Philanthropic boost – Support for startups

By Todd Cohen

Michael Chertok needed directors and officers insurance for the new Silicon Valley foundation he heads, but was not sure how much to buy.

So he asked his office mates in a new incubator that aims to hatch new philanthropies.

“In five minutes in the incubator, I was able to speak to people from three different foundations about their experience with this,” says Chertok, managing director of the Global Catalyst Foundation in Palo Alto, Calif. “It was good to have different perspectives.”

The foundation, formed by partners in Global Catalyst Partners, a venture-capital firm in Palo Alto, was the first tenant in The Foundation Incubator.

Modeled on nonprofit business incubators throughout the U.S. that provide a home and technical support for startup firms, the Palo Alto-based Foundation Incubator is believed to be the first designed to harvest emerging philanthropies.

The incubator, with five tenants, was formed by 18 foundations and three corporations that want to improve the odds for new foundations to succeed.

“Starting a foundation is complex, it’s time-consuming and it’s isolating,” says Elizabeth Bremner, the incubator’s executive director. “For many of the foundations we’re working with, this is a whole new industry.”

Companies launched in incubators, she says, are four times as likely to be in business after five years as are companies that venture out on their own.

The incubator targets foundations created with new wealth generated through the New Economy and high-tech sector, or with wealth transferred between generations.

Silicon Valley alone has given birth to more than 200 private foundations in the last 10 years, according to Foundation Incubator estimates.

Research commissioned by the incubator and the David and Lucile Packard Foundation in Los Altos, Calif., found that most new philanthropists need to develop their skills, and many want to learn in a “person-to-person, just-in-time manner from the best,” Bremner says.

The incubator aims to help young foundations “learn the business of philanthropy and have access to the expertise of the field,” she says. And its focus is “just-in-time learning,” she says, giving tenants access to the information, resources and experts they need, when they need it.

“The model of the incubator is all about collaboration,” she says.

Consider the Global Catalyst Foundation. Endowed with stock in privately held firms, the $10 million-asset foundation seeks to improve the lives of people outside the U.S. through information and communication technologies.

The foundation practices what it calls “engaged philanthropy,” working closely with groups its funds.

“We work hard to find ways to do things to help them advance their work beyond just providing funding,” says Chertok.

The foundation, which has made 23 grants totaling nearly $1 million, has found at the incubator the type of technical support it wants to give its own grantees.

“We really are committed to doing this kind of engaged philanthropy,” he says, “but to do it well, we really need to have the ability to have knowledge and connections and be able to provide something of value to the groups we are working with.”

In addition to office space designed to encourage tenants to learn from one another, the incubator connects tenants to experts who can help them, including officials of foundations investing in the incubator, Chertok says.

He and another member of his five-person staff have talked to colleagues at the Hewlett, Kellogg and Packard foundations, all incubator funders, and at the Ford Foundation, “to understand how we can do our work better.” Topics range from setting up a foundation to helping grantees build effective programs.

A big issue for the foundation, for example, has been finding financially sustainable business models for “telecenters” in developing countries that offer telecommunications services ranging from computers and printing to photocopying and Web access.

After a Ford officer told Chertok that Kellogg was working on a telecenter in South Africa, Tom Reis, a Kellogg program officer and incubator board member, hooked Chertok up with the telecenter.

And when Chertok later visited South Africa, the Kellogg officer there arranged a visit to the telecenter.

Lorna Lathram, executive director of The Omidyar Foundation in Los Gatos, Calif., and an incubator board member, says the collaborative environment the incubator fosters helps tenants learn from other foundations’ trial and error.

“Others have been there before,” she says. “You can ask the questions. You can brainstorm with people. You have the opportunity not to work in isolation.”

In teaming up with other foundations to plan the incubator, the startup Omidyar Foundation – created by eBay founder Pierre Omidyar – found itself part of an informal network akin to an incubator.

“It gave us access to people in all sorts of foundations of different sizes and different stages of growth,” she says. “You want to be able to have access to organizations going through a similar process or even a little ahead of you.”

In selecting tenants, the incubator looks for foundations that will work closely with other foundations. Three tenants, for example, are talking about teaming up to fund emergency medical support for Afghan refugees.

Bremner expects 60 percent of the 11,000-square-foot incubator, with room for about 25 foundations employing roughly 60 people, to be filled by March.

The incubator has hired BTW Consultants in Berkeley to evaluate its impact on its foundation tenants, and to document its work as a model for other regions.

“I feel pretty certain we will see other incubators cropping up around the country,” she says.

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