competed, including CEO Wang) Latitude employees joined in harvesting Christmas trees to sell, also to benefit VIA.
