Local Resources for Local Needs

A look at Silicon Valley’s surprising disconnect and opportunities that all local funders should consider.

The Northern California region of “Silicon Valley” is a leader for high-tech innovation, accounts for one third of the venture capital investment in the United States, and boasts the most millionaires and billionaires per capita.

According to a 2012 study by CFInsights, which compared data from 31 US community foundations, including those operating in major metro areas like Silicon Valley, giving to local causes from donor-advised funds averaged 68 percent nationwide—more than double Silicon Valley’s rate. In 2011, Silicon Valley Community Foundation, the second largest community foundation in the country, with more than $2 billion in assets, awarded only 33 percent of its $238 million total grants to local causes.

Over the past five years, giving to local nonprofit organizations (excluding higher education and large institutions) by the top foundation contributors in the Silicon Valley counties of San Mateo and Santa Clara declined by 20 percent—from $55.5 million to $44.3 million—likely as a response to the economic downturn. The majority of these foundations count giving to local causes as a small percentage of their overall granting budget. The handful of foundations that do focus a significant part of their resources in support of local, community-based organizations have overall giving budgets that are relatively small in size, with a few exceptions.

How is it that a region burgeoning with new wealth and so noteworthy for its overall philanthropic giving, is uniquely spare in providing for its own neediest causes and populations? To better understand these trends, we at Philanthropy Futures, with support from the David and Lucile Packard Foundation’s local grantmaking program, took a deeper look. We interviewed 26 leaders from nonprofits, county government, and both private and corporate philanthropy, and reviewed the foundation’s 2012 survey data from 111 local grantee organizations. According to this data, the overall wellbeing of the Silicon Valley community and its nonprofit sector face unprecedented threats.

Leaders we interviewed noted a growing chasm created by wealth in the region and intensifying economic hardship for expanding groups of residents, which in turn increases demand for many nonprofit services. Those interviewed cited four main threats to community and nonprofit wellbeing in Silicon Valley—threats that resemble trends nationally:

1. The economy remains challenging for most.

Despite data from the Brookings Institution, Milken Institute, and others showing that Silicon Valley is now back on top, the region’s most vulnerable residents—especially children and families—face worsening conditions, including growing unemployment and loss of wages, rising rental rates for housing, large government funding cuts including city and county layoffs, reduced federal food aid, the elimination of redevelopment agencies, and the loss of community development block grants. The cost of living in the region is one of the highest in the country, with an average home price nearing $700,000. Only 83 new affordable housing units were approved last year, and food stamp participation has hit a decade-high level of five percent, according to the 2013 Silicon Valley Index.

2. Unaddressed areas of growing need

Many serious social issues remain largely unaddressed due to a shortage of community leadership, as well as a lack of public awareness and funding support. These issues include food security, housing and homelessness, foster care, and public education. According to our own analysis, the city of San Jose alone has nearly 75,000 low-income students attending schools that fail to meet their needs—more than San Francisco and Oakland combined. And echoing a national trend, this population of students will graduate from high school unprepared to meet the needs of our 21st century economy. In Silicon Valley, residents with graduate degrees now earn about five times more than those who lack a high-school diploma (2013 Silicon Valley Index).

3. Fragile nonprofits

Local nonprofits need capacity-building resources and tools to manage through tough times. Many nonprofits are struggling to adapt their business models to adjust to a “new normal” in light of lost government funding (at levels never experienced before), accompanied by increased demand for services, as well as public pressure to try new approaches. In 2012, 92 percent of Packard Foundation local grantee organizations reported an increase in demand for their services, with 52 percent reporting the increase as “significant.” During the same period, 28 percent of local grantee organizations also reported a decrease in funding.

4. A weak philanthropic base

Despite being home to some of the world’s largest and most profitable companies, the region sorely lacks a cohesive core of individuals, corporations, and foundations committed to fueling innovations and solutions to its most urgent areas of need. This may be due in part to the timing of the economic slowdown of the last decade and more globalization, which has resulted in philanthropic dollars being spread more broadly. Donors may prefer to contribute internationally, focusing on countries where they come from or where larger scale social benefit can be achieved for a fraction of the cost (think India). The lack of support for local causes in Silicon Valley may also be attributed to many social problems remaining largely invisible, and physically separate, from the wealthy neighborhoods and high profile corporate campuses that are more iconic to the region. And for many in Silicon Valley, the region is a short term landing place, or merely regarded as a place where they commute for work.

Three main opportunities emerged during these interviews that align to national research on more effective philanthropy:

1. Maintain or increase current support levels, offering general operating support and capacity building grants.

A 2012 national study of philanthropic practice by Grantmakers for Effective Organizations asserts that funders can best support nonprofit resiliency by providing multi-year funding as well as general operating support and capacity building grants.

So it comes as no surprise that in our interviews, nonprofit leaders overwhelmingly placed a high value on these forms of support, especially from foundations locally attuned. There is a great need for what grantees call the “unsexy stuff,” such as collaborations and mergers, strategic planning, community assessments, data collection, and leadership development to strengthen the pipeline of nonprofit leaders at all levels, including the next generation. Any further declines in this funding could have a potentially large, negative impact.

2. Increase communication and coordination with nonprofits and government.

Nonprofits expressed a desire for greater communication with the staff of foundations so that they can establish partnerships to identify and solve problems. Local government leaders saw opportunities to work more closely with foundations, both to share timely data that could benefit funders’ work and to explore partnerships. This could set a new standard for local philanthropy, improve efficiencies, and model the way for new forms of public/private partnership. Models such as the Strive Partnership in Cincinnati are demonstrating the power of shared priorities and metrics across sectors for improving student achievement outcomes.

3. Catalyze greater regional philanthropy.

The fundraising environment in Silicon Valley is especially challenging, presenting an opportunity for current and new actors to help build more philanthropic support for the region and its community-based nonprofits. Community foundations are uniquely positioned to educate those with new wealth about the opportunities and needs for giving locally, but they need help strengthening their own fundraising capacity first in light of intense competition.

Nationally, investment firms such as Fidelity Investments and Schwab Charitable are winning new donor advised funds at tremendous rates—for their national reach and fully scaled offerings—even though they lack the local focus and expertise that most consider the mission of community foundations. Nervousness about the so-called “fiscal cliff” also drove new contributions at the end of 2012, with Schwab Charitable reporting a doubling of new donor-advised funds in the fourth quarter of 2012 compared to the same period in 2011. Unfortunately, all this positive philanthropic activity does not guarantee that the charitable awards paid from those donor-advised funds will go to support local causes.

Despite being one of the wealthiest regions of the world, Silicon Valley is struggling to attract local philanthropic resources to local causes at a rate that keeps pace with other major metro areas in the United States. It begs good questions. What have other communities learned about what it takes to build local support for local programs? How are other communities creating new business models for nonprofits in light of government funding cuts?

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  • BY Patricia Gardner

    ON May 8, 2013 10:54 AM

    For us at the Silicon Valley Council Nonprofits, this article describes the incredible downtown we have seen, however we also see that the bleeding has stopped in term of great cuts in services.  We are seeing some stabilization in funding this year and slight increases by government projected in FY 14. We hope the philanthropic corporate community looks to re-invest here in Silicon Valley because even here we see great disparities, poverty, lack of affordable housing, child care needs and a lack of services for our growing seniors.

  • BY Kathryn Hanson

    ON May 8, 2013 12:43 PM

    This blog demonstrates clearly some of the problems I face daily as an Executive Director for a SV non profit.  Very few foundation or corporate donors give general operating funds, capacity-building grants or multi-year funding.  Worse, corporate foundations often have lengthy, time consuming application, require multiple reports and detailed interviews as well.

    SV needs a community-wide effort like the Strive Partnership in Cincinnati, where we can pool efforts and share priorities rather than compete for funds and goals. We need the business community to step up and lead here.  Hewlett and Packard and many other leaders did this in the 60s and 70s and 80s.  Now we no longer see effective business leadership on education, despite the fact that California will be 1 million college degrees short by 2025 and businesses need those graduates. We may have technological innovation in the Valley, but we don’t have innovative leadership to help solve the broad issues of a poor public education system.  Where are the leaders from Facebook, Google and Apple (and other innovative companies) and why aren’t they helping to fund innovative education right in their own backyard?

  • BY Nick Vilelle

    ON May 8, 2013 04:43 PM

    Very interesting article. I see similar things happening in DC.  To combat this, we have develop a new model to get people involved in charitable giving.  CAUSE, a bar and restaurant in DC is unique in that 100% of the profits are donated to charity - it is also known as The PhilanthroPub.  We have two major goals for the venture: 1) to make it easier and more fun for people to get involved in charitable giving and 2) to bring exposure and resources to great grassroots organizations that might go unnoticed otherwise.  We started operations 6 months ago, and the response has been fantastic.  We hope to prove the model in DC and then have big dreams to take it to other cities both domestically and abroad.

  • Stephanie Fuerstner Gillis's avatar

    BY Stephanie Fuerstner Gillis

    ON May 8, 2013 05:16 PM

    Bravo, Alexis!  This issue (leveraging the philanthropic power of those in the bay area/silicon valley on behalf of our local communities) is really important and is a call to arms for community philanthropy as a field.  Though you write about Silicon Valley, San Francisco is also a prime example of this conundrum:  as Tom Van Der Ark has blogged in his Smart Cities posts in EdWeek, San Francisco is one of the most innovative and creative cities in the world, and host to more startups than the rest of the Bay Area combined. Why is it that none of that is reflected in our schools?  Our public schools operate on parent-purchased PCs with no clear vision for blended learning in upper elementary grades.  We have no local education foundation (LEF) raising money for public schools (unlike Marin/Peninsula where one exists for just about every district and school).  We have more dogs than children and well-documented family flight as middle school approaches.  And no vison for what “better schools” look like that the business community, philanthropy, City/District are aligned behind. There’s a huge opportunity for the community foundation to do what the Boston Foundation has done and define community indicators that all can work and give toward and monitor over time.  As we all know, people don’t give if there’s not a compelling vison and ask!

  • BY Peter Fortenbaugh

    ON May 8, 2013 06:20 PM

    I agree with Alexa’s recommendations and want to highlight her call for greater awareness around local needs.  Most of the potential donors that I meet are unaware of how difficult life is for the poor in Silicon Valley.  They don’t know that half of the kids drop out of school.  They don’t understand the real impact budget cuts in education are having on our most challenged schools.  They can’t relate to the challenge of studying for a math test when five people were just shot at the local McDonald’s in the middle of the day.  They may not appreciate how hard it is for students to navigate the local school system with almost no parental support.  They don’t know that the percent of kids growing up in poverty has doubled since we were kids.  This is not meant as a criticism of folks doing well.  I didn’t know any of this myself before I started working for a nonprofit.  We increasingly live segregated lives in isolated neighborhoods; it’s an out of sight, out of mind situation.  The Community Foundation would be the natural leader to get the word out.  As Harold Melvin & the Blue Notes sang 40 years ago:  “Wake Up Everybody.”

  • BY Mindy Berkowitz

    ON May 9, 2013 01:38 PM

    Alexa really “gets it.”  There truly are two Silicon Valleys: the blossoming tech community and the rest of us. So many Silicon Valley nonprofits are still recovering from the recession - it is as though we’ve caught the tail end of it and are still swimming in that malaise at times. Thank you for a fresh look at the truth.

  • Andy Marks's avatar

    BY Andy Marks

    ON May 9, 2013 04:15 PM

    Rich foundations usually are found in rich and successful areas (i.e. silicon Valley).  Don’t we expect such institutions to spread some money outside of the area? Probably we expect a lot to be spread to the communities that have, by purchasing the products, sent their hard earned dollars to Silicon Valley corporations. Where an “average” house costs $700,000 can’t we support sending some money to communities where the average house costs only 1/10th that—about $70,000 like in Detroit? The Elite seem to talk to other Elites and complain where 5% get food stamps, but forget where 75% get food stamps. Remember the taxpayers of the entire U.S. allow such concentration of charitable money through the U.S. tax code—to spread some of that money around the Country should be expected.  Sure, some should go locally, but the point remains competent charity leaders, looking to preserve long-range charity efforts must spread the money in a defensible manner.

  • BY Mary Hiland

    ON May 9, 2013 04:28 PM

    Disheartening data, wise comments. It has been my experience of economic downturns in this Valley that the nonprofit sector always lags others in recovery (business first, then government, then - if at all - the nonprofit sector). While, as Patricia Gardner notes, there is some light beginning to show, it remains to be seen whether we can truly “get it” in this community and invest more in our local nonprofits. We need strong organizations able to think innovatively and strategically and that means investment in infrastructure. Foundations and major donors can and should lead the way. Also - let’s not forget about boards of directors - what can and should their leadership role(s) be?

  • Kathi Gwynn's avatar

    BY Kathi Gwynn

    ON May 11, 2013 10:38 AM

    What seems to be missing in Silicon Valley currently is the strong sense of corporate commitment to the broad, local community that used to be addressed (whether adequately is another question) by the United Way model, or in even earlier generations, a “community chest”. When young employees see others stepping up to support a United Way-like institution in a public and financial manner, and hear about current, real needs in the health and human services arena, it can jumpstart their local giving. It is too bad that the virtue of the United Way model (the checking account for the local community) has been largely replaced by community foundations/donor-advised funds that consider themselves the savings or investment account. Because the question is how to get the Silicon Valley community focused on current, local needs, in addition to world needs such as tsunami relief and low-cost mosquito nets in Africa, and creating donor-advised funds that distribute +/- 5% of their value annually.

  • BY Margot H. Knight

    ON May 14, 2013 04:27 PM

    When it comes to cultural funding, institutions in San Mateo County are particularly challenged.  Tax monies are unavailable beyond the county borders of Santa Clara and San Francisco—even when artists/audiences from those areas are served.  Some private foundations also limit themselves geographically.  Changing priorities mean many foundations, including Silicon Valley Community Foundation, no longer offer operating support for cultural organizations.  Many long-term cultural funders now want “new” projects that emphasize community engagement.  These are well-intentioned initiatives but lurching from project to project is death for long-term sustainability for ANY organization. 
    I am the relatively new director of a cultural organization widely considered to be one of the top programs in the world (yes, I said WORLD) for what we do.  Our mission is to provide uninterrupted time for artists AND preserve 583 acres of coastal grassland and redwood forest in perpetuity.  We are geographically isolated yet the work of artists who come here finds its way to stage, page, museum wall and classroom globally.  It makes a measurable difference.  The simplicity and effectiveness of what we do is clear.  Yet the foundation rejections pile up like cordwood on my desk.
    Creativity is the backbone of Silicon Valley—we are working to find avenues to connect choreographers, composers, painters, poets, playwrights, etc with their creative cousins (and their investors)  in high-tech and science.  The creative processes and impulses are so similar.
    I remain optimistic and we keep ourselves open to all opportunities, including those for earned income.  But without a united fundraising effort for culture (e.g. united arts fund or strong local arts council) it is a daily challenge.   

  • BY Chris Block

    ON May 15, 2013 05:16 PM

    We agree with Alexa’s statement that, “While Silicon Valley is home to some of the world’s largest and most profitable companies, our region sorely lacks a cohesive core of individuals, corporations and foundations committed to fueling innovations and solutions to address its most urgent areas of need.”

    Add this to the fact that, for many people, Silicon Valley is a short-term landing place, or simply a place they commute to for work.

    The good news is that there are successful examples of multi-sector efforts such as Destination Home and 1stAct Silicon Valley; clusters formed to tackle issues such homelessness/housing and arts/culture/technology. These efforts are engaging individuals, service providers and cross-sector leaders while making headway on local issues.

    This brand of networked leadership, in which all sectors are working together to solve issues, point the way to a Silicon Valley where enough of the resources necessary to make a significant impact stay in the community. The challenge is to build upon and increase these efforts to create the deep attachment to place that will lead to a substantial increase in local philanthropic investment.

  • BY Greg Kepferle

    ON May 23, 2013 02:39 PM

    I agree with Alexa and appreciate the other comments. It is a tale of two valleys disconnected by income, race, geography, by lack of attachment, and ultimately by lack of relationship between rich and poor. Also, unlike places like Minneapolis, there is not the same wide-spread business cultural expectation of corporate engagement in the local community. Meanwhile the truism among development officers is that corporate philanthropy is only 15% or less of charitable giving, while individual giving counts for 85%. Corporate philanthropy is still heavily dependent on the relationships with the individual decision-makers and individual donors within the corporation. So if the members of the global corporations are more attached to communties around the world than here, it is perhaps not so surprising there is a lack of local engagement.

    At the same time as Chris notes, there are efforts to build networked leadership like Step Up Silicon Valley and collective impact strategies like the Franklin-McKinley Children’s Initiative and 1000 Out of Poverty that are beginning to connect corporations with government, academci, nonprofit and neighborhood groups.

    Some of the global corporations are also involved in some great work at the base of the pyramid globally. How do they translate that experience to help the local community? And how do we change, not just the culture (and models) of philanthropy, but the sense of belonging and commitment to a local community, which then can change the culture of philanthropy?

  • Leigh Stilwell's avatar

    BY Leigh Stilwell

    ON June 12, 2013 04:38 PM

    When I read this post, I was intrigued by the concept that, as a region, Silicon Valley is “uniquely spare” in addressing local needs.

    The article suggested we should be troubled by the statistic that (only) 33 percent of grants at Silicon Valley Community Foundation in 2011 supported local causes, defined as grants to organizations in San Mateo and Santa Clara Counties, because this is a comparatively lower percentage of local giving than at other community foundations, such as those in Cleveland, Boston, Flint, Mich., and elsewhere.

    In Silicon Valley spirit, let’s take another look. That 33 percent figure represented $80 million in grants to San Mateo and Santa Clara Counties – more than most community foundations and many private foundations’ total annual endowments. Another $43 million was given to nonprofits in San Francisco and the larger Bay Area communities. We publish statistics on our giving each year because we believe in transparency and we’re proud of our donors’ choices to create a better world.

    Silicon Valley Community Foundation’s 2,600 donors have made us the largest grantmaker to organizations in the Bay Area. In the past two years SVCF has celebrated a 39 percent increase in giving from our donor advised funds. This uptick extends to a growth in local giving: In 2012, 52 percent of our grants, or $105 million, went to organizations in the Bay Area.

    In my work at the community foundation, I see a world where philanthropy always begins – and ends – at “home.” And we should be careful not to criticize how donors define that word for themselves.

    We’ve learned that helping donors follow their dreams can take us almost anywhere. Last year, grants found their way to 29 countries. And at the same time – because many of our donors are committed local and global philanthropists—our endowment, which is dedicated to the needs of those in San Mateo and Santa Clara counties, continues to receive new gifts.

    And our donors generously contribute millions of dollars each year, at our request, to supplement our endowment grants. Our new campaign to help public schools implement the Common Core State Standards, our Donor Circle for the Environment and Our Donor Circle for the Arts are just some of the great stories we have to tell about the power of inspired donors.

    Recently I met with a donor who lives in San Francisco. She’d asked us for advice about nonprofits working in a particular area of interest. As a result of that meeting, she’s now giving to an organization she’d never heard of, in a town near San Jose that she’s never visited. Like many of us, she’s more focused on solutions than on geographic boundaries. Our biggest challenges don’t adhere to county lines. Neither do great ideas.

    Let’s embrace the possibility that a changed world requires things that are all within our reach: neighbors and colleagues that are inspired and recognized for all they have to give, nonprofit leaders (and boards) that challenge themselves to reach across geographic boundaries to do their best work, and a shared commitment to listen to the stories we need to hear to know our community and our world.

    In our complex, ever-changing world, how tightly should we draw the boundaries of our commitment and our giving?

    —Leigh Stilwell, Chief Donor Experience and Engagement Officer, Silicon Valley Community Foundation

  • Michelle Cale's avatar

    BY Michelle Cale

    ON July 4, 2013 07:24 AM

    Sometimes it’s hard to get over the “sexy” factor.  Funding an initiative or a nonprofit’s work in another country seems more catalytic or innovative.  The stories you are told about the (truly genuine and deep) problems in another country are apt to twang the heartstrings more than the stories of struggling people in our own back yard. 

    In the past year or so, I have done some work with my children’s private school around philanthropic engagement and, while everyone extremely enthusiastic about engaging on international issues - such as girls’ education in Africa, animal welfare/preservation, environmental conservation in central America - it is very hard to spark any interest in the social problems of our local area.  Bringing in speakers representing nonprofits serving local needs can be quite eye opening. For example, I brought in the ED of a nonprofit that works with girls in our local juvenile hall - and discovered that the students in our school didn’t even realize that there were girls of their own age incarcerated in the criminal justice system.

    Our young people are future donors and nonprofit/funder managers.  We need to meet them where they are, and help them understand the landscape in which their philanthropy can operate, both locally *and* globally.

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