October 22, 2008 – The billionaire founder of eBay Inc., Pierre Omidyar, is expanding his philanthropic investment firm, as some of the biggest private foundations continue to weather the growing economic turmoil.
Mr. Omidyar’s firm, Omidyar Network, during the next year will increase its total investments and donations, officials at the organization said. The group also will add two new areas of investment and create six new management positions, filling them with executives from companies such as eBay, Hewlett-Packard Co., J.P. Morgan Chase & Co. and a philanthropic arm of the British Broadcasting Corp.
Mr. Omidyar, with a net worth estimated at roughly $8 billion, has been closely watched in the world of philanthropy since he pledged to find innovative ways of putting his fortune to use. His expansion comes as some of the largest foundations, including the Bill & Melinda Gates Foundation and the Skoll Foundation, which is headed by a former eBay president, Jeff Skoll, are steadily boosting their donations, investments and hiring despite broad concerns about a global recession. "The current situation encourages us to be more aggressive and more active as, unfortunately, a lot of philanthropic organizations will pull in," said Matt Bannick, managing partner at Omidyar Network. "Not that we’re going to fill the gap, but I feel like we need to step forward."
Those plans are good news for nonprofits and businesses focused on social change, which are seeing many sources of funding dry up. Financial-services firms — once reliable sources of funding — are reining in their grant giving. Individual donations, meanwhile, are being squeezed while venture-capital firms, some of which invest in companies with social benefit as a mission, are slowing their new investments to a trickle.
Giving by U.S. private foundations as a whole tends to be largely unaffected by economic downturns. During recessionary periods since 1975, funding by foundations increased slightly, according to the Foundation Center, a nonprofit organization. In tough economic periods, foundations are "a countervailing force," said Josie Atienza, assistant director of research at the center. "Large foundations also have reserves that they can tap especially in bad times such as this."
That pattern could be broken if the current financial crisis deepens and the U.S. falls into a long recession. Still, the trend this time around also is partially driven by an unprecedented creation of new foundations in recent decades and a new breed of super-rich philanthropists who appear to be largely unmoved by economic fluctuations as they try to show results of their philanthropy as quickly as possible.
That group includes philanthropies like Omidyar, which uses a two-pronged approach: It houses a foundation that gives donations to nonprofit companies and also runs a venture-capital firm that invests in companies focused on social change. This year, Omidyar expects to make commitments of $110 million to nonprofit and for-profit companies.
Under its plans for the next year, the Omidyar organization plans to boost those outlays and retool around two broad areas: one providing "access to capital" that includes investments into financial services for the poor, and another it calls "media, markets and transparency," which will invest in technologies that can help improve transparency in government, the media and other areas. Omidyar will also increase to between $5 million and $7 million the amount of money it donates or invests in each organization. That is an increase from an average of $1 million each in 2006 and is part of a strategy to make fewer but bigger bets, Omidyar officials said.
Examples of Omidyar investments include Sunlight Foundation, a nonprofit that invests in ways to use the Internet to improve government transparency, and Endeavor, a nonprofit that helps entrepreneurs in developing countries. Future investments might include online services for rating the effectiveness of nonprofit organizations, said Matt Halprin, an Omidyar Network partner recently hired from eBay, where he was a vice president.