Editor’s Note: Peter Hero was a transformative figure in the tech world, described by Fortune editor-at-large Peter Elkind in a 2000 profile as the man who taught Silicon Valley, “the land of the ‘cyber-stingy,’” to care about philanthropy. He did it, Elkind wrote, “by channeling the area’s distinctive culture into an unusual brand of charity: demanding, ambitious, self-conscious, creative, even risky—in short everything you’d expect from Silicon Valley.”
In an online posting, founding eBay president Jeff Skoll, whose own charitable foundation has become a powerful force for good, praised Hero as his “original philanthropic mentor” and “a leader in the Silicon Valley social change world for more than 30 years.” Between 1989 and 2006, under Hero’s leadership, the Community Foundation’s assets multiplied from $9 million to more than $1.2 billion.
We republish Elkind’s fascinating profile of Hero below, which chronicles how Hero worked “to create a culture where philanthropy becomes a way of life in Silicon Valley.”
Not long ago, Peter deCourcy Hero, the 57-year-old president of Community Foundation Silicon Valley, sat down with a young dot-com mogul who had resolved to direct some of his newly minted millions toward charitable causes. “What are you interested in?” Hero wondered. “Children? Education? The elderly?” The donor looked at Hero blankly. “Whaddya got?” he asked.
It is a remarkable fact about the new economy that so many of those so skilled at generating mind-boggling wealth are so utterly clueless about the art of giving it away. In the old economy, riches were accompanied by a powerful sense of noblesse oblige. Not so in Silicon Valley. Though now home to a reputed 75,000 millionaires, it has long been known as the land of the “cyber-stingy.” Indeed, a 1998 study showed that a quarter of the Silicon Valley households with incomes over $100,000 gave $500 or less a year to charity.
The reasons for this lack of generosity aren’t hard to figure out. Many tech tycoons have shallow roots in the boomtown community and are far too young to have thought much about leaving behind a lasting civic legacy—or to provide one by kicking the bucket. Then there is their world-view: Tech entrepreneurs tend to be narrowly focused apostles of self-reliance who think sharing the wealth with the less fortunate means issuing employees more stock options.
Yet more than a conspicuous few have begun to share their largesse—and it is Peter Hero, more than anyone else, who has shown Silicon Valley how to give. He has done it by channeling the area’s distinctive culture into an unusual brand of charity: demanding, ambitious, self-conscious, creative, even risky—in short, everything you’d expect from Silicon Valley. And it’s posting big returns. Eleven years ago, when Hero arrived in the area, the Community Foundation held just $9 million in assets. Today that figure is about $625 million. The foundation hands out an average of $1 million in grants a week—to neighborhood groups, education programs, social-service agencies, and cultural organizations. Philanthropy is becoming another Silicon Valley growth industry.
To get that industry off the ground, however, Hero had to figure out a new way to sell philanthropy. The assumption “that giving is a moral obligation—You’re rich, they’re poor; you have to give your money away—that doesn’t fly out here,” notes Hero.
We are talking in Hero’s office at the Community Foundation headquarters in downtown San Jose, where the cool lime-and-charcoal color scheme offers the flavor of a well-funded Internet startup. A scrawled phrase on the obligatory whiteboard—”$576,920/day”—breaks down the foundation’s record fundraising goal for the budget year: $150 million. Just five months along, it has already collected $100 million.
If Hero has had a transforming effect on Silicon Valley, it’s because he operates in terms that tech moguls understand. He may have the gravity of a former college president (which he is), but he also has a Stanford MBA under his belt, not to mention a career in corporate advertising and marketing. Hero left the business world after a four-year stint at Spice Islands, when, he says, “I just finally decided I didn’t care how many more jars of pepper I’d sold.” In 1989, after serving as president of the Maine College of Art, he took over what was then called the Community Foundation of Santa Clara County.
Hero is now Silicon Valley’s go-to guy in the realm of charitable giving—even when it doesn’t directly benefit his own foundation. He attained that status in 1991 by masterminding a collaborative $12 million capital campaign for 11 showcase Silicon Valley arts groups—including the ballet, symphony, art museums, and opera—that had historically battled one another for scarce funding. Last year, when the local United Way—ostensibly a competitor for charitable dollars—announced a shocking $11 million shortfall that left it unable to fund 108 local social-service agencies, it was, of course, Hero who presided over the bailout. “Very few people could have pulled it off,” says Leo Chavez, chancellor of the local community college district and a Community Foundation director. “In this valley, credibility is hard to come by.”
While it seems hard to fathom now, when Hero arrived in Silicon Valley his foundation was in desperate straits. Traditionally, community foundations—there are more than 500 of them in the U.S.—relied heavily on bequests and gifts from elderly, uninvolved donors. Says Hero: “The donors’ role was to give away their money to the community foundation—and then, preferably, to die. Donors were merely to be suffered as a temporary responsibility while they were living. The whole idea of serving donors in their lifetimes was not really on the radar screen.” In Silicon Valley, that approach simply wouldn’t work. “My problem was, we didn’t have any dead donors.”
With the obvious help of a staggering explosion in local wealth, Hero reinvented Silicon Valley philanthropy. He did it by turning his foundation into a one-stop service center for new donors—precisely what was needed to involve the area’s young tech tycoons. Community foundations exist partly to make philanthropy easy. Donors can set up a fund there, take their tax deduction, and avoid the administrative headaches of running their own foundation.
Hero goes to special lengths to make the process even easier. Each donor is assigned to a foundation staffer, something like a private banker. The foundation provides research on various nonprofits—much as brokerage analysts cover public companies. It regularly produces studies—on local philanthropy, on charities’ effectiveness, on corporate giving—offering the sort of benchmarks entrepreneurs crave. Hero also helps newbies develop a philanthropic “strategy.” He urges them to build a diverse giving “portfolio” by directing some of their money to well-established individual nonprofits, such as the Red Cross or the local food bank (the “individual stocks”); by socking some away in foundation-directed “field of interest” pools (the “mutual funds”); and by allocating a piece to “highfliers,” cutting-edge programs that might generate spectacular results. Offering the hardheaded appeal that sells in his market, Hero talks to CEOs about philanthropy’s tax advantages—and even how it can help employee recruitment and retention.
In 1997, Hero discarded the parochial Santa Clara County moniker in favor of the more clearly entrepreneurial Community Foundation Silicon Valley. Now, with the help of some high-profile evangelists, philanthropy has turned a corner. “There was all this wealth and not a lot of conscience,” says eBay (EBAY) co-founder Jeff Skoll, a 35-year-old billionaire who has established a $70 million fund at the Community Foundation. “The fact is, the world needs our help now.” Skoll says he is thrilled at the idea that he can make a difference during his lifetime. “This,” he declares, “is a really cool thing.”
Raising lots of money, of course, is one thing. Tackling big social problems—and for all its riches, Silicon Valley has plenty of them—is quite another. And that’s Hero’s biggest challenge: making productive connections between the strong-willed new donors he is managing to attract and what really needs to be done.
What will be the fate of Silicon Valley?” intones a voice-over from the big screen in front of us. “Will we join the pantheon of cities that history has judged as creating true belles époques of human enterprise”—cities like Paris and Constantinople—or, the voice asks, will Silicon Valley become “just another boomtown that went bust?”
I am seated at a large U-shaped conference table at the McKinsey & Co. offices in Palo Alto, along with two dozen members of a civic group called Cultural Initiatives Silicon Valley. Sleek black laptops, loaded and fired up, sit in front of us. We are here to be introduced to the group’s new plan for convincing area leaders that culture is important. It is..a CD-ROM game.
The game—catchily titled “is.C3: Creating a Great Region Through Commerce, Culture & Community”—is a simulation. It goes like this: Bruce Largecap, a major Silicon Valley tycoon, has been run over by a Mercedes SUV at the tender age of 44, leaving behind a $500 million endowment to support the arts. How you spend it will determine whether Silicon Valley can attain “the sustained cultural heights of Renaissance Florence.”
The product of seven months’ labor—and $250,000 worth of foundation grants and donated services from the likes of Apple (AAPL), Adobe, and the games division of Lucas Arts—the game is aimed, says John Kreidler, the group’s executive director, at getting some 1,000 area leaders “engaged in the idea that culture is important.” In some places this sort of persuasion might seem unnecessary—perhaps even self-indulgent. But Kreidler says it’s needed here. “We could have created a PowerPoint show. But interactive media is the vernacular of Silicon Valley. A lot of the people we’re trying to reach play games—computer games. It’s part of their culture.” Kreidler goes on to make the sort of good-for-bidness culture pitch that was familiar to residents of Texas in the oil-boom days—evidence that arts are a hard sell here.
Just ask Sally Osberg. As executive director of the Children’s Discovery Museum in San Jose, housed in a bright, engaging building on the edge of downtown, she runs a $4.5 million enterprise, with 70 employees and a $9.5 million endowment. Yet when budding tech philanthropists arrive to visit with her, they often ask whether she is a volunteer. “They can’t believe this is a bona fide business,” she chuckles. “Their bandwidth is widening—but they have a ways to go.”
Early on, high-tech philanthropy reflected the narrow interests of the givers more than the needs of the community. Even now, tech companies provide half of their corporate giving in the form of computers and software. While nonprofits are glad to have computers, many—in the overheated job market for trained techs—can’t hire IT staff to keep them running. To deal with that problem, the foundation is trying to set up a network of IT “circuit riders” who would service the equipment at various area nonprofits. “There’s not a lot of understanding,” says Hero, “of where the needs are.” Even Bill Gates—who donated hundreds of millions to wire libraries and schools—has become scornful of tech philanthropy’s obsession with the global “digital divide.” At a recent conference in Seattle, he pointedly noted that technology isn’t high on the priority list for people who don’t have enough to eat.
High on the list for Hero is preventing high costs from pushing out so many middle-class people that Silicon Valley becomes, essentially, a gated community for the absurdly wealthy. Already government agencies are having to subsidize housing costs for police officers and public school teachers. Nonprofits face the same challenge. A recent Community Foundation grant will pay apartment deposits for dancers with a local ballet company. “We’re in danger,” Hero warns, “of becoming a community of rich people and their servants.”
Nowhere will Hero’s particular brand of community-building be put to the test more than in the Mayfair neighborhood of East San Jose. It is there, in a low-income, mostly Hispanic community of 6,500—the birthplace of farm worker organizer César Chávez—that the foundation is presiding over its most complex and ambitious project.
This is one of Hero’s highfliers—risky, but with the potential for big returns. Hatched in 1997, the “Mayfair Improvement Initiative” is aimed at permanently upgrading the prospects for an entire neighborhood—its streets, its homes, its schools, and its residents. Projected to involve more than $15 million in public and private funding (including $5 million from the Hewlett Foundation), it involves a breathtaking array of 76 separate improvement projects. To name a sampling: boosting literacy, adding streetlights, hiring crossing guards, renovating a neglected community garden, establishing home day-care centers, conducting health screenings, offering family financial counseling, painting murals, providing high-tech job training, building residents’ leadership skills. All of that will be meticulously monitored, with regular assessment of progress toward meeting hundreds of carefully established quantitative benchmarks.
The Community Foundation is serving, in essence, as general contractor—managing funds, finding donors for additional “investment opportunities” (the proposed Cesar Chavez Sports Complex goes for $1.5 million), and overseeing it all. Hero sees Mayfair as a flagship project—”a microcosm of what we’re about.” The list of projects—and goals—was developed by the neighborhood, not handed down. Everything is aimed at building “connections”—between Hispanic and Vietnamese neighbors; with public agencies; with corporate job-training programs. The community garden, Hero says, has become “the neighborhood living room.” A weekly farmers’ market has drawn outsiders into the community. There’s even a program to teach fundraising skills—so Mayfair residents will learn how to get private-foundation millions on their own.
Upgrading a neighborhood is not easy: An improvement in residents’ economic prospects will encourage many to move out, unless Mayfair becomes a more attractive neighborhood. And simply making neighborhood improvements without increasing household income will invite gentrification. “The whole issue is sustainability,” says Leo Chavez, who has been heavily involved in the project. “We’re trying to fix the issues that sustain poverty.” The big question, he notes, is the exit strategy. “We’ll see what happens when the Hewlett money runs out and the Community Foundation staffers pull out.”
Down the hall from Hero’s office, Steve Kirsch, the 43-year-old founder and former chairman of Infoseek, has established the Steven and Michele Kirsch Foundation—affiliated with the Community Foundation. Kirsch is Silicon Valley philanthropy’s most fervent evangelist and one of Hero’s most passionate allies. He has set aside $75 million of his net worth for charity, which he has been parceling out to causes as diverse as the United Way (he wrote the first $1 million check for the bailout) to tracking asteroids threatening to strike planet Earth. In the San Jose offices of his new startup, Propel, Kirsch rants about tight-fisted billionaires, bemoaning the case of one dot-com CEO who ignored his pleas to put a chunk of stock into a charitable fund. For a time, he was worth $2 billion. “He could have given 1% and never even missed it!” Kirsch complains. He quickly rattles off the names of tech billionaires who need to follow his example. “I’m hardly the richest guy in Silicon Valley,” he notes. “Not by a long shot.”
While Kirsch plays the provocateur—the finger-pointing conscience on the shoulder of Silicon Valley—Hero looks for new ways to expand the donor ranks. After years of wrestling with how to bring busy new tech millionaires to his door, for example, he’s now hatching schemes to go to them. The foundation has placed a “giving counselor” on the sprawling corporate campus of Cisco Systems (CSCO). It is indisputably fertile ground: Cisco has 18,000 employees in Silicon Valley, and its soaring stock has made even some secretaries millionaires. He’s also trying to tap the wealth of Silicon Valley’s 200,000-member Indian community, with an estimated combined net worth of more than $50 billion. Many immigrants want to support causes in their homeland, Hero says, but don’t have a vehicle for doing so. So while community foundations rarely initiate giving outside their own regions—and almost never operate overseas—Hero is exploring the idea of developing a fund through which Indian donors could support projects in blighted neighborhoods in both their homeland and Silicon Valley.
Finally, there is the foundation’s high-profile “venture philanthropy” group, aimed at young donors: the Silicon Valley Social Venture Fund, known as SV2. Modeled after counterparts in Seattle and Austin, SV2 has attracted 100 “partners” from the ranks of venture capitalists and entrepreneurs. Each contributes at least $2,500 a year. The money is pooled—and matched with Community Foundation funds—to provide grants. Under the “venture philanthropy” model, the donors subject nonprofits to the sort of scrutiny a venture capital firm would apply, then offer their expertise to maximize their “investment.” It insists on establishing “metrics” to measure returns and looks for “scalability” and “an exit strategy.”
The venture-philanthropy model—which has drawn plenty of buzz—has its skeptics. Bruce Sievers, executive director of the San Francisco-based Walter and Elise Haas Fund, a foundation with $240 million in assets, says thoughtful donors have been rigorously scrutinizing nonprofits they fund—and insisting on good results—for years. But he worries that it’s easy to go too far in trying to apply VC principles to nonprofits. “In the business world, there’s a simple test: Do you make money? There’s nothing equivalent in the social world.” Sievers also questions how much useful knowledge dot-commers bring to the table. “Because they’ve made a lot of money developing a software program doesn’t mean they know about developing education programs. They’re a potential bull in a china shop.” Sievers says he knows of one nonprofit executive who had a major business donor turn to her and ask, “Remind me: In this field, do we crush the competition?”
All those dangers, of course, remain theoretical—a question of not taking an approach too far. Hero, for his part, is a bit wary of some of venture philanthropy’s tenets—how can a museum’s “product” be measured?—but he’s delighted with the fresh recruits to charity’s cause. SV2, after all, is at least as much about training new givers as it is about funding nonprofits. eBay’s Skoll, who’s a member, calls it “kind of like training wheels for young philanthropists.”
Already the invitation-only organization has generated scads of national press—in fact, it was getting media attention even before issuing its first grant (which turned out to be $225,000 to a local group that helps underperforming low-income elementary school students). Several money managers have tried to join to get access to the young millionaires. But no one wants to be hit on. “One thing we are providing to our members is a safe place to be,” says a member of the group. SV2, urges another, needs to carefully target “the ideal people to become members of this group—the hot CEOs and the hot venture capitalists.”
“We had no history and no role models for doing philanthropic giving,” says SV2 co-founder Kevin Fong, managing partner of the Mayfield Fund, a Menlo Park VC firm. “We want SV2 to shortcut that learning process.”
Over time, says Hero, the venture philanthropy model embraced by SV2 may well evolve. “As they get to know these charities, their charitable giving may become more traditional.” It’s all just one more way to harness the astounding wealth of Silicon Valley. And that’s what is truly urgent, Hero says—creating a community where the arts can flourish, middle-class people can afford a home, and the poor can live in dignity and better themselves. For all of that, says Hero, “we need to create a culture where philanthropy becomes a way of life in Silicon Valley. If we don’t do that, people will say, ‘I can’t believe these guys blew it.'”
A version of this article was originally published in the November 27, 2000 issue of Fortune.
