This Little-Noticed Nonprofit Takes in Billions From Silicon Valley’s Wealthy Elite
The Silicon Valley Community Foundation has become a game-changing philanthropic organization, with donations from the likes of Mark Zuckerberg and Reed Hastings.
By Andy Serwer
At first blush, Castro Street in downtown Mountain View, Calif., looks to be a perfect little slice of Silicon Valley.
Partly closed to vehicular traffic, at midday the street is filled with a diverse throng of shiny, happy people dining al fresco at myriad ethnic restaurants. Mountain View is home of not only Google parent Alphabet, but also Intuit and Microsoft’s Silicon Valley campus, as well as scores of lesser-known tech companies.
At first blush, Castro Street in downtown Mountain View, Calif., looks to be a perfect little slice of Silicon Valley.
Partly closed to vehicular traffic, at midday the street is filled with a diverse throng of shiny, happy people dining al fresco at myriad ethnic restaurants.
Mountain View is home of not only Google parent Alphabet, but also Intuit and Microsoft’s Silicon Valley campus, as well as scores of lesser-known tech companies.
It’s more emblematic than ironic, however, that front and center in this techno-Avalon, a weathered, middle-age woman sits on the sidewalk asking for spare change.
A person with their hand out barely merits a glance nowadays, but in Mountain View it’s a reminder that the San Francisco Bay Area has one of the nation’s bigger income-inequality gaps.
(PHOTOGRAPH BY GABRIELA HASBUN)And there’s one more thing.
The woman asking for money is sitting in front of 444 Castro Street, a small office tower that houses the headquarters of the Silicon Valley Community Foundation, or SVCF, a powerful nonprofit organization funded by Silicon Valley’s wealthiest to aid those in need.
You might not have heard of the SVCF, but looking at the foundation provides a window into the thinking of some of the world’s richest people.
And the foundation’s primary fund-raising strategy, namely donor advised funds, or DAFs, can be employed by us mere mortals as well as the ultrarich.
In recent years, the Silicon Valley Community Foundation has become a game-changing philanthropic organization—ingesting billions of dollars of donations from the likes of Meta Platforms founder and CEO Mark Zuckerberg and his wife, Priscilla Chan; billionaire and former eBay President Jeff Skoll; and Netflix co-founder and chairman Reed Hastings—and dispersing a record $4.58 billion in grants last year.
That’s many billions more than legacy foundations like Ford, Lilly, Mellon, and Robert Wood Johnson.
In fact, SVCF is now second in annual giving behind the Gates Foundation, which says it plans to spend $8.6 billion this year.
“There’s tremendous wealth here in Silicon Valley,” says foundation CEO Nicole Taylor.
“In their day jobs, these people are changing the world.
They feel the same way about their philanthropy.”
The SVCF’s explosive growth is intertwined with the tech industry’s rise in the Bay Area, resulting in the greatest wealth creation in the history of the planet.
Simply by dint of proximity, the SVCF is sitting on a gold mine.
The foundation also owes its success to some old-money area residents and early-day Silicon Valley pioneers who forged the SVCF from two predecessor organizations.
Having said that, the SVCF’s trajectory, not unlike the uneven path of a hot tech start-up, has had some bumps along the way.
A critical facet of the SVCF has been its structure as a community foundation and its primary fund-raising vehicle, DAFs—which have links to John D. Rockefeller and Thomas Edison.
SVCF is now the nation’s largest of some 900 community foundations, which are grant-making public charities that typically focus on improving the lives of people in a defined local geographic area, raising money from individuals, families, and businesses to support nonprofits.
Banker Frederick Goff, who had caught the eye of John D. Rockefeller, established the first community foundation in Cleveland in 1914.
Goff wanted to create a permanent endowment that would benefit the citizens of greater Cleveland in perpetuity, as opposed to the “dead hand” of money locked up in private trusts.
DAFs were founded two decades later at the New York Community Trust, which was jump-started by a hefty donation from John D. Rockefeller Jr. In 1931, William Barstow, one of Thomas Edison’s top deputies, came up with the idea of a donor-advised fund.
A donor-advised fund is a charitable investment account that can be funded with cash, securities, or other assets.
The account can sit at a community foundation or at a charitable arm of an institution such as Fidelity, Schwab, or Vanguard.
The funds technically belong to the charity, but the donor can direct which nonprofit will receive the money.
Donors also are allowed to take a full tax deduction on the amount contributed each year and can parcel out the money as they see fit over a number of years as it grows in the account tax-free.
Netflix CEO Reed Hastings— who donated 40% of his Netflix stock, worth some $1.1 billion, into a DAF at the Silicon Valley foundation earlier this year—points out other advantages.
“My wife and I have chosen not to build and staff a foundation,” says Hastings, who has had a relationship with the SVCF going back more than 15 years and gives mostly to education efforts like KIPP, the charter-school network, and historically Black colleges.
“Instead, the DAF model becomes the virtual foundation.
SVCF takes care of all the paperwork and everything.
It’s efficient because they give you all the services of a foundation.”
The growth of DAFs has been “fast and furious,” according to the Chronicle of Philanthropy.
Today there are almost two million DAF accounts, up from some 218,000 a decade ago.
Total assets in DAFs have quadrupled to $229 billion from $57 billion, while annual contributions into DAFs have grown from $17 billion to $86 billion, according to the National Philanthropic Trust.
And as more Americans have opened DAFs, the average account size has dropped from $261,000 to $117,000 today.
But with this growth has come controversy.
Some progressives and philanthropy experts have criticized DAFs, saying they warehouse money for the wealthy, meaning that money can sit in an account for years instead of being distributed directly to those in need—and that it is therefore unfair to grant a full tax deduction in year one.
There is also evidence that higher contributions to DAFs mainly displace contributions to active operating charities, according to Joyce Beebe at the Baker Institute at Rice University.
Supporters of DAFs counter that the average payout ratio of DAF funds was 22.5% last year, higher than private foundations, which are required only to pay out 5% a year.
The Silicon Valley foundation mandates that if a DAF isn’t active within two years, it will pool and distribute the funds through its endowment fund.
Another issue is the lack of transparency of DAFs and community foundations.
A report from Stanford Law School notes that “gifts made through a DAF can be anonymous, with only the DAF sponsor listed as the donor.”
When Barron’s asked for names of the foundation’s top donors and the amounts they have given, the SVCF said it doesn’t provide that information about its donors.
Unlike a for-profit company or even a private foundation, community foundations don’t have to disclose investment details.
In 2017, SVCF assets increased by $5.3 billion.
When Barron’s asked the SVCF what this was, the foundation said, “SVCF had been gifted cryptocurrency assets” and that “the growth in our net assets in 2017 was in large part due to the fair value of the cryptocurrency holdings.”
In its 2023 annual report, the foundation listed more than $2.1 billion of investments in Central America and the Caribbean.
The foundation said it has “various investments in our portfolios that are formed and domiciled in the Caribbean islands,” which is common “particularly for tax-exempt investors like SVCF.”
The Silicon Valley Community Foundation is a bit of a misnomer.
Of the $4.58 billion parceled out to more than 5,500 nonprofits last year, only $186 million went to nonprofits in SVCF’s “two core counties—San Mateo County and Santa Clara County.”
Almost $2.9 billion went to Alameda (home of Berkeley) and San Francisco counties. Of that, over $2 billion went to two entities founded by Meta’s Mark Zuckerberg and his wife—the CZ Institute for Advanced Biological Imaging and the Chan Zuckerberg Biohub, the latter being “a group of nonprofit research institutes that bring together scientists, engineers, and physicians with the goal of pursuing grand scientific challenges,” with offices in San Francisco, New York, and Chicago.
The foundation says that “supporting local causes and global issues is not an either/or proposition.
It is both/and.”
Of course, SVCF does support local organizations, such as the food bank Second Harvest of Silicon Valley based in San Jose, which received $17 million last year.
That money funded meals for more than 500,000 people at 900 area sites—some 10 million pounds of food each month.
Second Harvest CEO Leslie Bacho took Barron’s on a tour of its 75,000 square foot warehouse, which resembles the operations of a Walmart food center, with hundreds of pallets, forklifts, and large trucks vigorously moving food about.
Most of the people sorting and packing food are volunteers, many wearing T-shirts from prominent tech companies.
Second Harvest’s corporate support comes from a who’s who in Silicon Valley, including Applied Materials, ServiceNow, and Oracle.
“The cost of living here is so incredibly high that you could be working, but if you’re in a low-wage job, you’re still not making enough money to pay your rent, your utility bills, and have money left over for food,” says Bacho.
In fact, inequality here is striking.
According to a new report by Joint Venture Silicon Valley, the Bay Area’s 50 billionaires hold 17% of all liquid wealth in the area, while the bottom 50% of the population holds just 1%.
Tech fortunes garner most of the headlines, but another path to riches in Silicon Valley has been real estate, as area developers converted bucolic fruit orchards into campuses for the likes of HP Inc. and Apple.
A number of these builders became billionaires, like the late John Arrillaga, whose daughter Laura Arrillaga-Andreessen was on the SVCF board and is married to tech investor Marc Andreessen.
Other such developers are Arrillaga’s partner Richard Peery, who has contributed to the foundation, and John Sobrato, a minority owner of the 49ers whose son served on the foundation’s board.
Slightly smaller fortunes have supported the SVCF, too, such as that of Susan Ford Dorsey, president of the Sand Hill Foundation.
Dorsey’s late husband, Tom Ford, struck gold developing real estate along Silicon Valley’s Sand Hill Road, which became the cradle of the venture capital business with names like Kleiner Perkins, Sequoia, and New Enterprise Associates occupying some of the most expensive commercial real estate in the country.
Ford, who also accumulated wealth by investing in these budding firms’ funds, began giving to the Peninsula Community Foundation—one of the SVCF’s two predecessor organizations—in the 1980s and also set up his own nonprofit, the Sand Hill Foundation.
Susan partnered with him on the couple’s philanthropic efforts and led them herself after Ford died in 1998.
Right before the pandemic hit in January 2020, Ford sold her company’s real estate holdings— 3000 Sand Hill Road and some properties down the road—for $610 million, according to S&P Global, to DivcoWest, a real estate investment firm.
As Tom Ford had gifted 20% of the properties to the Peninsula Community Foundation, the SVCF benefited mightily from the sale.
Ford Dorsey, who later remarried, has focused her giving on the environment and needy families in San Mateo County.
“I just love getting to know these people who run these amazing organizations and how they serve people,” she says from her office at 3000 Sand Hill Road, which she leases from the new owners.
“I find that deeply, deeply meaningful. I’ll keep doing this until I can’t do it anymore.”
The Silicon Valley Foundation was founded in 2006 through an uneasy combination of the aforementioned Peninsula Community Foundation in San Mateo and the Community Foundation of Silicon Valley in Santa Clara County, to the south.
“So the Hatfields and McCoys got engaged,” reads a SVCF document describing the merger.
Emmett Carson, who had previously run the Minneapolis Foundation, one of the nation’s oldest and largest community foundations, was named CEO of the new organization.
“He was a thoughtful and influential leader, really focused on racial equity,” says a former SVCF employee of Carson’s.
“He was ahead of the curve in understanding how to build staff, programs, and strategies.”
Carson was indeed focused on growth. Former employees recall that he would begin meetings with a chant, calling: “We’re as small…” and employees responding: “…as we’re ever going to be!”
In 2018, the Chronicle of Philanthropy published an article about alleged abusive behavior by one of Carson’s lieutenants, a top fund-raiser.
The article said that Carson was told of the problems but didn’t act, allegedly because he was so keen on growing the foundation.
Carson later tweeted, “As CEO of @siliconvalleycf I am responsible for workplace culture,” adding that his priority was listening and “fixing this.”
“It was a really tragic and terrible situation,” says Sandy Herz, an SVCF donor.
“It certainly gave me pause to work with them then.
Emmet’s chant was emblematic of this idea that we’re supposed to grow the assets, not that we’re supposed to be investing back in the community.”
Carson and his subordinate left the foundation, and in December 2018 the board brought in Taylor.
Raised in Los Angeles by a single mother immigrant from Jamaica who worked as a domestic, Taylor received a full scholarship to Stanford.
“We were poor and didn’t have much of our own.
And I was really good in school,” Taylor tells me.
She later worked for a number of philanthropic organizations—including College Track, co-founded by Laurene Powell Jobs—and at Arizona State University.
Taylor had a mandate for change.
“Most of my career has either been around fixing, turning things around, or growing it to the next level,” Taylor says.
The SVCF?
“It was a turnaround.
Now it’s take it to the next level,” she says.
Taylor worked on restructuring the organization.
“Downsizing made sense to me,” says an employee who was there at the time.
“Under Emmett’s leadership and the rapid asset growth, there was a rapid increase in staff.
One of the first things Nicole did was rein that back in.”
“I think she’s been a great leader,” says Ford Dorsey.
“She has a really good background and, as she said, we wanted to bring the community back into the phrase ‘community foundation.’
That’s the right focus.”
Some former employees say that management still has work to do at the SVCF, pointing to high attrition, including the departure of a number of senior team leaders over the past year.
The SVCF says it has experienced slightly higher attrition than is typical for a nonprofit, “but not outrageously so.”
The foundation says it expects attrition to decline this year, saying in a statement: “This is due in part to the significant effort Nicole, management, and the rest of the team has put into rebuilding the internal culture at the Foundation….Given the nature and complexity of the work and the high-profile donors, comparing SVCF to other community foundations really is apples to oranges.”
Reputation is especially important to the SVCF because its donor base is so concentrated.
In 2022, 86% of the foundation’s contributions came from seven donors; in 2021, 80% came from nine donors.
And the DAF model can also be a relentless beast to feed.
Recall that the average DAF spends down some 20% a year.
Even given investment returns and fees from managing DAFs—the SVCF has a sliding scale that starts at 1% of assets for the first $100,000—the SVCF and other DAF-based nonprofits are under pressure to raise more money to cover operating costs.
Salaries and other compensation alone amounted to nearly $20 million last year at the foundation.
(Taylor’s salary and bonus were just over $1 million.)
Investment firms like Fidelity, Schwab, and Vanguard don’t face the same pressure, as they may treat DAFs as a loss leader, add-on service, or a way to garner more assets for their funds in which their DAFs would invest.
“It’s a model that depends on constant fund-raising,” says a former employee.
“As long as your fund inflows are positive, you can support the pervasive gap between your operating expenses and what you’re deriving from fees off the asset base, even though you got $10 billion in assets,” (the SVCF’s most recently reported number).
Maintaining SVCF’s reputation, garnering donations, and tending to grantees ultimately falls on Taylor.
“My job is about changing hearts and minds and not just about philanthropy,” she says.
“I have a lot of work ahead.
“We live in an inequitable world, and our fates are inextricably linked to those who are not doing as well.
We have a lot of people who’ve done very well here in Silicon Valley, and we have people who are serving those wealthy people living in RVs with their children.
They’re waitstaff in restaurants.
They’re cleaning office buildings.
They’re preparing and picking food.
Is your life really great if that’s part of your reality?”
Taylor’s rhetorical question speaks to one of the most vexing issues of our time.
It’s up to her to make sure the Silicon Valley Community Foundation stays on track to address it.
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