Last year, the founder of a charity that is focused on making sure everyone on earth has clean water and a co-founder of an e-commerce mattress company met for lunch at a SoHo restaurant. As the two ate, the talk inevitably turned to start-ups.
“How come at a start-up you can participate in the equity upside?” Neil Parikh, the co-founder of the mattress company, Casper, said in recalling the conversation with Scott Harrison, the founder of Charity: water. “But at a charity, you’re helping all these people, and you can’t participate in the monetary upside?”
It was a quandary that Mr. Harrison, who has forged close ties with the Silicon Valley elite over the years, had been mulling for some time. Now he is doing something about it. Under a new program, start-up founders will be able to share their wealth not just with impoverished families in the developing world but also with a rather more comfortable demographic — Charity: water employees.
Here’s how it works: Entrepreneurs who own sizable stakes in private companies can donate some of their equity to Charity: water. When their company goes public or is sold, some of the proceeds will be paid out as bonuses to Mr. Harrison’s staff.
Already, founders and paper billionaires from Uber, WeWork and Casper have pledged at least 1 percent of their shares to the new program, which Charity: water is calling The Pool. That all but guarantees that the organization’s 78 employees will share in the spoils from some of the most hotly anticipated initial public offerings in the history of Wall Street.
In the past decade, Silicon Valley titans like Jack Dorsey, Sean Parker and Daniel Ek have donated millions of dollars to the New York-based nonprofit organization, which has drilled some 38,000 wells for villagers in Ethiopia, Rwanda and other countries in sub-Saharan Africa and Asia. But earmarking sizable donations to pay bonuses to a charity’s employees is unconventional to say the least, and could elicit backlash within the philanthropic community.
“It’s very strategic to structure gifts in this way,” said Darren Walker, president of the Ford Foundation. “But the issue of enriching employees of the charity is potentially problematic.”
Mr. Harrison, who is also Charity: water’s chief executive, said the new program was a natural extension of his efforts to recruit employees who might otherwise take jobs at Facebook, Google or Amazon.
“We want to attract the best possible talent,” he said in an interview at the organization’s TriBeCa headquarters, which WeWork helped design. “But how do we compete with massages and Michelin stars?”
If working for a good cause isn’t enough, now Charity: water employees can have some Uber stock, too.
“They’re making below-market salaries,” said Mr. Parikh, who has pledged 1 percent of his equity to the program. “In this tech boom, where a lot of their friends are participating in these I.P.O.s, why should they get left behind? It’s a win-win.”
Never mind that the point of philanthropy is to give to others, not make for yourself. It seemed unjust to Mr. Harrison and his supporters that the tech-savvy millennials working at Charity: water should toil away on nonprofit salaries while their friends got rich.
(Mr. Harrison’s total compensation was $325,278 in 2017, according to public filings. The organization’s “chief water officer” made $293,442. The chief operating officer made $201,261.)
The program also melded with the charity’s broader mission to disrupt the nonprofit world. Mr. Harrison has already proved himself to be an innovator in marketing, fund-raising and community building. Now he wants to make his organization less like a stuffy old foundation and more like one of the Silicon Valley start-ups he relies on for funding.
“We’ve been trying to reinvent and reimagine charity,” Mr. Harrison said. “The vision is to build a super transparent organization that looks more like Apple or Nike than my grandparents’ beige charity.”
Before Mr. Harrison, 43, set about disrupting charity, he was a nightclub promoter. “After a decade of indulging his darkest vices,” his official biography reads, “Scott declared spiritual, moral and emotional bankruptcy.”
In search of meaning, Mr. Harrison spent two years volunteering on a hospital ship off the African coast, and saw firsthand how the lack of clean water hampered health and economic development. He came back to New York and founded Charity: water in 2006, drawing on his robust social network for funding.
From the outset, the organization had a knack for messaging. “They know how to brand water better than anyone,” said Mr. Walker of the Ford Foundation. “They understand the narrative about water, and they are also really good at giving you a sense of the crisis that we are in.”
Among Mr. Harrison’s early innovations was encouraging people to “donate their birthdays” to his cause. Instead of receiving presents, people started asking friends and relatives to make gifts to Charity: water. The effort was a hit, and is widely mimicked by other nonprofits today.
Mr. Harrison also struck up partnerships with companies including Google and Amazon. WeWork donated design expertise and furniture to the group’s headquarters.
But Mr. Harrison’s signature innovation concerned how he would fund the organization. Instead of having just one pot of capital that covered everything from rent and salaries to equipment and work in the field, Mr. Harrison had two.
A small group of wealthy donors, known as The Well, funds the overhead of the organization, each giving between $60,000 and $1 million a year. As a result, Charity: water boasts that 100 percent of donations received from the public go straight to programming costs.
It was a savvy marketing move, but it rubbed many in the philanthropic community the wrong way.
“Charity: water’s 100 percent model is largely smoke and mirrors,” said Joe Garecht, who runs a fund-raising consulting firm. “They have overhead. They have program expenses. They find donors to cover both, just like every other nonprofit on earth.”
But by saying that all donations from the public go directly to program costs, Charity: water appears to be suggesting — intentionally or not — that other nonprofit organizations are less efficient.
“It makes it seem to many donors like they can and should expect organizations they support to put 100 percent of their donations to programs,” Mr. Garecht said. “This is an unreasonable expectation for nonprofits. It’s not possible, and not helpful.”
Nonetheless, the model has been a success. Today, there are 133 megadonors, who give a total of $11 million a year. Though many of them are tech entrepreneurs, it is a diverse group that includes Education Secretary Betsy DeVos, the venture capitalist Chris Sacca and the skateboarder Tony Hawk.
In addition to funding the overhead, the top donors are granted access to Mr. Harrison’s inner circle. They are celebrated at the group’s lavish annual gala, which was held in 2017 in the Temple of Dendur at the Metropolitan Museum of Art and last year — in a nod to the group’s deep ties to Silicon Valley — in San Francisco for the first time. And many of them often travel with Mr. Harrison to Africa, enjoying made-for-Instagram moments that are shared widely on social media.
Ryan Graves, a former chief executive of Uber, whose stake in the company is estimated to be worth as much as $1.6 billion and who has pledged at least 1 percent of it to Charity: water, went on a trip to Ethiopia this year.
“It gives you the chills and makes you feel great,” Mr. Graves said of the experience.
Miguel McKelvey, a co-founder of WeWork, whose stake in his company is worth an estimated $2.9 billion and who has also pledged at least 1 percent to Charity:water, traveled to Ethiopia with the group in 2017.
“There’s nothing like seeing in real life what it’s like to bring water to a real community,” he said. Without a Charity: water well, Mr. McKelvey said, “literally a cow is peeing in the water and they are picking it up and going to cook with it.”
“We all felt an obligation to help,” he said.
For those with the means to donate at scale, the trips can also serve as networking events. Mr. McKelvey met another entrepreneur, Dan Teran, on his trip. Recently, WeWork acquired Mr. Teran’s company, Managed by Q.
“It puts your life in so much perspective,” said Mr. Parikh of Casper, who went on a trip this year. “I can walk down to Union Square and get a smoothie anytime I want to.”
The Future of Philanthropy
After the idea-sparking lunch with Mr. Parikh and after working with HSBC to figure out how to accept private company stock, Mr. Harrison began approaching his friends with the ask.
Already, start-up equity currently worth more than $50 million has been pledged to Charity: water. Besides the men from Uber, WeWork and Casper, donors include Heather Hartnett of Human Ventures and Courtney Nichols Gould, a founder of SmartyPants, a vitamin company.
“It really speaks to their success in setting themselves apart with the tech world,” said David Callahan, author of “The Givers,” a book about modern philanthropy.
When those shares are eventually sold, 80 percent of the proceeds will go to overhead like salaries and rent, and 20 percent will be paid out as bonuses to all employees except Mr. Harrison.
“It almost has the effect of turning Charity: water into one of the tech companies,” Mr. Parikh said. “They’re participating in the capital pool of all their friends’ companies.”
If all goes well, Mr. Harrison believes more perks could be on the way. “Maybe everyone gets a free mattress,” he said. “I haven’t asked Neil yet. Or we might be able to get a free gym membership for everybody.”
Charity: water may be doing things differently, but it remains well regarded by many independent organizations that evaluate philanthropies, getting high marks for effectiveness and transparency from groups including Charity Navigator, Charity Watch and GuideStar.
To date, Charity: water has raised more than $370 million, and claims its wells have brought clean water to nearly 10 million people.
But Mr. Harrison, who approaches his work with an entrepreneurial zeal, now wants to scale up his operations, and is aiming to reach an additional 25 million people by 2025. He hopes to raise $1 billion over the next seven years, $800 million of which would go to program costs and $200 million to back-end support for field operations, rent and payroll.
To accomplish as much, Mr. Harrison believes he will need to think less like a plodding foundation and more like a start-up.
“We’ve always fashioned the organization as a quickly scaling business that’s trying to acquire customers,” he said.
Mr. Harrison refers to donations as “revenue” and talks about key performance indicators. He is fluent in business speak and even calls himself chief executive officer, eschewing the traditional nonprofit leadership titles of executive director or president. To many of the entrepreneurs who support Charity: water, this is a big part of the appeal. He speaks their language. He’s one of them.
“Scott runs it like a company,” said Mr. Graves of Uber. “It’s not a bloated, cloudy not-for-profit.”
So far, it seems to be working. Charity: water’s work in the developing world draws favorable reviews even from those who question its fund-raising tactics.
And while many young tech millionaires and billionaires are criticized for being insufficiently generous, Mr. Harrison is drawing them off the sidelines and putting their money to work, sometimes in the field and soon in the form of employee bonuses.
“Scott and his team are trying to innovate,” said Mr. McKelvey of WeWork. “It’s an awesome exploration into the future of philanthropy.”