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A Philanthropy Reboot in Silicon Valley

December 17, 2011 by Leave a Comment

LAURA ARRILLAGA and Marc Andreessen are practically a royal couple around here. But when they met, on a New Year’s Eve date in 2005, Ms. Arrillaga didn’t care that Mr. Andreessen had made a fortune in Silicon Valley.

She cared whether he was giving money away. “One of the first questions I asked him on the night we met was what he was doing philanthropically,” she recalled.

Not your usual flirtation, but also not your usual romance. She is the daughter of a real estate billionaire and ended up marrying an almost-billionaire: Mr. Andreessen, co-founder of Netscape.

Yet the question she posed that evening still resonates. She is encouraging tech titans like her husband to become as famous for giving money as they are for making it.

Stars here often get rich in their 20s, but the tech industry over all has been criticized as being stingy when it comes to public charity. Some executives, like Bill Gates, wait until they retire to become active philanthropists. Others, like Steve Jobs, may not give much publicly during their lives. And while there is evidence that the valley is more philanthropic than it seems, Ms. Arrillaga-Andreessen, 41, says more could be done.

“The word ‘philanthropy’ brings up an image of somebody who’s had an illustrious career, has retired and is giving to highly established institutions that may or may not have ivy growing up their walls,” she says. “I personally have felt the need to give philanthropy a reboot.”

While attending the Stanford Graduate School of Business, she created a business plan for an organization that would teach philanthropy and make grants using strategies borrowed from the venture capital industry. The group, SV2, now has 175 donors who have financed 35 early-stage nonprofits over 13 years and last year gave away almost $500,000.

Ms. Arrillaga-Andreessen has taught a Stanford class on strategic philanthropy for 11 years and is on the board of her parents’ foundation. She started a center at Stanford to connect academics and nonprofits, and this fall published a book, “Giving 2.0: Transform Your Giving and Our World.”

But her most powerful weapon may be her personal cachet. Her father is John Arrillaga Sr., a commercial real estate developer who transformed this area from farmland into techdom’s epicenter. Her mother, Frances, was a philanthropist. Today she and Mr. Andreessen make a glamorous pair. They live in a grand home filled with abstract and pop art she selected. (She has two degrees in art history.)

Ms. Arrillaga-Andreessen has the ear of billionaires. She advised Mark Zuckerberg, founder of Facebook, and his girlfriend, Priscilla Chan, on their $100 million donation to Newark public schools, and is working with Dustin Moskovitz, another Facebook founder, and his girlfriend, Cari Tuna.

She is also close friends with   Laurene Powell Jobs, Mr. Jobs’s wife, who many assume will take responsibility for the family’s philanthropy.

Meg Whitman, the former eBay chief and gubernatorial candidate who now leads Hewlett-Packard, has taken advice from Ms. Arrillaga-Andreessen on her family’s giving. “What’s different here in Silicon Valley is people recently have made a significant amount of money much earlier in life,” Ms. Whitman said, “and I think Laura is beginning to change the dynamic here.”

Ms. Arrillaga-Andreessen said she was drawn to philanthropy because of her mother’s early death from cancer. “That inspired me to make a commitment to myself and to her and to God to live a life of service,” she said.

Philanthropy is more meaningful, she says, if people follow their passions but also do intensive research and evaluation.

Bradford K. Smith, president of the Foundation Center, a research organization, said: “This is a field that can run aground on the shoals of being excessively personal and anecdotal or being excessively strategic and analytical, and she weaves that middle ground in a way that speaks to a lot of people.”

Her philosophy fits into the Silicon Valley gestalt. When entrepreneurs, engineers and investors here give to charity, they are most comfortable with the strategies they apply in their day jobs. The Omidyar Network, for instance, started by the eBay founder Pierre Omidyar and his wife, Pam, uses a market-based approach to invest in for-profit companies and give grants to nonprofits. So does the Skoll Foundation, started by Jeff Skoll, eBay’s first president, which finances social entrepreneurs by using the same criteria that venture capitalists use to invest in start-ups. Nonprofits like Kiva, DonorsChoose.org, Samasource and Causes use the Internet to connect people in need with donors, jobs or supporters.

Such endeavors have failed to silence critics who say Silicon Valley isn’t generous enough.

“Society can’t wait,” said Leslie H. Wexner, founder of Limited Brands, who says he gives 10 percent of his time and pretax income to the United Way, Ohio State University and other causes. “It’s sad there are so many entrepreneurs, business successes and venture capitalists who give no thought to society.”

Others here say they are too busy building businesses when they are young to focus on charity, and view their products as their contributions to the world.

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Being Careful About Whose Money You Take

November 17, 2011 by Leave a Comment

But Mr. Krishna found the guidance of one of his investors, Maria Cirino, invaluable largely because, he said, she had been an entrepreneur herself. Ms. Cirino is a co-founder of .406 Ventures, a venture capital firm in Boston, but before that she spent 20 years building technology businesses.

“Maria had run a sales cycle before and knew it was complex,” Mr. Krishna said. “She had dealt with the angst of not bringing in that crucial deal, so she provided empathy and an ability to push forward. Every company goes through challenges, and the question is, How do people around the table react when that challenge comes upon us? Who’s there for you? Former entrepreneurs are the most understanding, though not necessarily the most lenient. They won’t hold you to a lower standard, but a person who has grown a company from nothing is more able to deal with it.”

Only a minority of small-business owners seek venture capital, but for those who do, it can feel like a deal with the devil. Venture-backed companies are expected to grow quickly, and their boards can impose rigorous controls, audits and metrics. A founder who takes venture capital gets the opportunity to grow but also risks losing control of the company. One way entrepreneurs mitigate the tension in the relationship with investors is to work with venture capitalists who may have more patience during the company-building process because they have been through it themselves.

Such entrepreneurs-turned-investors have become more common recently, even as the venture capital industry contracts after years of lackluster returns. Some insiders see this as the industry righting itself after a bubble, saying venture capital has gone back to its roots now that many M.B.A.’s lured by giant paychecks have left the field. They say they believe that venture capital is once again attracting the right mix of former founders and operators who are truly passionate about nurturing companies and who have hard-won insights that can help founders succeed.

“It’s back to the future,” said Kate Mitchell, a managing director at Scale Venture Partners and former chairwoman of the National Venture Capital Association. “Silicon Valley was founded by a balance of entrepreneurs and finance types. The bubble brought a huge influx of people, but the tourists have gone home and the ratio is back to normal. A lot of the new venture firms are led by former entrepreneurs.”

Some business owners say entrepreneurs-turned-VC’s are more supportive, particularly in times of trouble or when dealing with thorny issues. Mr. Krishna, a serial entrepreneur who is now president and chief executive of MineralTree, an accounts-payable security provider for small businesses that is also backed by Ms. Cirino’s .406 Ventures, recalls a time when one of his male employees was insensitive to a working mother. This human resources conundrum was not a board-level issue, but if left unchecked it could have become one.

“If I take these situations to my board members, are they going to say, ‘This person is an idiot,’ or be glad I’m opening up to them?” said Mr. Krishna, who again sought advice from Ms. Cirino. “Sometimes you need to wear your angst and emotions on your sleeve. Certain VC’s might see that as a sign of weakness, but I know Maria’s experience is so deep in these areas.”

For many venture capitalists, replacing founders with professional management, or at least providing adult supervision, is part of a well-established strategy to increase the value of companies in their portfolios. It is not always a last resort; sometimes it is just a question of when. “You don’t want someone who’s constantly thinking, ‘Should I fire this C.E.O.?’ ” Ms. Cirino said. “Unfortunately that’s the relationship the majority of entrepreneurs have with their VC’s. Some of that is the entrepreneur’s fault, if the entrepreneur never allows the VC to gain important insight into the business.”

Scott Friend, who is now a managing director at Bain Capital Ventures, said his history as an entrepreneur informed the way he navigated the more difficult aspects of the relationship between founder and investor, such as structuring employment agreements.

Article source: http://feeds.nytimes.com/click.phdo?i=c8175bb634dbdfdd400d794da448f2bc

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DealBook: Venture Capital Fundraising Tumbles in Third Quarter

October 10, 2011 by Leave a Comment

With the market for initial public offerings still on ice and dark clouds looming over the United States economy, the venture capital industry is struggling to raise money.

Venture capital firms raised $1.72 billion in the third quarter, the lowest level since 2003, according to a report released on Monday by Thomson Reuters and the National Venture Capital Association. The amount also represented a 53 percent plunge from the period a year earlier. In all, 52 firms managed to raise money in the quarter, a 4 percent decrease.

The industry started the year on a strong note amid soaring enthusiasm for fast-rising Internet companies like Facebook and Groupon. Several major firms, which managed to get shares in these companies early, were able to parlay their success into big fund-raising rounds. Accel, for instance, one of Facebook’s earliest backers, announced in June that it had closed two funds, totaling $1.35 billion in new capital.

But recent market volatility has started to wear on the industry. Venture-backed companies, including Groupon, have delayed their public offerings. In the third quarter, just five venture-backed companies went public. Valuations, meanwhile, have started to tighten across the board, according to analysts.

“The quarter’s low fund-raising numbers are reflective of ongoing challenges within the venture capital exit markets,” Mark Heesen, president of the National Venture Capital Association, said in a statement. “Until we begin to see a steady and sustainable flow of quality I.P.O.’s which return cash, limited partners will remain on the sidelines, and the venture industry will continue to contract.”

Article source: http://feeds.nytimes.com/click.phdo?i=4d1de9818d17a8ccf1a7c991fe3d4b07

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