Philanthropy Class: Peter Hero, CFSV (10/21/2004)

Since taking over the Community Fund of Silicon Valley in 1988, Peter Hero has grown the asset base from 10M to 670M. The bulk of the money is in "Donor Advised Funds" and "Supporting Foundations". But by actively working with donors, CFSV is able to help ensure that local non-profits are funded. Before he gave his talk, the members of the class listed (from the case) some of the initiatives that he had taken to grow CFSV:

1. Focusing on Donor Advised Funds rather than trying to raise unrestricted funds
   
2. Forming ties with professional advisers (estate planners, etc) who might refer donors (the infamous "tuna fish lunches")
   
3. Offering a wide variety of "products" like charitable lead and remainder trusts, supporting organizations, donor advised funds, etc.
   
4. Providing research about the community and local non-profits (through "Partners in Philanthropy")
   
5. Convening meetings among non-profits (like arts groups that led to a joint endownment fund drive raising some $12M)
   
6. Working with companies, inspired by the fact that more philanthropy in Silicon Valley is influenced by the work life, not the religious life
   
7. Becoming a service provider for managing the endowments of corporate foundations and other non-profits

Peter said that he viewed the capabilities of the CFSV as a trusted intermediary who could:

1. Convene (meetings of donors, non-profits, community)
   
2. Connect (donors with each other, non-profits with each other, non-profits to donors)
   
3. Endow (non-profits)
   

He specifically mentioned SV2, a group of younger donors that was initially proposed by Laura Arrillaga, as an example of these connections. Some 170 people give $2,500 - $25,000/year each, and jointly choose where it is directed, typically in a highly "engaged" fashion (providing time and talent as well as money). This is an example, he said, of the philanthropic style reflecting the culture of the area. (He cited Annalee Saxenian's Regional Advantage, a good book comparing Silicon Valley with the Route 128 region near Boston).

He answered a lot of questions, such as the challenges that CFSV faces:

• Educating donors on payout rates (right now, it's much higher than the "sustainable" 5% rate)
  
• Encouraging donors to augment grant making with "field of interest" gifts
  

He also talked about some of the opportunities that CFSV is currently attacking or planning:

• Doing more research, a low cost, effective way to establish credibility
  
• Renewing ties with the older families that started the foundation and may have felt a bit ignored when high-tech wealth was the focus of the Valley.
  
• Receiving gifts of real estate from long-time property owners (they've received some $100M of such gifts so far)
  
• Talking directly to potential givers rather than always going through financial intermediaries
  
• Appealing more directly to minority communities (Hispanic, Indian) in order to help them find places in the local community that they can support.
  

Peter also answered frankly the question about whether CFSV invested its endowment in socially responsible investments: No. The purpose of the endowment is to maximize the money available for grants, and constraining investment options in that way can have significant negative impact. Besides, he said, other than tobacco, it's hard to determine what is socially detrimental. Is Nike exploiting child labor or providing employment in areas without enough jobs?