Unit 1: Why make an equity pledge?

Alicia_Schmidt — Thu, 11 Jul 2024 17:30:35 GMT

We could give you hundreds of reasons why to donate equity. Ultimately though, each argument boils down to two essential points. It’s the right thing to do. And the smart thing to do.

It’s the right thing to do.

The world needs your leadership.

“The most pressing issues of our time are not going to be solved by the government and nonprofits alone. We need the resources, technology, funding, influence, and talent of companies working alongside with other sectors to tackle and solve these challenges.”

-Amy Lesnick

Chief Executive & President, Pledge 1%

We have a moral obligation.

“In the last 30 years, the innovation economy has created more value than any other period in the history of mankind, yet this value has not been shared broadly. Setting aside 1% of our company’s equity for social impact is just one small way for us, as leaders, to give back to the communities where our customers, employees, and partners live and work.”

- Sameer Dholakia,
Partner, Bessemer Venture Partners

Former CEO,SendGrid/Twilio,

We didn’t get here alone.

“I believe that we all have a responsibility to give back. No one becomes successful without lots of hard work, support from others, and a little luck.”

- Ron Conway,
Founder & Co-Managing Partner, SV Angel

We have the power to drive impact at scale.

"Your actions will inspire and empower others to follow your lead. It is an obvious future to me that in 10 years the majority of startups and VC backed companies will have implemented a program like this. Imagine the potential when critical mass has taken hold and this (equity pledge for social impact) becomes the default.”

- John Hering,
Co-Founder & Executive Chairman, Lookout

It’s the smart thing to do.

Attract and Retain Top Talent

69% of workers say having societal impact is a strong expectation or deal breaker when considering a job (Edelman Trust Barometer 2023).
57% reduction in turnover for employees actively engaged in company giving and volunteering efforts (2018 Benevity Engagement Study).

“Employees want to be proud of the companies they work at. In this super-competitive environment for top talent, I believe that DocuSign’s strong and visible commitment to Pledge 1% (and to our DocuSign Impact program) has positively impacted our ability to recruit and retain an incredible team.”

- Dan Springer,

Former CEO, DocuSign

Strengthen Customer Relationships

77% of consumers are motivated to purchase from companies committed to making the world a better place (AFLAC CSR Survey 2019).

“At SIGNAL, Twilio’s annual customer conference, the sessions that spotlight the amazing impact of our nonprofit customers and the way they use Twilio's technology to address social issues are consistently rated as our most popular sessions. All of our customers are humans too and want to partner with a company that is having a positive impact in the world.”

- Jeff Lawson,
Co-Founder & CEO, Twilio

Attract Investment

73% of investors believe efforts to help improve society and the environment contribute to return (AFLAC CSR Survey 2019).

“Salesforce Ventures is focused on creating the world’s largest ecosystem of enterprise cloud companies. Values alignment is a core factor we look for when considering our investments, and we believe that truly great companies care about all stakeholders - customers, employees, partners, communities, and the environment. We’re proud that more than 120 of our portfolio companies are members of the Pledge 1% movement.”

- Paul Drews

SVP, Managing Partner, Salesforce Ventures

Drive Revenue

72% of B2B buyers - say they are more likely to buy from firms that do well on socio-political issues they consider important (AMA Future of Marketing "The New B2B").
Companies with high employee engagement are 21% more profitable than ones with low engagement (Zenifits, “Employee Retention a Bigger Problem Than Hiring for Small Business).

“We founded Flexport.org because we believe we have a huge opportunity to use our technology and expertise to empower our entire ecosystem - customers, partners, and NGOs - to realize their missions for humanitarian aid and environmental sustainability. As an added benefit, Flexport.org programs offer a terrific opportunity for us to partner with new companies that may eventually convert to customers.”

- Ryan Petersen,

Founder and CEO, Flexport

Prepare for IPO

“Reddit’s announcement of our Pledge 1% commitment was well-received by the press and the public markets. In fact, NYSE included the creation of ESG and DEI programs in their IPO Readiness checklist.”

- Steve Huffman

Co-founder and CEO, Reddit

Common Misconceptions

“We should have done this earlier. We missed the window.”

Numerous companies have pledged equity on the road to IPO. Airbnb, Olo, Pager Duty, Remitly, Reddit, Rubrik, SendGrid, Toast, Twilio, Unity, Upwork, Zuora and others have formalized their equity commitment for social impact less than a year (and in some cases, just a few months) before filing their S-1. Donating equity can be accomplished at any stage prior to the IPO.

“My board would never approve.”

Board members from top firms believe in the power of making a pledge for good. Investors and Board members from top firms including Accel, Andreessen Horowitz, Bain Capital Ventures, Battery, Benchmark, Bessemer Venture Partners Capital G, Foundry Group, IVP, Lightspeed, Mayfield, NEA, Salesforce Ventures, Sequoia, Techstars, USVP and others and others have supported their late-stage CEOs in joining the Pledge 1% movement and setting aside equity for social impact.

Check out this list of Boardroom Allies and investors from leading venture capital firms who have committed to supporting their portfolio companies in setting aside equity for social impact.

“We can get to this ... after our IPO.”

It can be easier to make the pledge prior to filing your S-1. Setting aside corporate equity prior to filing your S-1 is significantly easier than doing it after you go public. Donating equity for social impact may become significantly more difficult post-IPO given the substantial increase in shareholders and regulations.”

“I don’t have the bandwidth for all this entails.”

You don't have to formalize your impact programs now. You can sort out the details of your strategy and program later. Executing your social impact equity commitment is the ONLY element with a countdown clock.

You do NOT need to set up a foundation. You can work with a grant making partner to easily set up a corporate donor-advised fund which handles all of the administration.

Similarly, you do NOT need to select your causes or impact strategy. You’ll get to all of that when you hire the right person to lead this effort down the road. And Pledge 1% is here to help you, your Board, and your team at all phases of your journey from choosing a philanthropic partner to analysing tax and accounting considerations to helping you find a social impact leader.

"It’s too early to think about building a social impact program, I need to focus on growing my business.”

It is never too early to set aside equity. Founders and companies may issue shares directly to, or enter into a warrant agreement with, a philanthropic partner or operating nonprofit to formalize an equity set aside at any stage prior to a liquidity event, be it at the time of corporate formation; or prior to or in conjunction with a financing round. It is never too early to show the world that you are a company that cares about giving back.

Check out the Personio, SuperSocial , Crunchbase, Skill Jar and Tiger Eye Case Studies.

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