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Oregon’s Entrepreneurs Foundation draws philanthropic startups

The Entrepreneurs Foundation of Oregon held a reception Thursday evening that drew more than 30 startup executives to hear about how the wealth they hope to generate someday can help build a better community.

By:
Aliza Earnshaw
Business Journal of Portland

Executives gathered at U.S. Trust Co.’s riverside offices off Southwest Macadam heard pitches from Executive Director John McLaughlin, directors Les Fahey of Fahey Ventures and Hugh Mackworth of SmartForest Ventures, and advisory board members Frank Gill of Technology Investments and Jeff Grubb of U.S. Trust.

The Entrepreneurs Foundation’s goal is to help new companies that are still so busy building their businesses that they have no time to become involved in their communities. These companies also don’t have any spare cash to donate to causes they care about. "We know that community matters are No. 43 on your priority list," said McLaughlin to the assembled group. "We understand that—we’ve all been there."

The nonprofit’s main role is to take donations of stock options from companies, and hold them until a "liquidity event" takes place—an acquisition by another company or a public stock offering—and then to donate the resulting cash to community causes from a fund directed by the company that donated the options. Entrepreneurs Foundation commits to donating at least 75 percent of the cash from options, retaining no more than 25 percent for operations.

Companies donate anywhere from one-eighth of 1 percent to 1 percent of the value of the company to Entrepreneurs Foundation. So far, options donations have come in from Unicru Inc., Storied Learning Inc., Eid Access Inc., Natural Messaging Inc. and Verinform Inc. Natural Messaging has made the largest donation as a percentage of company value, at 1 percent. CEOs of at least a dozen more local companies have decided to donate options, said McLaughlin, and are now in the process of seeking approval from their boards of directors.

Larry Neitling, CEO of Eid Access, was on hand to talk about why his company elected to donate options to the community through Entrepreneurs Foundation. The early days of building a business, he said, are so busy with raising money, creating a product, finding customers and hiring, that there is no time for community involvement.

"In our case, we chose to take a small percentage of the company, set it aside as stock options for the future, and then we can concentrate on what we need to do for the company," he said. "As we continue to build value in those shares, we’ll do something else. Maybe someday you’ll even see us at a charity auction."

Eid Access made an initial donation of 10,000 options to Entrepreneurs Foundation, out of six million total authorized shares. "We expect to do some more," said Neitling. "There’s really no risk, and a very high potential reward [to the community]."

Making the donation up front, while the company is still small, assures that at least some of the wealth generated in Oregon will stay here and help build the kind of community that local businesspeople want, said advisory board member Grubb. "If you sell off to a huge out-of-state company, they could say, ‘OK, we care about Oregon, let’s put $5,000 into the community’—but gee, you grew the company here, and you’d like to see the community get a little more than that," Grubb said.

Mackworth, co-founder of SmartForest Ventures, said he and his partner Debi Coleman feel so strongly about Entrepreneurs Foundation that they have written into their standard term sheet a requirement that their portfolio companies must meet with McLaughlin to talk with him and gain an understanding of what Entrepreneurs Foundation does. "We think it should become a standard for companies in this area," said Mackworth, drawing laughter when he added, "Of course, we don’t want [companies] to take checks from us and start writing big checks to nonprofits."

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