April 15, 2004 | Read Time: 4 minutes
Pierre M. Omidyar, the 36-year-old founder of eBay, the giant online marketplace, has always said he wanted to take an uncoventional approach to giving away the bulk of his fortune, estimated to be worth at least $10-billion. Last month he made that clear by announcing he would fold his foundation into an enterprise that would not just pursue charitable giving, but also engage in public-policy advocacy and provide investment and start-up capital to businesses that promote social change.
The move to create the Omidyar Network will give Mr. Omidyar the option of cutting back on his work with nonprofit groups — a possiblity given concerns he expressed about nonprofit organizations at last month’s PC Forum, a technology conference, where he spoke on a panel.
At the conference, Mr. Omidyar said his foundation “wanted a better return on our investment” than what he said the foundation was getting by working with nonprofit organizations.
“I’m really excited about this — being out of the box of nonprofits,” Mr. Omidyar said. “You can have a significant social impact through for-profit enterprises.”
No Expectations
The reluctance or failure of nonprofit organizations to show tangible results from the work they do appears to be at the heart of Mr. Omidyar’s frustration with nonprofit groups.
“People in the nonprofit field are used to getting money without any expectations attached,” said Iqbal Paroo, who oversees grant making for Mr. Omidyar. “That’s what we want to change.”
As Mr. Omidyar’s wealth has grown in recent years, his desire to make what he calls “investments” in organizations has expanded. Officials at the Omidyar Foundation, in Redwood City, Calif., said the organization had already distributed $8.6-million this year — fulfilling all its grant commitments and distributing 8.8 percent of its $98-million in assets. Mr. Omidyar also has given $9.4-million to his donor-advised fund this year, officials said. Mr. Omidyar does not plan to transfer any of the assets of the foundation or the donor-advised fund into for-profit companies, they said.
But Mr. Omidyar’s fascination with Meetup.com, a Web site that helps people with common interests come together, persuaded him to wonder why he should limit his philanthropic work to nonprofit groups, Mr. Paroo said.
“There are some companies, but not that many, that are in business explicitly to promote social change,” Mr. Paroo said. “We want to encourage more businesses to help promote social change.”
Mr. Paroo also said that because the federal government limits how much lobbying foundations and charities can pursue, the Omidyar Network wants to establish a unit that will focus on influencing public policy. And if the Omidyar Network sees a service or product that no organization has developed, it will consider starting its own company or charitable group to fulfill what it thinks the market needs.
“Instead of looking at the foundation’s assets as our spendable base,” Mr. Paroo said, “we now have a $10-billion checkbook.”
‘Radical Philanthropist’
Soon after Mr. Omidyar established his private foundation, in 1998, he appeared on the cover of Forbes under the headline “The Radical Philanthropist.” He told the magazine that he planned to foster a “network of social entrepreneurs” who shared his uneasiness over how few problems traditional philanthropy solves. He also said he wanted to persuade charities to run like businesses.
His approach, however, has sometimes rankled charities. And Mr. Omidyar’s latest announcement, that his foundation would not make new grants until it develops a new strategic plan, caused concern among some of the foundation’s beneficiaries.
Melissa Pailthorp, the outgoing executive director of Aspiration, a nonprofit organization in Seattle that has received $105,000 from the Omidyar Foundation, said that her organization is “certainly not counting on any particular commitment from Omidyar in the foreseeable future.”
She expressed frustration at the fund’s grant-making process. “Organizations have been caught short, thinking they were among the chosen few groups that would get a long-term commitment from Omidyar,” she said
Diane Ty, chairman and co-founder of Youth Noise, in Washington, which has received $385,000 from the Omidyar Foundation to help get young people involved in social issues, said the fund “has had all the best intentions, but by being vocal about being empathetic to the grant-making process and how slow it sometimes moves, unfortunately Omid-yar raised the expectations of some people.”She added: “That’s why some people feel disappointed.”
Mr. Paroo said that his organization has never reneged on a promise to a nonprofit organization — and that the Omidyar Foundation tries to make sure charities understand that no group is guaranteed long-term support.
“The problem is that people see a new wealthy foundation on the scene and they sometimes think, Great, there is going to be a large amount of money we will be entitled to,” Mr. Paroo said. “But if any group makes an assumption that they are part of a chosen few for a long-term commitment, that suggests an irresponsibility in their thinking.”
However, Mr. Paroo said, “it is absolutely our intent to continue working with the segment of the nonprofit market that is involved in social change.”
