November 14, 2002
Hands-On Form of Philanthropy Grows
"You have very little control over how the money's being spent."
Ari Engelberg has always taken a personal interest in those less fortunate than himself.
Whether tutoring third- and fourth-graders in math and English while at UC Berkeley or coaching an inner-city youth basketball team as a UCLA law student, Engelberg has long dedicated himself to tikkun olam, the Jewish mission of repairing and improving the world.
For most of his life, though, the 30-year-old Encino resident could offer little more than his time and expertise in helping others. That all changed two years ago when the co-founder of Stamps.com -- a once high-flying Santa Monica-based company that sells postage over the Internet -- cashed out most of his stock holdings.
Like other technology prospectors who suddenly struck gold, Engelberg found himself in the position to give a significant amount to charity. But rather than simply write a check to a large organization like the United Way or The Jewish Federation of Greater Los Angeles, Engelberg searched for a decidedly more hands-on approach to giving.
He discovered one in the Los Angeles Jewish Venture Philanthropy Fund (LA-JVPF).
Founded earlier this year by 25 Jewish professionals in cooperation with The Federation, the self-funded group plans to award a total of at least $250,000 by the end of this year to two to four start-up or existing nonprofits that benefit Jews. One organization could receive as much as $125,000.
Borrowing a page from the venture capital world, LA-JVPF principals expect to provide consulting, accounting and other support services to recipients and closely monitor their performance to ensure success.
The Federation's involvement notwithstanding, LA-JVPF members, each of whom has contributed at least $10,000 to the fund, will have the final say on winning grant recipients.
That's exactly what attracts Engelberg, now a part-time teacher a Harvard-Westlake School.
"I would be hesitant to give to any large charity -- Jewish or otherwise -- because you have very little control over how the money's being spent, by whom and on whom," he said. "I feel like I'm getting more bang for my buck [with venture philanthropy.]"
The birth of LA-JVPF comes on the heels of similar Jewish philanthropic funds springing up in cities across the nation, including Washington, D.C.; New York; Stamford, Conn.; and Denver, among others. Their appearance reflects a growing demand among donors that charitable organizations become more responsive to their desires, said Mary Joyce, Gianneschi Professor of Nonprofit Marketing at California State University, Fullerton.
Several factors are driving the trend toward directed giving.
In the wake of corporate meltdowns at Enron, Global Crossing and Arthur Andersen; the scandal-plagued Clinton administration; and the sexual-abuse charges plaguing the Catholic Church, cynicism about big organizations has never been greater. The Red Cross' initial plan to spend part of the money raised after Sept. 11 for future disasters, instead of on terror victims, only heightened that skepticism, Joyce said.
Simply put, many donors have lost trust in major charities and "no longer want to give to generic causes, where they're not even sure their money is going to be used for something they even support," she said.
The greening of philanthropy has also influenced giving patterns, said Barbara Leopold of the Center for the Study of Philanthropy at the City University of New York.
The late 1990s technology boom made scores of young entrepreneurs rich. Unlike their parents and grandparents, though, these energetic philanthropists tend to favor a more hands-on approach to giving, which is helping to fuel the creation of new venture philanthropy funds and foundations, experts said.
Not surprisingly, a growing number of banks, brokerages and other financial services companies are setting up plans that allow donors to deposit money into special charitable accounts, get a tax deduction and then recommend which charities should receive the money. Even such button-downed firms as Fidelity Investments and Vanguard Group now have so-called donor-advised funds, said Stacy Palmer, editor of the Chronicle of Philanthropy.
Many Jewish charities have long allowed major donors to earmark donations for specific causes. However, Marvin Schotland, president and chief executive of Jewish Community Foundation of Los Angeles, said local donor-advised funds have grown significantly over the past decade. Givers, especially younger ones, are asking lots of questions about how their money is spent, he added.
Mitchell Kaplan is among the new breed of donors looking for more input.
The Hollywood agent set up his first donor-advised fund in 1998 through the Jewish Community Foundation of Los Angeles to disburse the more than $100,000 he gives annually to charity. Among his pet projects: the Alliance for Children's Rights, the ACLU Foundation and Chapman University in Orange.
Kaplan said he likes his arrangement with the Community Foundation partly because the organization "can't give [my money] to any organization I don't want it to go to." Also, the relationship has simplified his life. Instead of having to write separate checks for each of his favorite causes, a time-consuming process, he writes a single one to the foundation that "manages" his giving.
Typically, a donor must contribute a minimum of $10,000 to establish a donor-advised fund.
In an attempt to exercise more control over how their money is spent, some donors now bypass federations and foundations altogether. Such is the case with Larry Siegel, head of real estate brokerage firm.
Siegel and two friends, clothing manufacturer Ami Pykovski and wholesale distributor Motti Slodowitz, recently canvassed business associates, local Chabad synagogues and personal relations to raise $48,000 for Israeli terror victims. In late October, the trio, along with Siegel's 18-year-old son, Eliahu, and Rabbi Amitai Yemini of the Chabad Israeli Center, went to Israel for two weeks, meeting with children and spouses of Israelis murdered in suicidal bombings and other attacks.
They gave money to 17 families in the West Bank, Jerusalem and elsewhere, including a gift to a widow with six children. The group's willingness to take time off from work and venture to the Holy Land during these turbulent times underscored their solidarity with and support of their Jewish brethren.
Siegel said his foray into direct giving should not be interpreted as a vote against Jewish charities. He said the funds he and others raised would have gotten to the "right people" if they had worked through a traditional nonprofit.
However, administrative fees -- which typically range between 15 percent and 20 percent, according to Melissa Cliett of the Council on Foundations in Washington, D.C. -- would have undoubtedly eaten up some of the money. (The Federation says its fees range from 12 percent and 14 percent.)
Siegel is so sold on do-it-yourself-giving that he hopes to soon raise funds again for Israeli causes. He encourages others to follow his example.
"What we did wasn't complicated," Siegel said. "We just put some money together, went over there and gave it away. There's no reason a school or synagogue couldn't do this."
Jewish and other charities are by no means deaf to the clarion call for greater accountability and donor control. They understand that if they don't make an effort to address givers' concerns, their coffers could shrink.
Federations, in an attempt to become more responsive to givers and preserve their role as a conduit for Jewish giving, are helping to create venture philanthropy funds as never before. For their administrative and staff support, they often receive up to 7 percent of the money raised for the fund. Although The Federation has yet to decide whether it will charge a fee for its services, the group is asking venture fund donors not to reduce their Federation gifts
Venture funds also serve as de facto recruiting grounds for federations. In Washington, D.C., for instance, many fund participants have gone on to become federation benefactors for the first time, said Erica Drath, director of foundation services for the Jewish Federation of Greater Washington.
Los Angeles Federation President John Fishel said venture funds do more than simply expand federations' donor bases and improve the community. "I would hope that over time, some number of [fund] participants would take on leadership roles in the Jewish community," he said.
Working with The Federation's Morlie Levin, the LA-JVPF was created earlier this year by Brian Shirken, a South-African-born real estate investor and developer, and Anton Schiff, a corporate executive. The pair recruited 23 other successful Jews to participate.
Group members, in an effort to learn more about philanthropy, have attended a series of lectures on topics ranging from how to evaluate a grant proposal to the needs of the Los Angeles Jewish community. In July, the LA-JVPF received 46 written requests for money. The list of potential recipients has since been whittled down to 13. Organizations offering elderly care and job training are among those up for consideration.
Shirken, a longtime activist in the Jewish community, said Jewish venture philanthropy has the power to change lives.
"The return is not financial," he said. "The return is social. The return is to the community."