Tough Times for Philanthropy

By John Greenwald. Sunday, Apr. 01, 2001
    • For the instant jillionaires of the tech-stock IPO boom, pledging lavish gifts to charities and universities was a way of parading both their compassion and their clout. But with the tech bubble gone poof, many of those same promises are worth about as much as dotcom-stock shares. Cancel that new dorm.

    Take, for example, the $100 million that MicroStrategy founder Michael Saylor vowed to donate last year to endow a foundation that would create the world's premier online university. That was shortly before the software company stunned Wall Street by restating its revenues for the previous two years--a shock that caused the company's stock to plunge more than 60% in a single day. Throw in the tech sell-off, and last week MicroStrategy shares that had traded for more than $225 a year ago closed at $2.88. Saylor's personal holdings, which had stood at $9.9 billion, are now worth a mere $126 million.

    Neither the foundation nor the university nor the $100 million grant are anywhere to be seen, but Saylor insists he has not given up. He says he plans to put some lectures online by year's end and hopes to have the rest of the university up and running within a decade, assuming the stock price cooperates.

    All across the U.S., high-tech givers have been scaling back. eBay vice president Jeff Skoll, who commands a $2.1 billion net worth, pared his contributions from $47.5 million in 1999 to a still hefty $39 million in 2000. The cutbacks came as eBay's stock lost more than 70% of its value last year. At Kana Communications, a troubled software maker whose shares have fallen more than 98% from their 52-week high, the $1 million worth of stock that vice president Michael Wolfe pledged to Stanford a year ago nearly evaporated. By the time the school received and sold the stock, its value had fallen to $100,000--enough to endow a single undergraduate scholarship.

    Stanford's disappointment is shared by outfits like the Austin Entrepreneurs Foundation, which was formed at the height of the dotcom frenzy to fund Texas community groups. But of the 120 Internet and software companies that contribute their stock options, at least a dozen have closed their doors. Others have delayed making good on earlier commitments. As a result, the Texas foundation, which had expected to give away as much as $500,000 in grants, has been forced to disburse less than a third of that, or $150,000. Says director Paula Fracasso: "I read the paper every day to see which company has folded."

    So do officials of the Community Foundation Silicon Valley, where contributions this year have been running 50% behind the year-ago pace. The foundation suffered major setbacks when the Web portal AltaVista, which had pledged 25,000 IPO shares, postponed the offering last April and then abandoned it altogether in January in the midst of an ice-cold market and following several rounds of layoffs.

    One big exception to the trend is Microsoft chairman Bill Gates, who upped his giving from $2.4 billion in 1999 to $5 billion in 2000. This staggering largesse came despite the fact that the value of Microsoft stock fell 63% last year. It leaves Gates with a fortune of only $60 billion.