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Coronavirus aid: How tech's richest are giving — and why it matters

Each way of donating rests on a different set of calculations, involving issues like taxation, corporate voting power, and the industry's responsibility to society.

Jeff Bezos and Bill Gates

Jeff Bezos and Bill Gates have both pledged $100 million or more to help fight coronavirus.

Bezos photo by Mandel Ngan/AFP via Getty Images; Gates photo by Nicolas Liponne/NurPhoto via Getty Images

Every week that the coronavirus crisis deepens, another tech titan seems to come forward with a new relief fund, multimillion-dollar donation or big-budget public health project. And while the goals of these efforts differ widely, so do the methods of giving, illustrating how Silicon Valley's once-unimaginable wealth — and tech billionaires' very particular concerns about how their money is doled out — have transformed the world of philanthropy.

Last week, it was Jack Dorsey's announcement that he would launch a $1 billion LLC to fund "global COVID-19 relief," with the focus later shifting to global women's health and universal basic income. Two weeks ago, Jeff Bezos declared on Instagram that he was donating $100 million to American food banks. In the meantime, Bill Gates and his namesake foundation have marshaled upward of $125 million from donors including Mark Zuckerberg to speed up vaccine R&D.

"Our early money can accelerate things," Gates explained in a "Daily Show" interview this month.

But following the money behind tech's COVID-19 response can be dizzying. The industry's many billionaires give through webs of LLCs, private foundations and nonprofit contributions, and their companies often kick in donated supplies, employee matches, and their own cash or in-kind contributions. Each mechanism rests on a different set of financial and moral calculations, involving issues such as taxation, the retention of corporate voting power, and long-simmering questions about what tech owes to the social safety net.

Meanwhile, some billionaires prefer to stay quiet, and many spread their bets.

"Fundraising is different here," said Sam Cobbs, CEO of San Francisco grant-maker Tipping Point Community, which draws support from tech donors like Pinterest. "People are for the most part not concentrating their dollars in one place. They're spreading it out wider."

To understand who's giving what, and how, Protocol took a look at some of the recent moves by the industry's wealthiest executives.

Jack Dorsey

Commitment: On April 7, Dorsey announced on Twitter that he would transfer $1 billion of equity in his most recent company, Square — about 28% of his wealth — to an LLC called Start Small.

"After we disarm this pandemic, the focus will shift to girl's health and education, and UBI," he wrote. "Why UBI and girl's health and education? I believe they represent the best long-term solutions to the existential problems facing the world."

Why it matters: Dorsey is the latest of several tech billionaires to wade into the fast-evolving world of philanthropic LLCs, which come with very different spending, disclosure and tax rules than traditional nonprofits. Dorsey opted for an LLC to "segment" his shares and provide flexibility, he wrote. Unlike old-school nonprofit stock grants, the structure allows him to retain voting power on Square's board and control over what happens to his shares.

LLCs are not required to file annual disclosure forms like the 990s filed by nonprofits, leaving it up to the owner of the fund to say how much they spend and how. But Dorsey promised to voluntarily track all donations made by Start Small in a public Google doc.

Cobbs said donors gain freedom through LLCs thanks to the ability to spend on a wider array of efforts, including lobbying, and that this can be an advantage on entrenched policy issues like poverty relief. "I actually like that structure," Cobbs said. "When you are a 501(c)3, or depending on the type of foundation you are, you're very limited around what it is that you can do. But as an LLC, you can affect that."

Dorsey's spending is sure to be closely watched. The San Francisco Chronicle was quick to ask how much of the money might have already been committed to charity through Dorsey's existing donor-advised fund — a common financial vehicle for newly rich entrepreneurs to set aside money earmarked for philanthropy and reap tax benefits while they work with a foundation to decide if and how to spend the money. Square declined to comment to Protocol on Dorsey's behalf.

Bill and Melinda Gates

Commitment: The couple got out ahead of other tech donors with a commitment in early March to spend "up to $100 million" for research on COVID-19 treatments, plus preventative measures in Africa and South Asia. Their namesake foundation gave another $5 million to aid local public health agencies as the virus hit Seattle.

Why it matters: The Bill & Melinda Gates Foundation, the world's largest private family foundation, is widely known as a pioneer in global "venture philanthropy," or applying business tactics to charity, and its unprecedented "COVID-19 Therapeutics Accelerator" is an aggressive step in a more experimental direction.

The foundation is a tax-exempt 501(c)3 nonprofit and major grant maker that must follow strict rules on nonpolitical activity and financial disclosure. Its $48 billion endowment is managed by a nonprofit trust that is also exempt from federal income tax and pays a 2% excise tax on investment income. (Some past investments, such as in oil companies, have drawn criticism for contributing to social ills the foundation works to alleviate.)

Details are still emerging about the financial structure of the COVID-19 accelerator, a partnership funded with $50 million from the Gates Foundation, $50 million from British research charity Wellcome, $25 million from the MasterCard Impact Fund, $25 million from the Chan Zuckerberg Initiative, and research support from major drugmakers. The fund, which will "operate jointly as an initiative of the funders," a press release said, aims to expedite vaccine development by creating a short list of promising treatments, building new testing facilities and ultimately lowering "the financial risk and technical barriers" for drug companies.

The Gates' plans have raised questions about power and influence: whether society benefits from such critical endeavors being funded by billionaires rather than the government.

Mark Zuckerberg

Commitment: The Chan Zuckerberg Initiative, a 5-year-old LLC that employs 400 people in Silicon Valley, has committed $25 million to the Gates Foundation's COVID-19 Therapeutics Accelerator, plus an initial $5 million to Bay Area COVID-19 relief efforts.

Similar to other large tech companies that have offered up a mix of in-kind and cash contributions to relief efforts, Facebook also announced it will contribute $100 million "in cash grants and ad credits" to small businesses affected by the crisis.

Why it matters: The Chan Zuckerberg Initiative is a case study in new-wave tech philanthropy. The group is structured as an LLC "to support any idea — whether it's from a nonprofit or a for-profit organization working on issues we care about," Zuckerberg's wife, Priscilla Chan, says on the website. The initiative doles out funds three ways: the nonprofit 501(c)3 Chan Zuckerberg Foundation, the Chan Zuckerberg Initiative donor-advised fund at the Silicon Valley Community Foundation, and the 501(c)4 advocacy group Chan Zuckerberg Advocacy.

Each entity has its own disclosure rules, and while taxes are often higher for LLCs than for foundations, Zuckerberg is not bound by nonprofit rules that generally forbid an organization to own more than 20% of any one company's voting stock. The Chan Zuckerberg Initiative usually funds efforts focused on education, science and justice, and its science-focused donations to combat COVID-19 are among the largest one-time contributions the organization has made.

To pay for the initiative's work, Zuckerberg taps into his donor-advised fund, a practice that has attracted criticism in Silicon Valley and beyond. The New York Times warned that a donor-advised fund can, without oversight, become "a sort of charitable checking account with serious tax benefits and little or no accountability." With COVID-19, the fund manager that oversees Zuckerberg's money, the Silicon Valley Community Foundation, has asked all donor-advised fund owners to contribute at least 1% to 5% of their fund to the crisis, so far generating $17 million in contributions.

"We very much want to encourage folks to get grants flowing," said Alex Tenorio, the foundation's executive vice president of fundraising and business development. "We're doing what we can to make it as easy as possible."

Jeff Bezos

Commitment: On April 2, just as Amazon was fending off a strike at a New York warehouse by workers upset about work conditions during the COVID-19 outbreak, Bezos unveiled his biggest contribution to date: a $100 million gift to the nation's largest hunger-relief nonprofit, Feeding America, which he announced in an Instagram post.

Amazon has also announced several relief efforts, including: a $5 million Seattle Neighborhood Small Business Relief Fund to provide cash grants; an initial $25 million "Amazon Relief Fund" for workers and open to public contributions; a €21 million donation (around $22.9 million) to European relief organizations; and Amazon Web Services' $20 million COVID-19 diagnostics initiative offering up "a combination of AWS in-kind credits and technical support."

Why it matters: As the richest person in the world — and head of a company that stands to benefit from quarantine-driven demand — Bezos is perhaps the biggest lightning rod for criticism about skimping on giving in relation to wealth. After a few large-scale public donations, it's less clear how much of Bezos' own $131 billion fortune (at the time of this writing) is going into the mix of corporate and personal donations.

So far, there have been no public COVID-19 announcements from Bezos' other philanthropic organizations, the education-focused Day One Fund started with ex-wife MacKenzie Bezos, and the recently announced $10 billion Bezos Earth Fund. Bezos previously said that the latter would begin issuing grants this summer. The Bezos Earth Fund does not yet appear to have a website, and no public details have been released about tax questions or any disclosure efforts.

For philanthropy executives like Cobbs, the question for all potential mega-donors is: If not now, when? "If you're not giving right now, and if you're not giving big right now, then you're never going to give," he said. "This is the time of our generation."

Jack Ma

Commitment: The Alibaba founder's 6-year-old foundation based in Hangzhou, China, has shipped millions of masks and other supplies to countries including the U.S., Europe and Africa. Collaborating with Chinese hospitals, the Jack Ma Foundation also published online resources for global health organizations. In recent weeks, the Jack Ma Foundation and the Alibaba Foundation have expanded a Global MediXchange for Combating COVID-19 by facilitating telemedicine calls with Chinese doctors who weathered the first wave of the virus.

Why it matters: Ma's efforts reflect a strategy that goes beyond cash or technical donations, instead digging into chaotic global supply chains to distribute badly needed medical equipment. Also in this category are Apple and Facebook, which have donated stockpiles of millions of masks to hospitals, and Elon Musk, who donated 1,200 breathing machines and has mused online about producing ventilators at his Tesla factories.

The Jack Ma Foundation did not answer questions about the total cash value of contributions, and its status as an international organization results in different tax and legal requirements than other tech billionaires' U.S. foundations and funds. As of December, the foundation was financed with 23 million Alibaba shares with a value of around $4.6 billion of Ma's total $41 billion (at the time of this writing) fortune, Forbes reported, and had "distributed or pledged" $300 million to projects ranging from wetland protection to women's sports to aid in Africa and the Middle East.

Local donors: Steve Ballmer, Paul Allen's estate, Pinterest

Commitment: In Silicon Valley and Seattle, local foundations with a long roster of tech donors have spearheaded emergency funds to provide grants to direct service providers working on homeless outreach, food security and other pressing issues.

At Tipping Point, Cobbs has raised about half of a planned $30 million Bay Area response fund. Among the donors are Ripple co-founder Chris Larsen ($1 million), Pinterest ($500,000) and the Bezos family. Cobbs said area tech companies have been eclipsed in this fundraising effort by old-line industries like finance and telecommunications.

In Mountain View, the Silicon Valley Community Foundation has raised about $27 million toward a goal of $75 million for three funds delivering direct services for local families, small businesses and nonprofits, Tenorio said. Among the biggest donors is the Chan Zuckerberg Initiative ($1 million).

The Seattle Foundation has raised $19 million for a local response fund from individuals including Steve Ballmer ($3 million), Microsoft and Amazon ($1 million each), the Gates Foundation, and the estate of Microsoft founder Paul Allen.

Why it matters: The "techlash" began during boom times, but questions about how much the world's most valuable companies owe the communities where they grew up have never been more acute.

Tech executives have given "in many ways and at many levels" in Seattle, said Seattle Foundation President and CEO Tony Mestres. His organization has received grants from corporations and foundations, donations from tech executives, contributions from donor-advised funds, and small-scale online donations from employees of companies with matching programs like Microsoft. "It's incredibly encouraging to see the industry mobilize," he said.

Get in touch with us: Share information securely with Protocol via encrypted Signal or WhatsApp message, at 415-214-4715 or through our anonymous SecureDrop.

In many ways, the COVID-19 crisis is surfacing inequality that has spiraled in recent years during the unicorn era for tech startups. Among those hardest hit by fallout in the Bay Area are homeless service providers overwhelmed by thousands of applications for aid, undocumented immigrants ineligible for federal stimulus money, and marginalized groups already squeezed by high costs of living and uneven health outcomes.

"The kind of disparities we were seeing in the Bay Area prior to this are only exacerbated" by the coronavirus, Tenorio said. "Unfortunately, it's a marathon."

Correction: San Francisco grant-maker Tipping Point Community does not receive support from the Chan Zuckerberg Initiative. This story was updated on April 17, 2020.

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Welcome to this weekend's Source Code podcast.

Cole Burston/Bloomberg

This week on the Source Code podcast: First, an update on Google's user-tracking change. Then, Ben Pimentel joins the show to discuss Square buying Tidal, and what it means for the fintech and music worlds. Later, Emily Birnbaum explains the bill moving through the Arizona legislature that has Google and Apple worried about the future of app stores. And finally, Janko Roettgers discusses Microsoft Mesh, the state of AR and VR headsets, and when we're all going to be doing meetings as holograms.

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