Business Guest Universal philanthropy: Even cash-strapped startups should give back November 10, 2012 3:33 PM Payam Zamani Large tech companies have a rich tradition of “giving back” and more of their billionaire founders than ever pledging to give half their wealth to charity. But titans like Google, Apple, Facebook, and Microsoft aren’t the only companies donating money to social causes. Startups, even those strapped for cash, are also finding creative ways to support social causes. As an entrepreneur I know how difficult it can be to even think about charity when you’re hurting for cash, not yet profitable, and working 12-hour days just to keep on top of the demands associated with hyper-growth. But I also know most Silicon Valley entrepreneurs have a unique DNA that compels them to not only create success and wealth for their companies — they also give back to the community at large. While some of Silicon Valley is comprised of a few massive companies, it is primarily made up of thousands of startups. If every startup found a way to participate in philanthropic giving in some way, no matter how small, the collective impact would be huge. Startups don’t have their own foundations, heaps of cash to give away, or lots of time to run charitable programs. But every company and every individual can find a way to give back, supporting the idea of “universal philanthropy.” And there are creative ways to go about doing so. Here are my five recommendations for startups to consider: Find the right match Choose an organization to support that fits with your company’s values. Whether you fund one charity for the long haul, or choose a new one each year, it’s important the organization supports a program aligned with your company’s vision and values. My company chose to support the Mona Foundation. Mona supports causes our management and employees believe in, including education for women and girls, as we believe mothers will often be the first educators of future generations. The organization does not promote traditional charitable giving, but rather they support social and economic development. They look for schools organized and established by people who live in the communities they serve and support projects that have long-term sustainability. This was an entrepreneurial model that resonated with our company’s DNA. To select your charities, do a bit of research, read through their multiyear plans, visit the places they’re doing work, and ask a lot of questions. When you find the charity or charities that “fit” with your company’s vision, it will be obvious. In my company’s case, we actually traveled to Africa and visited a few of the projects that Mona was supporting. Depending on the size of the foundation and the relative size of your contributions, it may make sense to ask for a seat on their board of advisers or directors. Give 1 percent of your EBIDTA or profits Once you’ve identified the charities you want to support, consider setting up a simple, ongoing way to give. The easiest way for a startup to donate money is to give 1 percent of your EBIDTA. This model works well for startups for two reasons. First, it’s simply calculated as part of your budget and becomes a line item you can expect from year to year. Second, it’s a profit-sharing model that rewards the charity with more funds as your company improves performance. If you go through lean times, the charity gets less. The 1 percent of EBIDTA model gives an extra incentive to everyone in the company to deliver the most profitable growth possible. Get employees involved If you involve your employees in your charitable program from the beginning, they’ll be more eager to support the cause. Invite representatives from the charities you support to your office for special events, allow employees to volunteer at the charity during work hours, and support them if they want to get more involved. At my company, we have gone on trips to Tanzania and Haiti to experience the actual projects first-hand. Many of our employees choose to contribute some of their salary to the foundation that we’ve adopted or donate to charities of their own — even though we don’t require it. By creating a culture of giving, employees will participate on their own accord and will further help the overall impact. Give, even if you don’t have profits Many startups aren’t yet profitable, but that doesn’t mean they can’t donate to charity. In the absence of profits, you can give 1 percent of your company’s equity to a charitable organization or foundation. This is an incredibly generous gift, because you’re donating your company’s future upside. It’s fairly straightforward to draw up a contract giving 1 percent of your company to a charity. I would argue every company can spare 1 percent of its value for a good cause. Become an agent of change Creating a culture of giving within your own company is just the first step toward fostering universal philanthropy in Silicon Valley and beyond. Aim to set an example by publicizing your charitable endeavors and encouraging other startups to follow suit. Host industry events where you invite charities to present, and use social media to share your experiences with charitable giving. Many startups believe they don’t have the time or resources to be philanthropic, but once they learn about innovative charitable models, they’ll realize there are always ways to give back. Payam Zamani is a veteran Silicon Valley entrepreneur. As the CEO of Reply.com, Payam introduced the concept of adopting a foundation as part of his business plan with the goal of making philanthropy part of the company’s corporate fiber. For the past seven years, Reply.com has been donating 1% of its profits to the Mona Foundation to help build schools across the globe. In 2009, Payam joined Mona Foundation’s board of advisers. In his spare time, he also serves on the board of directors or advisers for SoulPancake, Fundly, Les Concierges, TheRealReal, and CrowdMob. Hand holding the heart image via file404/Shutterstock We're studying conversion rate optimization. Take our quick survey and we'll share the results with you.