Earlier this year, Shervin Pishevar and I (Matt Galligan) were at an event called Summit at Sea, on a cruise ship, sailing to the Caribbean with a thousand like-minded entrepreneurs, social entrepreneurs, entertainers and more. Among the many sessions that we were able to attend one was on philanthropy, causes, and social entrepreneurialism. In all honesty I didn’t plan on attending that panel. Instead I thought I was heading to talk given by Scott Parazynski, an American astronaut that had also summited Mount Everest. Mistakenly I went to the wrong room and found myself in the talk on philanthropy. It’s funny how life can steer you in totally different directions that you may not have anticipated, leading you down an even better path. That simple mistake became the start of a big idea.
The talk on philanthropy was incredibly interesting. They talked about all the ways that people felt more empowered than ever before to give back through causes like Charity: Water, which brought to light the concept of socially encouraged micro-donations. The head of Johnson & Johnson’s philanthropic arm was there as well talking about ways that major corporations can give back, and the many ways they already do. But something felt missing to me - where is the discussion around early-stage companies? A startup guy myself, I was really disappointed to see that it wasn’t represented on the panel. I brought this up when the audience was able to ask questions. “So what about early-stage corporate philanthropy? Why don’t we hear more about that?”. Shauna Robertson of Crowdrise responded that I should talk with Shervin, and that he was asking the same questions.
Shervin and I got to talking, comparing notes. We tried to understand all of the reasons that a startup might not participate in philanthropy. One answer was that they didn’t have money to spend - a valid one. The next was that maybe these early-stage entrepreneurs didn’t actually have exposure to philanthropy or have any clue as to how they might contribute. This too was a valid concern. So armed with this information we asked how we might set out to solve this problem.
We looked at causes like the Salesforce Foundation and the Entrepreneur’s Foundation, that were already encouraging companies to give some of their equity and sometimes time and profit to causes. Then we outlined all the things we liked and didn’t like about the organizations already out there and came up with a primer for our “Mission: One” (an early name).
The idea was that we could encourage founders to give 1% of their equity to a cause of their choice. Then if that startup was acquired it would turn into immediate cash for that cause and hopefully a lot of it. We recognized that there aren’t a ton of companies that get acquired every year but believed that if we could get even a small percentage of all startups to commit to the pledge it could create a whole new sector of philanthropy - something I’ve mentioned before - “early-stage corporate philanthropy”.
After we had baked the concept a bit more, we hashed it out while on the boat with a fellow entrepreneur and philanthropist, Michael Birch. He really liked the concept and believed that it was a great way to get philanthropy built into the startup model. But he didn’t like the name. In no time at all he came up with “1% of Nothing”, citing that when a company starts, the value of the equity that the founders have is worth pretty much nothing. Indeed this is true - when a company gets incorporated, the stock is usually worth a tenth of a penny or less. It was bold, and would underscore just how simple this pledge is. We loved the name, and in just a couple of days the concept was born.
This idea was pretty close to Shervin and I, having both donated parts of our companies to a cause. My first company, Socialthing, through the Entrepreneurs Foundation of Colorado, donated 1% of our equity to the Community Foundation of Boulder. The idea was that if we got acquired, that 1% of equity would magically turn into a windfall of cash for that organization.
Fast forward a year, we were acquired by AOL. We had almost forgotten about the 1% that we gave to the Community Foundation. It’s a small number right? Wrong. That equity, after the acquisition was completed, turned into an actual cash donation to the CF. As turns out it was the single largest donation made to them in 2008. They’ve now since used that donation and through smart investing, our involvement had a hand in pushing forward a proposition that would increase funding for “at risk” schools in Colorado by $5m forever. It was hard for me to believe that the little equity that we gave up turned into such an agent for change.
Shervin and I decided that we couldn’t wait any longer. We had to try. We had to see if we could truly instill change that would make a difference. And that’s when the cause became far bigger than just the two of us. As news of our mission got out, we were inundated with emails, tweets, and messages asking for how people could pledge, how they could help.
Today we’re launching 1% of Nothing into beta. The idea is that an entrepreneur identifies a cause that they’d like to support and pledge, at a minimum, 1% of their equity to that cause. If and when that company gets acquired, goes public, etc., that equity then turns into cash for that cause, instantly. Additionally, the entrepreneur that donates their 1% actually gets a tax write-off benefit, sweetening the deal even more. But it’s not just about write-offs. It’s about creating a case for change. By donating their equity to a cause their interests are now aligned together. And it’s not just for brand new companies, the structure of the 1% allows any company at any stage to pledge.
When we come out of beta in the future, our web presence will be dedicated to educating entrepreneurs about philanthropy, identifying those that have taken the pledge and who they’ve given to, and creating a hub for early-stage corporate philanthropy. For now we’re just launching our early pledge page.
Our goal is for early-stage corporate philanthropy to become an integral part of the startup world. We believe that just 1% of equity can potentially lead to 1% of worldwide change. That change could bring about 1% of newfound hope in the world. And if that newfound hope brings about 1% of a difference in the world our mission has been solved.
We encourage you to identify your cause, make the 1% pledge, and make a difference. If you’d like to know more or understand more please get in touch with us. You can tweet us or you can email us at “info [at] 1percentof [dot] org”.