Opening the Gates

Large gifts by Microsoft’s CEO and other high-tech entrepreneurs could be a sign of things to come

Two multimillion-dollar donations from high-technology tycoons relect how computer moguls are giving away their money — and may soon spark an explosion of philanthropy.

Bill and Melinda Gates last month pledged to spend $200-million from their Microsoft Corporation fortune to help public libraries in the United States and Canada provide their patrons with access to the Internet and other electronic sources of information. Just a day after the gift was announced, Larry Ellison, chairman of the Oracle Corporation, which makes data-base software, announced that his company would spend $100-million to put computers on the desks of children at many of the nation’s public schools.

Those two donations are likely to cause “the dam to break on high-tech money going to charitable causes,” says Paul Saffo, a director at the Institute for the Future, a non-profit consulting group in Menlo Park, Cal.

Technology entrepreneurs “are enormously competitive people,” says Mr. Saffo, “and the next competition is going to be who can be the most creative and make the biggest splash in charitable giving.”

With the $200-million provided to the Gates Library Foundation, the Microsoft founder estimates that he has given or pledged $555-million to charity. Even so, many people have criticized Mr. Gates for not giving enough to charity, noting that his donations are a tiny percentage of his net worth, which is more than $35-billion. Many have derided Mr. Gates and other high-technology entrepreneurs as techno-tightwads.

But savvy fund raisers say that technology executives are among some of their most prosperous prospects and generous donors.

In fact, many high-technology entrepreneurs have quietly taken a central role in some fund drives. In Seattle, the United Way of King County has seen contributions from the high-technology industry nearly double in five years, rising to more than $7-million last year.

Donors from the high-tech industry have been especially willing to make gifts of $1,000 or more. The number of such donors to the United Way of King County increased 374 per cent in five years, to 787, and the amount they contributed rose 245 per cent, to more than $1.9-million.

The expansion of technology giving reflects the growing economic power of the high-tech industry in Seattle. The rapid growth of computer and telecommunications companies in the Puget Sound area has resulted in a burgeoning class of millionaires. Some 59,000 households in the Seattle area had a net worth of at least $1-million last year — a rise of 86 per cent from 1994.

What’s more, over 200 people with a net worth of at least $10-million live in Washington and Oregon, says Tom Alberg, a principal of the Madrona Investment Group, an investment-banking firm based here. At least 40 of those households are worth at least $100-million, he says.

The largest single source of new-technology wealth is the Microsoft Corporation, founded 22 years ago by Mr. Gates and Paul Allen. Mr. Allen has also made his mark philanthropically, giving more than $100-million to national and local charities. Last month he broke ground on the $60-million Experience Music Project, an interactive rock-and-roll museum that he is building as a gift to Seattle.

But the thriving company has helped bolster local philanthropy far beyond the gifts made by Mr. Gates and Mr. Allen.

The company encourages employees to give generously, and it promises to match up to $12,000 in charitable contributions that each of its workers makes annually. Seven out of 10 Microsoft workers have their gifts matched each year.

Over all, giving by the company has risen steadily in recent years, from $11-million in fiscal year 1996 to $14-million in the fiscal year that closed at the end of last month. This year, the company expects to spend about $17-million on matching contributions and direct grants.

Many Microsoft employees continue to nurture strong attachments to the company, even after they leave it. Some of them have retired early to set up their own companies, while others have quit outright — exhausted by the grueling pace of work at the cutting-edge software giant.

Hundreds of former workers stay in touch with one another through the Microsoft AlumNet, a non-profit association. Since it was founded two years ago, the group has swelled to more than 1,100 members, most of whom are in their late 30s and early 40s.

In large part, the group is designed to help members develop their personal and entrepreneurial goals. But the group has increasingly devoted its attention to helping members give money wisely and become more active in non-profit organizations.

In March, the group held a meeting, attended by about 200 current and former Microsoft employees, to describe the requirements and responsibilities of serving on non-profit boards. In April, the heads of several leading non-profit groups met with Microsoft AlumNet to discuss volunteer opportunities.

The enthusiastic response from the group’s members is prompting the organization to put increased emphasis on community service and philanthropy. The interests of the Microsoft alumni cover a wide array of non-profit causes, but the alumni all have one thing in common. “They want to see solutions in their lifetime,” says Bonnie Tabb, a former Microsoft director of community affairs who is the alumni association’s administrative director. “They are not satisfied working around the margins. They want to see major change.”

Many smaller high-tech companies in the Seattle area have also produced hundreds of entrepreneurs who have amassed sizable personal fortunes.

Several veteran philanthropists have gotten together to form Social Venture Partners, a grant-making organization designed to encourage philanthropy among young technology entrepreneurs. The concept, says Paul Brainerd, founder of the Aldus Corporation, is to operate like a venture-capital firm for social purposes, pooling resources so that inexperienced donors can make more effective contributions together.

To participate, donors must contribute at least $5,000 annually. And they will be encouraged to become personally involved in committees that will decide which charities to support.

Last month, 130 people attended the group’s first meeting, and more than 50 others had to be turned away because there was no more space in the meeting room. “The response was far more than we anticipated,” says Mr. Brainerd, who, after selling his stake in Aldus in 1994, put $35-million into his own foundation.

Social Venture Partners will enable donors to become involved in the whole process of making grants, soliciting proposals, visiting potential grantees, and providing other kinds of support.

As donors become more comfortable with the practice of philanthropy, Mr. Brainerd expects that many of them will go out and do it on their own. “I view it as a set of training wheels for new philanthropists,” he says.

Mr. Brainerd believes that the Gates Library Foundation will have a big influence on computer executives as they form their ideas about philanthropy. Mr. Gates and his wife have said they will provide the foundation with $200-million to spend in the next five years to put computers in libraries that serve the poor.

Many observers say it is notable that the Gates fund will not operate in perpetuity. “As a model for getting results and working an issue hard over a fixed period of time, this will appeal to people in the high-tech industry,” Mr. Brainerd says.

The library effort is also unusual because in the past, Mr. Gates has put his philanthropy to work in relatively traditional ways, with a very heavy emphasis on large gifts to higher education. He has donated nearly $70-million to colleges and universities.

To decide what causes to support, Mr. Gates typically consults with his wife and his father, William H. Gates, who also prefers to be called Bill. The elder Mr. Gates, a partner at Preston, Gates & Ellis, one of the city’s most prestigious law firms, does much of the legwork to determine where his son’s philanthropy will be directed and oversees the work of the William H. Gates Foundation, which has assets of $315-million.

The elder Mr. Gates finds much of his time consumed by writing letters to tell people that the fund does not accept unsolicited proposals.

His son has often said that he has not decided how to distribute his fortune but that most of his money will eventually go into philanthropy. The elder Mr. Gates says that such statements have attracted a lot of “helpful” advice. Many of the letters the foundation receives, he says, go something like this: “Since you haven’t decided what you are going to do, here are some thoughts.”

The Microsoft founder did not need any outside influence to encourage him to be passionate about one cause: the United Way.

He inherited that interest from his parents. His father is a former United Way campaign chair in King County. And his late mother, Mary Gates, was chair of the board of the United Way of King County, as well as a board member of United Way of America and United Way International.

Since 1990, the younger Mr. Gates and his wife have contributed $3-million to the United Way. But perhaps even more important, he has been one of the organization’s most-stalwart fund raisers. He has backed local and national efforts to encourage wealthy donors to make big gifts to United Ways, invited potential donors to his Puget Sound mansion, and spoken in behalf of the United Way at events nationwide.

During the last three years, Mr. Gates has spoken at a half-dozen events in cities around the country, to more than 450 top United Way donor prospects, who subsequently gave nearly $16-million.

While Mr. Gates has been more than willing to use his influence to attract donations, his father says that peer pressure has not made a big difference in his son’s giving.

“It would never occur to him to say, `Well, Joe Schmidlack just gave $100-million; maybe I have to do something to match that,’ ” says the elder Mr. Gates.

But the father says he would not be surprised if others followed his son’s lead in making gifts like the $200-million library donation, just as they have followed his lead in business. “It would be wonderful if it happened,” says the senior Mr. Gates, “but it is not part of a plan.”