The Israeli founders of Waze and the company’s investors were not the only ones to benefit when Google earlier this year acquired the smartphone navigation app for about $1 billion. Some of Israel’s most disadvantaged kids also reaped rewards, thanks to Tmura, which for the past decade has offered high-tech entrepreneurs the opportunity to donate their start-up’s shares or stock options — as Waze did two years ago — with the eventual proceeds going to charity.
In most cases, when the donation is made it is all but worthless, but following an initial public offering, acquisition by another company, or the sale of the donated stock on the market it can bring in hundreds of thousands and sometimes even millions of dollars for Tmura and the charities it supports. More than 300 donations have been made since Tmura launched in 2002 with almost 50 payouts. The sale of the stake in Waze netted Tmura $1.5 million, its biggest ever, and brought its total donations to more than $9 million. (Tmura is the Hebrew word for change or metamorphosis and also means value for money. It is an anagram of the word “truma,” which means donation in Hebrew.)
Tmura taps into a trend that has seen tech entrepreneurs start to think about their legacies and how they can give back even before they make it big. An app or a tech tool that rates a huge valuation today may disappear in a few years but making the difference in the lives of disadvantaged people will have a lasting impact.
Money and stock are not the only ways to give back. For example, members of the London tech community came together under the umbrella of Techbikers, a group started by Eze Vidra, Google’s Campus London Manager, and Benjamin Southworth, deputy CEO of the Tech City Investment Organisation, to help children in need by supporting a charity called Room to Read.
In September 2012, 40 tech entrepreneurs, venture capitalists and executives cycled more than 200 miles from Paris to London to raise $47,000 to build two schools and a library in Nepal. This year the group repeated the journey, raising funds Room to Read will use to help build 16 libraries.
The idea is that tech entrepreneurs don’t need to wait to have the wealth of a Bill Gates to contribute. When a start-up launches, cash and time are almost always tight. And when there is an IPO or other type of sale the thoughts of making significant donations can easily get forgotten amid the hoopla of the successful exit. That is where Tmura comes in.
“Around 1999 or 2000 I started hearing a lot of complaints in the media and elsewhere that the high-tech community and venture capital were cut off from the rest of society,” says Yadin Kaufmann, founder of Tmura. “The wealth of Israel’s high-tech community wasn’t making it to the rest of society and I wanted to do something about that.”
Kaufmann, who also co-founded, with Saed Nashef, Sadara Ventures, the first fund targeting investments in Palestinian technology companies, got the initial inspiration for Tmura from Entrepreneurs’ Foundation of SVCF, a Silicon Valley-based not-for-profit 501(c)(3) public charity that is now part of Silicon Valley Community Foundation.
“I didn’t want to reinvent the wheel,” says Kaufmann. “I had heard of something started in Silicon Valley that relied on equity donations to support charities and it seemed to be the ideal way to get high-tech companies involved. Early-stage start-ups don’t have much cash, but they have potential and Tmura lets them give a bit of their upside potential.”
Take the case of XtremIO, which makes digital storage systems. When EMC acquired XtremIO in May for $430 million, Tmura made about $450,000 selling shares donated to the organization back in 2009. Ehud Rokach, CEO and co-founder of XtremIO, says it would have been tough to make such a big donation in a more conventional manner; he and the other shareholders are “thrilled by the outcome.”
“It was a very easy decision for the founders of the company as well as the shareholders (venture capital investors) to make such a donation,” says Rokach. “I’m personally proud of being part of such a big donation for such a good cause.”
Kaufmann says it is human nature to view stock slightly differently than cash and that part of the beauty of Tmura’s model is that nobody knows what the options or shares will be worth, but people are willing to take a chance.
While there is no minimum donation, it is usually between 0.5% and 1% of outstanding shares (Tmura requests that the donation be equal to or greater than the number of options that would be granted to a senior engineer). In the case of a donation of actual stock, the request is that it be valued at $50,000 using the share price at the time of the most recent investment. In some cases companies have made a second donation of shares to minimize Tmura’s dilution following later financing rounds.
Giving entrepreneurs a way to donate to charity when they and their companies are cash-strapped might even benefit the companies themselves.
“I believe being involved in philanthropy helps companies with recruitment, motivation and retention of good employees,” says Kaufmann.
Some donors are happy to let Tmura allocate the funds to the youth-related charities it supports while others want to pick the charity themselves, something Tmura allows. Still others ask for help finding a suitable organization active in a specific area. Up to 10% of the money raised in an exit can be used to cover Tmura’s costs including overhead and fund raising efforts.
Tmura works not only with companies based in Israel, but also with those that “have their heart in Israel,” as Kaufmann puts it. That might include, for example, a company founded by Israelis, but based in the United States. Kaufmann says he would like to start an organization similar to Tmura in the Palestinian territories. Both of the Palestinian start-ups backed by Sadara — Yamsafer, a hotel and event online booking site, and Souktel, which offers mobile phone services — have committed to allocating a small part of their shares to charity.
With such a seemingly successful business plan it is reasonable to think Tmura might soon have competition but Baruch Lipner, executive director of Tmura and the organization’s only employee, says he is not worried about that.
“We are already very well connected with the investor community in Israel, including with VCs, micro-funds, incubators and angel investors so one could view that I suppose as a barrier to entry,” says Lipner. “We run on a very lean budget so it would be difficult to justify a second organization on the basis of cutting costs. Also, as we allow equity donors the option to allocate funds from a successful exit to a project of their choice, I can’t really see a reason that people wouldn’t want to work with our existing platform.”