There’s always been an ongoing conversation amongst successful tech entrepreneurs about how to “give back.” Not everyone can afford to found an entire hospital, and yet many feel a desire to do something more than move on to the next startup. What probably needs to change is not so much the conversation around the “big exit” but the “conversation” with philanthropy.
Mark Benioff’s “1%” pledge of equity, time and product to good causes has piqued the interest of many, but could appear to some as being more complicated than it needs to be, especially for serial entrepreneurs.
Founders Pledge has emerged from Europe as an alternative idea. In the scheme, founders commit to donate a minimum 2 percent of their personal proceeds to social causes following an exit. That’s it.
They’ve now taken this idea to the U.S. and the first partner is going to be Y Combinator.
In a blog post, YC Partner Sam Altman said more than 500 founders have already pledged with Founders Pledge, including those from Jawbone, Shazam, SwiftKey, AvantCredit, DeepMind, Huddle, Farfetch, Hampton Creek, Funding Circle, Blockchain, Zesty, Vicarious and Unruly, as well as 10+ YC companies.
David Goldberg, director of Founders Forum for Good, said: “Every pledger has signed a legally binding contract to give at least 2% of the aggregate gross value of what they receive pre-tax in the event of an exit or liquidation of shares in the company. The pledge is individual and is not tied to equity.”
“They give their donation to our donor advised fund and we pass 100% of the gift onto the charities of their choice. Our operational costs are supported by a set of private donors who believe in the work we’re doing,” he added.
The pledge will be encouraged and recommended across all new batches and YC alumni, with the idea that every YC-backed company could be involved, if the founders so wish it. It’s not compulsory, it’s just being encouraged.
Given that the pre-money valuation of a YC company is over $10 million out of the gate, this is not an insignificant pledge.
To be clear, Founders Pledge is a charity through which founders, investors and VCs commit to donating a small percentage of their personal proceeds to a charity or social cause of their choice, following an exit. Launched in the U.K. in June 2015, it now operates in 21 countries.
To date there have been 540 pledges, with $140 million committed to charity across over 420 companies worth a collective $40 billion, says the organization. And in its network, there have been 14 exits with $10.3 million in deployment.
This is clearly not insignificant, and the fact that YC has signed up is a very interesting indicator that this idea might take off across Silicon Valley.