Some Tech Entrepreneurs Embrace Giving Before They Have Anything to Give

Tech start-up Obindo consists of one big idea, two motivated employees, and a co-working space inside the Twitter building. Given that co-founder Joe Kleinschmidt hasn’t raised any venture capital yet, it may be odd to hear him talk about giving money away.

But he is, and he’s quite serious about it.

Together with Tim Smith, executive director of a San Francisco nonprofit called the Full Circle Fund, and Josh Becker, the Full Circle Fund’s co-founder, Mr. Kleinschmidt created the Founder’s Pledge, a sort of Giving Pledge that aspires to find tomorrow’s Bill Gateses and hit them up before they become billionaires.

The pledge itself is simple: Signatories promise to give 1 percent of their company’s equity, 1 percent of their employees’ time, and 1 percent of their product to charity. The pledge draws inspiration from the 1-1-1 philanthropy model devised by SalesForce.com chief executive Marc Benioff, which has created early buzz in Silicon Valley.

It officially went public in early September, and 17 companies have signed on so far, most of which have fewer than 10 employees and little financing. Mr. Smith hopes to have 25 companies by year’s end. There’s also talk of establishing similar programs in Austin, Chicago, New York, and Seattle.

Expectations Rise

The pledge reflects the growing maturity of Bay Area philanthropy. No longer content simply to make money, many young entrepreneurs already envision giving back and currying influence outside the tech industry.

“There’s just an expectation now [that companies will give],” says Mr. Smith. “It used to be something that was nice to do.”

Mr. Kleinschmidt, who arrived in San Francisco at the end of the dot-com boom and has already sold a start-up, says philanthropic attitudes in the region have matured with the tech industry. What once resembled a gold rush has been replaced by something more substantial and outward-looking.

“When I first moved to the Bay Area, I feel like there was this energy of ‘let’s pour money into this and flip it,’ ” says Mr. Kleinschmidt. “Who cares what happens downstream?”

He believes a growing number of entrepreneurs—even those who are not yet established—care a great deal about the long-term, particularly in their backyard. No city’s wealth gap is growing faster than San Francisco’s. Facts like that have grabbed his and others’ attention.

“There’s a lot of wealth being created on this floor—in this building,” says Mr. Kleinschmidt. “You go outside, and it does not take long to see a lot of poverty and a lot of pain, frankly.”

Risk and Opportunity

The pledge’s biggest obstacle may be the attitudes of venture capitalists and whether they will discriminate against young companies that have already promised 1 percent of their equity to charity.

“When I’ve brought it to the attention of other founders, they were concerned with what their current or future investors would have to say about it,” says Perri Gorman, founder of Archively and one of the pledge’s charter members.

She is careful to note, however, that the hang-ups so far have been the entrepreneurs’ alone. She does not know of any venture-capital firms that penalize companies that have taken the pledge.

What most excites Ms. Gorman about the pledge is that it aims to take advantage of the talent and ideas percolating in the Bay Area. Before moving to San Francisco in 2012, she worked for more than a decade in New York as a Wall Street headhunter and says her new community has much more to offer the philanthropic world than just its financial might.

“A banker doesn’t have much to give except money,” says Ms. Gorman. “Tech companies have products. They have developers. They have marketing knowledge. They have so much beyond money that can really make a difference.”

The pledge focuses on the youngest and hungriest of that set, with companies that have yet to acquire investors or establish boards. That simplifies the process of pledging 1 percent of equity and helps the organization build a community of young entrepreneurs who can amplify one another’s philanthropic inclinations.

The companies also get material benefits. Many believe having a strong volunteer component helps young companies recruit and retain talent in what is a savagely competitive marketplace. Full Circle Fund boasts that a company can improve its brand by infusing “social change into your company’s DNA at its earliest stages of development.”

There’s also the possibility of establishing relationships with nonprofits that could in turn become customers.

“There are tons of nonprofits that also purchase products,” Mr. Smith says.

He and Mr. Kleinschmidt acknowledge that few start-ups ever reach the point at which 1 percent of equity would translate into a significant sum. But if even one of the eventual signees reaches the status of Facebook, whose shares are worth about $200-billion, or Google, whose shares are worth roughly $390-billion, the payoff would be huge.

“Silicon Valley is built on this model,” says Mr. Kleinschmidt. “You’re placing some bets. Not every bet is going to take off. But the ones that do are amazing.”