Charity at the tip of a unicorn

[Pledge 1]

By Gillian Tett.  Originally published in the Financial Times.

If you are strolling around downtown San Francisco these days you might notice an imposing superstructure springing up, changing the skyline. This is the new headquarters of Salesforce, the cloud computing company that was founded by Marc Benioff in 1999 and has since exploded at startling speed. (Among its clients is the FT.)

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But Salesforce is using more than concrete to change the landscape — it is trying to use philanthropy too. In recent years, the group has run a big charitable foundation, which dispenses tens of millions of dollars of aid each year, along with donations of employee time and Salesforce products.

There is nothing unusual about that: most tech companies today run philanthropic programmes, and most newly minted billionaires are giving money away. Just look at how Facebook founder Mark Zuckerberg has joined forces with Warren Buffett and Bill Gates to implement a pledge to each give away at least half their wealth.

But what makes the Salesforce initiative striking is that the company started doling out cash as soon as it was founded, long before it could aspire to create a 61-storey San Francisco skyscraper. More interesting still, when Benioff’s company made its move into philanthropy, it did this by placing 1 per cent of the equity into a foundation — creating a windfall when Salesforce went public in 2004 for a $1.1bn valuation.

These days, Salesforce is on a mission to persuade other start-ups to do the same via a “1-1-1” pledge (a framework whereby companies give away 1 per cent of their equity, employee time and services for social good). This year, for example, it has teamed up with the Robin Hood Foundation, an organisation that seeks to address the problems of poverty in New York, to promote that pledge on the East Coast.

But the really big prize is Silicon Valley, which is now home to a herd of so-called “unicorns” — start-ups that have not yet floated on any stock exchange but are already valued at more than $1bn. For if those unicorns were to earmark 1 per cent of their equity for charity, it could eventually deliver a philanthropy bonanza. “We think that start-ups should be thinking about philanthropy right from the start,” says Suzanne DiBianca of Salesforce. This is a campaign to turn the tip of those unicorns’ horns into a force for good.

Not all unicorns seem to be convinced by this pitch, however. There is no sign that, say, the founders of Uber — arguably the most (in)famous unicorn around today — are about to give 1 per cent of their company to charity. Nevertheless, dozens of start-ups have signed up to variations of the 1-1-1 pledge, including Seth Levine (founder of Foundry), Dan Siroker (Optomizely), Ron Conway (SV Angel), Scott Farquhar (Atlassian) and Krista Marks (Simbulus).

To my mind, this is a fascinating development. In the past, it was generally assumed in corporate America that people donated money after they had become successful and rich. It was also assumed that companies ran corporate social responsibility programmes only when they had profits to disperse. But what the Salesforce model is trying to do is build philanthropy into the company from the very start. And that reflects a subtle shift in how Benioff and his ilk view companies — and capitalism.

For instead of assuming that companies are just about shareholders, or that corporate social responsibility sits in a separate mental or structural box from business, the 1-1-1 pledge tries to put them into a wider vision of social interest.

This is different from the Wall Street ethos — the concept of capitalism that people such as Buffett espouse (he does not believe in giving chunks of the company to philanthropy because it goes against shareholder interests). Indeed, the language of the 1 per cent pledge has more in common with centre-left ideas, or the 19th-century British Quakers who created companies such as Cadbury. “Companies can do more than make money,” Benioff insists. “They can serve others

[too].”

If you want to be a cynic, it is temptingly easy to scoff. After all, 1 per cent of your wealth is not that much to give away (the traditional Christian church has usually demanded a 10 per cent “tithe”). And when the tech sector talks about philanthropy today there tends to be a hefty dose of self-interest involved — or, more accurately, self-preservation. The wild success of Silicon Valley is fuelling rising inequality, and savvy entrepreneurs know they need to do something to defuse the inevitable backlash.

To be fair to Salesforce, it should be noted that it started its 1-1-1 pledge well before the current boom. And even if you dismiss the idea as hype, it is worth pausing to consider what might happen if company executives of all stripes assumed that it was normal “business” to give part of their enterprise away. Would that make capitalism more effective (and loved)? Or would it muddy the waters in a dangerous way?

Personally I think Salesforce has it right — but the debate will continue long after the tech bubble has burst. Better keep watching the tips of those unicorn horns.

Originally posted: October 30th, 2015