Virtuous Capital: What Foundations Can Learn from Venture Capitalists essentially challenges the old ways Foundations approach giving that was "¨based the potential efficacy of a program"...and proposes that "the venture capital model can act as a starting point for foundations that want to help nonprofits develop the organizational capacity to sustain and expand successful programs."

Tony Chase stands out in any crowd. For starters, he has a JD and MBA from Harvard University, feats he accomplished concurrently. After spending a few years on Wall Street focusing on capital restructuring in media and telecommunications, he moved back to Texas. He taught at the University of Houston Law Center-he's on sabbatical this year- while figuring out how to raise the money to buy radio stations. He now owns six. In 1998, Leap Wireless International acquired the telecommunications company he started in 1996.

But what sets Chase apart is the company he founded, ChaseCom, a sales and marketing firm providing telecommunications products and services to small and mid-sized businesses and to ethnic minorities in underserved communities. His original business plan for the company included a philanthropic project: The Telecom Opportunity Institute (TTOI), a nonprofit organization that focuses on career training, mentoring, and increasing management and ownership opportunities in the telecommunications industry for at-risk youth, women and minorities in underserved areas."

During the mid '90's, Chase was troubled about the widening chasm between the technological haves and have-nots, especially as it effected technology education for at-risk youths and their communities. "I wanted the next company I started to be different, not solely devoted to the naked pursuit of profit. Not that profits aren't important, says Chase. He was also well aware of the technological workforce needs in Texas and California. "It's enlightened self-interest to make certain people are educated and well prepared as workers and consumers.

Philanthropy is nothing new. The Robber Barons of the late 19th century left a tremendous philanthropic legacy in the arts and education. Steel magnate Andrew Carnegie helped build libraries and established the Carnegie Endowment to promote world peace. The former home of Henry Clay Frick in New York has 19 rooms filled with paintings and other exhibits. Railroad tycoon Leland Stanford founded a university, unique for its time, that was coed, non-denominational and practical.

Today's moneyed elite-the instantly wealthy dotcom set- have an opportunity to make their own mark. But reports show that these younger barons of the new Gilded Age lack some of the generosity of their namesakes. The question is: How philanthropic will these new billionaires and multi-millionaires be, now and in the future?

Martha Farmer is a nonprofit consultant who has raised money for KLRU Public Television in central Texas, Leadership Texas and American, The Telecom Opportunity Institute, and the $30 million capital campaign for the Women's Museum in Dallas. For her the answer is-not philanthropic enough. "Many of the people who have made this money have been slow to come to the table," says Farmer. Some of the tech rich have a social conscience, but not anywhere near where they could be. Others don't have a philanthropic bone in their bodies. They need to be taught."

The 19th century radical reformers had Karl Marx's Communist Manifesto. The venture philanthropists have a 1997 Harvard Business Review article by Christine Letts, William Ryan and Allen Grossman. Virtuous Capital: What Foundations Can Learn from Venture Capitalists essentially challenges the old ways Foundations approach giving that was "¨based the potential efficacy of a program" often overlooking organizational issues that could make or break a nonprofit. The authors lay out a blueprint for a new way of approaching philanthropy utilizing the principles and techniques developed by venture capitalists. They propose that "the venture capital model can act as a starting point for foundations that want to help nonprofits develop the organizational capacity to sustain and expand successful programs."

Foundations sprouted, utilizing this approach, especially in the geographic areas where tech money is made; existing foundations changed course. Venture Philanthropy was touted as the hot, new cure-all. The promise wrote Neil F. Carlson, director of communications at the national committee for Responsive Philanthropy in Washington, DC, is that nonprofits will be stronger organizations with accountability and results and have committed donors.

Indeed, the legacy of today's tech philanthropists may be not what they donate, but how they contribute. For many of them simply writing a check just doesn't cut it. They are not satisfied with the traditional method of giving. They want to be involved, including seats on the boards of foundations and nonprofits. And they want accountability and results. The new breed researches, scrutinizing each cause as they would a potential business investment.

One needs look no further than Chase's involvement with Houston-based TTOI. Chase designed the curriculum. ChaseCom and SBC Communications, whose visionary chair, Ed Whitacre, saw the need, were the first two funders. Chase and Karen Jennings, SBC Senior vice-president, are on the board. The first programs are in at least one high school and community center in Houston and Los Angeles and will soon expand to a Native American reservation in New Mexico, the Rio Grande Valley, San Antonio and Oakland.

With only two full time staff, TTOI relies heavily on volunteers coming from Pacific Bell, Southwest Bell and ChaseCom. They undergo extensive training under the guidance of executive director, Brian Stevens and director of program development, Nicole Holmes. Critical elements of the program are including the children's caregivers and teaching life skills. "The students have to know it's as important to come to class on time as it is to work a mouse," says Chase. Student incentives include awards for perfect attendance, graduation, and certificates. He credits Jesse Jackson for the life skills and self-responsibility portion of the program. TTOI's Board of Directors is impressive which says as much about the charismatic Chase as it does TTOI.

"Tony did something unique," says Farmer. "He not only conceptualized and implemented TTOI, but also took into account the big picture. TTOI is about giving, teaching and job placement."

Tony Chase may stand out but he is not alone. In 1994 Catherine "Cate" Muther left her position as senior marketing officer at Cisco Systems with a lot of money. A lot. With two million dollars of her own money, she also started her own foundation, The Three Guineas Fund, named after a Virginia Woolf essay on philanthropy, with the intent of empowering women. After initially funding several projects, in 1999 she opened a nonprofit housed in 30,000 square feet of renovated warehouse to house promising women-founded technology companies.

The Women's Technology Cluster in San Francisco can accomodate up to 20 businesses. WTC provides space, all the requisite tech tools including computer networks, faxes and copiers plus mentoring and seminars and workshops led by legal, business, and technology experts. Muther's establishment of the WTC was motivated by the knowledge that less than ten percent of the engineers in the country are women and that huge roadblocks exist for women to access starting capital. A trip to Bangladesh in 1994 influenced Muther's concept of WTC. One of the critical elements of the program is that every start-up at the cluster is required to contribute two percent of their equity to be reinvested in the Cluster. Venture Philanthropy at work: provide the mechanism for the nonprofit to become self-sustaining.

Social Venture Partners (SVP) was the inspiration of Paul Brainerd, former Aldus Corporation president. The nonprofit, dedicated to addressing children's and educational issues in King County (Seattle), Washington, includes such heavyweights as founding member, Scott Oki, former vice-president of sales and marketing at Microsoft.

The vision of SVP is to build a philanthropic organization using the venture capital model. SVP is committed to giving time, money and expertise to create partnerships with nonprofit organizations. Members are encouraged to go beyond mere check writing and become involved whether through mentoring a child, fundraising, designing a marketing brochure or setting up a Web site. Since 1997, they have given over $900,000 to 13 King County nonprofits. This year an additional one million was given to 20 schools and children focused nonprofits.

Buoyed by its Seattle success, SVP traveled to Texas. David Lunsford, director of strategic investments for Dell Computer Corporation helped create the Austin Social Venture Partners. Formed in 1999, beneficiaries include Communities in Schools, the Girl Scouts-Lone Star Council for a technology center, and the Medical Institute, which focuses on sex education, for Web site improvement.

The venture philanthropy modeled foundations and nonprofits are found where the major tech growth and wealth resides from the Pacific Northwest to Silicon Valley, Texas and Silicon Alley. The Flatiron Foundation in New York encourages social entreprenuership and funds as one of its program areas, nonprofits that help children acquire skills for the digital age.

There's little doubt that venture philanthropy is leaving its mark on the non profit section. But Rona Feit, president and executive director of the Women's Economic Summit in Washington, DC wonders how nonprofit employees will handle the corporate venture mentality plus the funder's desire to be involved in running the organization. Business styles conflict.

The new breed of philanthropists demand involvement and accountability-in many ways a good thing. Questions arise, however, about the potential clash between corporate and nonprofit mentalities. Feit is concerned about the response from community grassroots organizations to this group for whom instant gratification takes too long.

The heavy emphasis on outcome concerns many. How do you measure the success or results of a chemical dependency recovery center or a halfway house for battered women or abused children. Is any of this money even going there or to the arts for that matter?

Carlson faults venture philanthropy for failing to address the fundamental questions of social and economic justice and take risks in the nonprofit sector like they do in business. "Social return on investment" is sometimes elusive and hard to quantify. If they fund a clinic for gay and lesbian youth that reduces the risk of HIV by 20%, is that good enough?

Carlson questions whether the needs of the nonprofits and the communities they serve will be secondary to the needs and interest of the donors. The new money isn't inundating gun control, immigrant rights or community organizing for low-income housing. Important too is the effect of the stock market fluctuations. A downtick in the market can wreck havoc with new donors' portfolios and test their philanthropic commitment. With many of the dotcom philanthropists talking of a three-to-five year commitment to a project, what happens after that?

Feit is glad that those who have the impulse to give are doing so and looking at how to make things better. It is disconcerting, however, that Chase, Muther and a few others are the exceptions, not the rules. More like them are needed: philanthropists who can bring to the table their business practice and results focus along with their long-term commitment.

"I want to share the vision that there is work to do in this world. We have to think outside of ourselves. Philanthropy and work for profit don't have to be inconsistent. They should work hand in hand," says Chase. However it shakes out, the world of philanthropy and nonprofits will never be the same. Boot-up, log-on to see where it all goes.

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