High impact philanthropy

1. High impact philanthropy Steve Kirsch www.kirschfoundation.org www.skirsch.com

2. MISTAKES HAPPEN

3. Philanthropy is like Dragnet • Lot of stuff going on in the world • Sometimes, things go wrong • When they do, I go to work • I am a philanthropist

4. DISCLAIMER • I am not your typical donor • Do not try these techniques at home • If you are thinking of trying this, you should seek professional help

5. Agenda • About our foundation • About giving • Strategic philanthropy • Non-traditional giving • Mistakes • Results

6. About Kirsch Foundation • 501(c)(3) Supporting organization; $50M endowment • Give $4.5M to $8M/year, ~100 to 150 grants, 6 full time staff people; Medical advisory board • Goals we could accomplish in our spare time • Ensure world safety • Cure all major diseases • Restore the environment • Improve politics • Improve education • Support the local community • Encourage philanthropy • Battle the forces of evil: government stupidity/arrogance

7. My secret motivation • To see my smiling faceon the cover of the Rolling Stone … • …and buy 5 copiesfor my mothing

9. Why give? • To benefit everyone (including ourselves) • To achieve certain goals we think are important to make the world a better place • Ideal investment is both • High leverage (ROI) and • High impact

10. Example of high impact giving: Carnegie Foundation • Donated $5.2M 100 years ago • Built 65 public libraries • Still in operation today • Moral: A small one time donation can have a bit impact

11. Some things that make us different • Invest in people, not projects • Long term commitments • People dedicated to environment, medical, politics • Invest endowment in private for-profit companies • Involved in politics when needed to achieve goals (e.g., ZEV program) • Encouraging collaboration between foundations • Look for “market opportunities” such as NEOS which have a great ROI but little visibility • Fund “gaps” (e.g., experienced researchers, stem cells) • Fund hair loss research

12. Agenda • About our foundation • About giving: A personal perspective • Strategic philanthropy • Non-traditional giving • Mistakes • Results

13. Giving statistics in Silicon Valley One of the richest areas on the planet, but… For high net worth households (assets >$1M not including their home) : • 45% give < $2,000/yr • 6% give $0 Source: Community Foundation Silicon Valley

14. United Way • Sept 99: $11M shortfall • Richest place on the planet (65,000 millionaires in Santa Clara County) • We waited 2 weeks for something to “happen” • We were the first to step up with a $1M donation • Only 2 other individuals matched it: Gates and Moore • Only 15 people gave >$1,000

15. “I worked really hard to make it” “… we’re talking REALLY hard …nights…weekends…holidays… gave up sex for 2 years… (not that I was getting any before the startup) “Now you are asking me to give it away?!?” “Are you nuts?”

16. Why don’t people give? • Just earned it/want to enjoy it • Want to ensure have enough to have lavish lifestyle for rest of life, even if something goes wrong • If I don’t, someone else will, so why should I? • Lack of time • Focus all cycles on business • Greedy/ego • Like writing your will or going to dentist; it’s good for you, but low on the priority list • Lack of knowledge of how to do it • Never really thought of a cause that resonated • Lack of understanding of the benefits of enlightened self interest • Lazy/afraid…”hit reply key if you support clean air”

17. How it is supposed to work • You start an Internet company • At IPO, you are worth $2.5B, but you can’t sell any shares • So you donate 10% ($250M) to a charitable fund • You get a nice writeoff and you get to make donations to your favorite causes for the rest of your life without an additional investment

18. A tale of two Larrys(a true story) • Larry #1 • Worth $2B at IPO in 1999 • Too focused on his business to make a gift to charity • Stock has gone from 240 to 1.7 today. He’s now worth <$10M. • Larry #2 • Also a billionaire • Gave $100M to endow a charitable fund. Asked top scientist in aging to donate over 5 years • Largest private funder of aging research in the US • Business doing fine. He’s now one of richest people in the world

19. Giving strategy Make periodic small donations as your stock rises Many notable philanthropists regret not having taken advantage of this strategy. Don’t make the same mistake.

20. How to donate to charities when your stock is locked up • Your stock seems to always peak when you are locked up… but... • You donate the stock; the charity shorts other shares • Allows you to give charity lots more money AND gives you a bigger writeoff • Typically done through a community foundation so you can decide later where to give and how much to give

21. “Where do you want your estate to go tomorrow?” CHOOSE ANY TWO: Family Taxes Philanthropy Who would you rather invest your dough? You? Or the government?

22. The best things in life aren’t all that expensive • House • Car • Vacations • Subscription to Fortune • Replay/Tivo box • Private jet • Assets for guaranteed income for rest of your life So now what?

23. So we had a choice... • Sit on our assets or • Put those assets to work in a way that will benefit: • ourselves • our kids • future generations of our family • our friends and community

24. No tax advantages to giving after you are dead No personal satisfaction to giving after you are dead Giving can ultimately benefit you or your family Reduce current tax burden presbyopiahair losssleep apnealactose intolerancepsoriasisreceding gumsnear sightedtorn ACLtype I diabetes macular degenerationtinnitus Why give young

25. Example • Ten years from now, you might be diagnosed with: • Heart disease/stroke • Cancer • ALS, Parkinson’s disease, … • At that time, starting a giving plan will be too late to have an impact on your health • In hindsight, would you think keeping your assets sitting in stocks was the right move?

26. Take an objective look at yourself What kind of person do you want to be? In “A Christmas Carol,” did you like Scrooge better BEFORE or AFTER ?

27. Virtually all who try philanthropy stick with it • 100% donor satisfaction at CFSV: • No donor advised endowment funds have closed (except if the donors move) • Problem is that it takes them a while to “break the code” to figure out that giving early is good. • Bill Gates is very smart and it took him years to figure this out.

28. Giving can be pragmatic • Doesn’t need to be altruistic; can be totally pragmatic • Example • We give because we get a higher return on our assets • Our one-time $80M donation may cure cancer, diabetes, or arthritis; save the world; help reduce pollution; … • Was that a good use of $80M? Or should I have invested it in stocks? For whose benefit?

29. Giving can be purely in your self-interest • Or giving can be in your self-interest • Example: donate to causes that affect or may affect you or your immediate family • aging research • heart disease • asteroids

30. We DO give to make a positive difference in our own lives and the lives of people we care about. We DO NOT give out of a sense of obligation payback civic duty because it is “the right thing to do” “to create a legacy” because it is fun because we have nothing else to do because we like to see our name in print to feed our ego to get our picture on the cover of Worth to win awards to win friends or social status (keep up w/Ken Lay) to atone for being wealthy to get invited to all the cool fundraisers to get preferred seating at fundraisers to avoid income tax “Why Give?” Summary

31. Why give • Your wealth gives you an opportunity to make a difference • If you don’t take advantage of it, who are you trusting to look out for your interests? • We are the leaders we’ve been waiting for • One person CAN make a difference

32. Agenda • About our foundation • About giving: Why give? • Strategic philanthropy: Where? • Non-traditional giving • Mistakes • Results

33. Traditional philanthropy • Donate to American Cancer Society, United Way, public TV, etc. • “s.o.b.’s”: symphony, opera, ballet

34. Reactive approach • You wait for people to ask you for money • You evaluate each one without a scoring system, a context, or a budget • Semi-reactive: You say that you fund area X and evaluate proposals that are relevant to area X

35. Life changing advice • SK: “What is the secret? How do you separate rich people from their money?” • LE: “You know, there are some people in this world who want to give money away.” • SK: “Oh…so you are doing them a FAVOR!” • I later came to the conclusion that it made more sense to be someone who knows what they want and gets it instead of being someone with a lot of cash and no purpose

36. Strategic approach • Figure out the areas important to you • Create a vision and a set of annual goals • Create a strategy/plan to achieve the goals • Fund and/or initiate projects consistent with the strategy • Create your own criteria for evaluating grants (I have 13 that total 100 points) • Make a long term commitment • Realize that results are often hard to quantify

37. How it works in real life(sometimes) • I read in Time about how we just had a near miss from an asteroid • Say to myself • Wow! That is really brain dead that they aren’t spending $50M to save 6B lives. • Someone should do something! • Look in mirror • Bottom line: I get pissed off and use philanthropy to combat the stupidity and/or arrogance.

38. 3 top criteria • Fit with our goals? • Will outcome be really useful or solve a problem that pissed me off? • Are they likely to achieve their goal • People • Funding outlook • Track record • Approach

39. My history • Started with a donor advised fund at the local community foundation 10 years ago • Added to it over the years • Switched to a supporting organization so we could invest assets more aggressively, hire a staff, and lobby

40. To apply: Some rules • Don’t bother us if you don’t fit our criteria • The spreadsheet we post is for your benefit • Ignoring it wastes your time and ours • Keep inquiries simple and short and compelling. • Don’t bombard us with information.

41. How to make me feel truly valued • I don’t care about “Thank You” letters or recognition. • I do it for results • The best way to thank me for my contribution is achieve the goal you set out to achieve. • Show me it worked!

42. Agenda • About our foundation • About giving • Strategic philanthropy • Non-traditional giving • Mistakes • Results

43. Selected charitable projects • NEOs • Catalyst for a Cure • Curing cancer • Junk faxes • Terrorism • Environment/Energy • K-12 education • Political reform

44. NEOs • NEOs=“Near Earth Object” • Your chance of dying from asteroid hit is 1 in 20,000; ~ same as a plane crash • Your chance of winning the California state lottery: 1 in 41 million. • Therefore, asteroids are a certainty • #1 most likely reason the earth could end tomorrow • When a 6-mile-wide asteroid slammed into Earth 65 million years ago, it wiped out the dinosaurs, about 80 percent of the world's plant species, and all animals bigger than a cat.

45. NEOs • What I don’t understand is this: • People buy lottery tickets... • Our government spends BILLIONs on missile defense but virtually IGNORES the statistical certainty of an asteroid hit that is PREVENTABLE if we spend the $2M/yr for the next 10 years • Someone should do something!

46. Catalyst for a Cure • Collaboration with Glaucoma Foundation • Brings together scientists from different fields to collaborate on new approaches • Pick areas where there is potential for a breakthrough • Replicate in other areas (spinal cord)

47. Targesome • Large molecule technology for targeted delivery of drugs • Chemo therapy can be delivered only to sites of angiogenesis resulting in a quick elimination of cancer without any side effects • Same technique can be used to image cancers which are too small to detect • Today have fantastic lab data, partnerships with leading drug companies, and NCI • I provided initial funding. Unlikely to have received funding without a charitable investor • The whole donation resulted from follow up from a chance meeting, not proactive research on my part.

48. Junk faxes • Fax.com sends out 4 million junk faxes a day, all in clear violation of state and federal law..wake you up… tie up your resources • I got pissed off at getting 4 faxes for an illegal credit repair scheme from a company that keeps changing its name and location. “Now only $99!” • Got pissed off and did a lot of research and phone calls and e-mails. I am responsible for: • a comprehensive website on the topic • getting the California state AG to sue fax.com • getting ….. to file a class action against them • filing 20+ lawsuits on behalf of my company • getting their Sacramento lobbyist to drop them as a client • getting key California Senators to change their vote to support the federal ban through arguments tailored to them

49. Junk faxes…so why should YOU care? • Plan to sue them for $250B and… • … donate the recovery to charity! • We tried to get a hospital or university to be a plaintiff. Judge would award $50K participation fee. • So I thought this is a nice way to be like Robin Hood… legally steal from the bad guys and give to the poor guys • Result: Most can’t make a decision.

50. National security • How many terrorists are in the room today? • Way too expensive and inconvenient to secure every resource • Much cheaper to keep terrorists from entering the country • A reliable “lie detector” that can give you an instant, unambiguous result can save billions of dollars