Edit: We now do this as a family unit. Our children can propose gifts, and the entire family must OK them. It’s been fun!
I think it’s important to give.
With Government slashing social programs, I think we should all consider giving more. So, I thought I’d try and explain what my wife and I do on that front:
1. We give away 10% of each year’s pre-tax income. Our giving tries to be proportionately meaningful even when we were earning $20,000 a year: 10% of a pre-tax number is an even larger percentage of after-tax, or “disposable”, income.
This means that our marginal tax rate today, all-in, is higher than what you find in Sweden. My tax rates include: Federal, State, the 15.3% Self-Employment Tax, the self-imposed 10%, deduction caps from the Pease Rule, and two Affordable Care Act taxes.
Frankly, giving way 10% of pre-tax wasn’t my idea. Mrs. T. insisted on it at the beginning of our marriage, and I begrudgingly followed. She didn’t buy my argument that “we should give later when we make more money.” She stuck to her guns.
Over time, I’ve come to see the wisdom of her convictions. Admittedly, it was a very painful decision early on, when I was a b-school student and we had very little income.
2. We some years ago started a family giving account. It’s a snap. You no longer need an expensive lawyer to set up a family foundation. You instead can fill out a form at a mutual fund company, forward donations to them, and then request grants for charities over time. So, you can get the tax deduction in that current year, but you choose how much goes out of your account and when: all of the money, part of it, or none. The assets are invested in a combination of mutual funds, and you decide the allocation. You can set up trustees to disburse the money after you die.
3. We no longer give to “blind pools” and instead give directly to programs. For example, I wrote previously about a rehab shelter for young mothers (more at “Single and Homeless Mothers: True Entrepreneurs”). It’s a Catholic Charities program called Genesis II, and we give directly to it. Now, there are some very well-run “blind pools” out there that raise money and then allocate money to various needs. But, we prefer to give directly to a program. There’s no middle man.
I’ve had the chance to meet the Genesis II director and staff, and some of the residents. It is very emotionally satisfying. I cannot believe the level of human suffering that exists out there in the richest nation on earth.
4. We give anonymously when possible. If we cannot, we ask that charities not to list our names in their marketing materials.
5. We rarely go to evening receptions for charities. With a large family and a new VC firm, our schedule is very tight. There are so many great causes, but scheduling conflicts usually get in the way.
6. We pick one or two meaningful projects a year rather than spread many little checks. Interestingly, it’s what we do at Kepha as VCs. We make a handful of investments a year. We’re not a VC firm that does 25+ seeds a year. I apply that same philosophy to charitable giving. It lets us give a meaningful number to really “move the needle” for a program. Unfortunately, it means that we are usually tapped out when other charities come calling.
7. We don’t give to political campaigns. We’re pretty jaded about the political scene right now. Plus, it is tough to take money away from a homeless shelter to give to a political campaign.
8. It is very hard for me to join non-profit boards. My partners usually say “no.” You see, VCs are inundated with offers to join various boards. And, sitting on many non-profit boards is a major distraction to doing the VC job.
Our VC firm has decided that we must really honor our investors’ trust in us by spending as much time as possible on Kepha. So, if one of us wants to do a non-Kepha activity or work with a non-Kepha company, we first have to get the other Partners’ approval. Eric and Ed let me chair my b-school Reunion a few years ago, but they’ve said “no” to two non-Kepha activities this year.
So, that’s what my wife and I do. It works for us, and I hope it encourages others to think about their own charitable-giving plans. Giving has become a habit in our marriage.
A lot of good causes can use your help. I think the days of Government being the answer are over for some time. Each of us should consider giving more. Please consider doing so?
3 thoughts on “A VC’s View on Charitable Giving”
Thank you for the inspiring post! Great tip on the family foundation via Vanguard. I’m going to look into setting an account up now.
Coming from you, that’s a huge inspiration for me. Thank you, David….
On giving I take similar and yet opposite approach. I find charities that I believe in, and have teach a man to fish (not give a man a fish), and then fund them monthly, and permanently. I am a small amount of income they can count on. I think the world needs both project giving and sustained giving.