Cornering a Franchise on Giving

Social Venture Partners spreads far beyond Seattle

As technology companies soared in value in the late 1990s, Mary Jalonick struggled to figure out how to

persuade Texas technology executives to contribute to the Dallas Foundation, the community foundation that she heads. Then, in 1999, she and a colleague read about Social Venture Partners, a venture-philanthropy fund here that teaches new donors about giving and encourages them to volunteer their business expertise at the charities in which the fund invests. In its first three years of operation, the fund had quickly signed up a few hundred donors, including a number of Microsoft executives.

“We said, ‘Wow — that’s it. That’s the model,’” Ms. Jalonick recalls.

She found two people in Dallas — a venture capitalist and a corporate lawyer — who were enthusiastic about the concept, and they enrolled others, using a how-to booklet written by the Seattle fund. The Dallas Foundation provided office space and offered the help of its staff members during the first three years of Dallas Social Venture Partners, and awarded it a three-year grant worth $50,000 per year in late 2002, when the fund left the nest for free office space provided by one of its partners. Dallas SVP, which remains affiliated with the Dallas Foundation, now has 63 donors, and supports eight charities with grants averaging about $47,000 per year.

Social Venture Partners has become a popular franchise almost by accident. Neither the founder nor the current director planned to take the fund beyond Seattle, but the concept has been eagerly embraced around the country, especially by community foundations. SVP affiliates now exist in 24 cities in the United States and Canada, and 11 of them keep their grant-making accounts at community foundations. At 6 of the 11, the community foundation has provided financial or other support to help get the venture fund off the ground.

The partnership is counterintuitive — it seems as though venture-philanthropy funds and community foundations should be competing for the same philanthropic dollar. But Social Venture Partners has an educational mission that in the long run may bring big benefits to community foundations.

The organization aspires to teach young donors how charities work, in order to stimulate greater long-term giving. Each donor to the group annually contributes an amount ranging from $5,000 to $7,500 (it varies from city to city), but the venture fund doesn’t ask for anything beyond that.

“We’re not trying to get the big money,” says Paul Shoemaker, director of SVP Seattle, which has awarded grants totaling $6-million since 1997. “We want to be a catalyst for future philanthropy. We ultimately do want folks to give lots more, but we don’t care if they give to us or not.”

The largest community foundation here, the Seattle Foundation, has never provided direct financial support to SVP Seattle, but it has provided advice and introductions to prospective partners. “We see SVP as a first step — a sort of Philanthropy 101 — with the younger donors,” says Phyllis J. Campbell, the Seattle Foundation’s president. “We think as people make giving a habit, they’ll move into establishing a larger fund with the Seattle Foundation.

More Than Writing Checks

There’s irony in the incubator role that community foundations are playing. Paul Brainerd, an entrepreneur who created the desktop-publishing software known as PageMaker, said he started Social Venture Partners only because he and other friends in the tech world didn’t find traditional philanthropic outlets appealing.

“I had set up a family foundation after selling my company in 1994, and several of my peers began calling to ask me out for lunch,” he recalls. “After the fourth or fifth lunch, I realized that there was a lot of interest among my peers in the whole issue of philanthropy and how they might give back. They wanted to do more than just give money, and they were frustrated by some of the existing structures.” In particular, they wanted to learn the best approaches to philanthropy, and they wanted to be able to work hand-in-hand with the charities they supported.

Mr. Brainerd spent a year studying funds that worked very closely with their grantees, including the Robin Hood Foundation, in New York. In 1997, he and several friends pulled out their Rolodexes and began calling, and Social Venture Partners signed up 35 partners within the first month.

Mr. Shoemaker left Microsoft, where he was a marketing manager, to become the fund’s first director in 1998. Seattle is now the largest SVP affiliate, with 265 members. Ninety percent of members are younger than 55, and 40 percent work at technology companies.

After people in other cities began contacting Mr. Shoemaker about starting affiliates, he had an intern write “SVP in a Box,” a booklet that outlines the values and organizational structure of the fund. In 2001, the William and Flora Hewlett, W.K. Kellogg, and Surdna Foundations pledged a total of $400,000 over three and a half years to establish SVP International, the network’s umbrella group, which is headed by its own director. Each affiliate is separately incorporated, and has some latitude in setting investment minimums and in deciding what types of charities to support.

Shortly after joining SVP, new partners are assigned to a grant-making committee that meets for six months. They spend the first few months learning how to evaluate charities and meeting with educators and community activists to identify local needs, and the final three to four months weeding through grant requests and investigating the most-promising charities. SVP Seattle invests in only four new charities each year, focusing on early-childhood development, elementary and secondary education, after-school programs, and the environment.

Although Social Venture Partners encourages close ties between donors and charities, not all the members of the group are themselves highly involved. About a third of the donors work as volunteers, using their business experience to help the fund’s grantees in such areas as technology, marketing, and strategic planning. Another third only attend SVP educational meetings, and the final third do little more than write checks.

Kim Fortunato, who recently started an SVP affiliate in Wilmington, Del., with financial support from the Delaware Community Foundation and others, didn’t talk much about the venture-philanthropy approach in pitching the new fund to the bankers, doctors, lawyers, and business owners who make up the bulk of her partnership. Instead, she emphasized the fund’s charitable focus — early-childhood development. “It’s easier to sell that than capacity building,” she says. She signed up 62 members, at $7,500 each, in just the first year, earning her “rookie of the year” honors in June at SVP International’s annual conference in Calgary.

Changing Focus

Social Venture Partners operates on a shoestring budget compared with many traditional grant makers. SVP Seattle has just four paid employees, and they share a small downtown office with the two employees of SVP International, including its director, Tom Donlea.

As the economy has cooled, so has SVP’s growth.

“In 1997, you could sit down with somebody for lunch, and they would whip out their checkbook,” Mr. Shoemaker says. “That doesn’t happen anymore.”

Back then, the Seattle affiliate was adding about nine members per month; now, it is down to about four. The network had been in a holding pattern for more than a year, before recently adding an affiliate in Santa Fe, N.M. (Mr. Donlea says six cities intend to start chapters in the next 18 months.)

For an organization whose growth was unplanned, the slowdown isn’t all bad. “It gives SVP time to get rooted,” Mr. Donlea says.

And time to tackle some tough questions. Donor-renewal rates at the Seattle chapter remain above 90 percent, but the fund’s focus has generally been on educating newcomers to philanthropy. As donors gain knowledge, they might decide it is time to move on — and perhaps establish their own fund at a community foundation. SVP is deciding how far it wants to go in creating programming and a home for these more-experienced philanthropists.

In most cities, SVP is understaffed, according to Mr. Donlea, making it challenging to appropriately match volunteers with charities. Plans call for more full-time staff members, but he notes the organization could lose its vitality if staff members, rather than the volunteers, become the primary point of contact for charity officials.

SVP also is weighing how far it should go in exploiting its 24-city network. Mr. Donlea thinks the network could at some point jointly tackle problems that are common in U.S. cities.

“SVP has bright, driven, affluent people who have connections,” he says. “If they can’t help bring about solutions, then I think we’re all in trouble.”