David Goldberg. Post-Exit Impact: $10B Pledged to Charities

40:55Yeah. It should work. I guess it's because they weren't great entrepreneurs. Okay. So it's an execution problem. I think so, yeah. I mean, they were very well-intentioned good people that had all of the desire and just lacked the grit, capacity, determination, execution to do it well. I mean, there's a couple of people who were better than others. But overall, you know, we gave almost a million pounds of cash to 20 companies 50 ,000 pound grants equity free grants usually businesses to like accelerate their growth and with mentorship from within the founders forward community and it just didn't work a year in you can lead a horse to water but you can't make a drink right so basically you're talking about your the companies you invested in these are the people who didn't have enough that's right experience yeah I understand so founders forum did have that ability to execute The issue was not founders firm.

41:55The issue was these 20 companies, these founders we were trying to support just weren't great. And we looked long and hard. We looked across Europe and had hundreds of applications and picked the 20 best. When you picked them, you only picked those that actually had a socially impactful purpose. That's right. Is it possible that these were just types of problems that could not be solved by businesses? Um, no. No. Okay. So it's really just, just the quality of execution. And the issue was like, good people, not great entrepreneurs, you know, really cared about affecting the world positively, but couldn't.

42:38Couldn't. They didn't have the skills. Yeah. And so I like, we spent a year doing this and I, you know, didn't want to, didn't want to spend another year, waste another year having it not work. And I sort of took a step back and I thought, how do I approach this problem differently? And I had this moment where I was like, what if I just help great commercial entrepreneurs be more social instead of helping these social entrepreneurs be more commercial? And it really just like, it clicked. And I was like, huh, I'm going to build the thing that I wanted when I sold my business, which was how do I make decisions about using my resources to affect the world positively?

43:15They're scarce resources. So how do I use them as effectively as possible to do as much as possible? and work with a community of people that are already sort of on their way to success and are going to have much, much more of it than, you know, even your sort of, you know, the top quartile average. You know, and at the same time, there was this tech was becoming mega. And we were, I was seeing people becoming billionaires, like right, left and center. I mean, these were not overnight successes, but they were like an overnight success after 10 years, right? That's how the saying goes. But there was this subset of people in the world that had more earning potential than anyone else.

44:00And it was venture-backed technology companies and the founders behind them. And so I thought, you know, let's just help people like this give better. But it became clear that I was not a person to be listened to. Like, you know, I sort of had ideas about how to do this well. and then developed a bit of a framework for it. But, you know, I was not venture-backed. My exit was not like a venture-backed tech exit. And so I didn't have any credibility or network to execute with. And so I thought maybe there's this idea, like, let's get people to commit to give before they've actually made money. We discount the value of the future extremely, such that if you commit to give away 5%, 10 % of something that hasn't yet materialized, something in the future, you're committing to give away today 5 % or 10 % of nothing, which is zero.

44:51David, please tell me how a founder's pledge works, because obviously I know, but some of our listeners wouldn't. So the basic idea is that we ask founders of technology companies to commit legally to give a percentage of their exit, if they ever have one, to go to charity. And they sign a document, a contract, that binds them to do that. Now, it's not like a 20-page legal contract. It's a one-page, you know, if X, then Y. X is I sell shares in my company and make money. Y is then I'll donate some percentage of what I make. The charities or social causes of my choice at that point. And the first person I spoke to, like I got a meeting with under like different pretenses.

45:36Guy named Nick Hungerford, a company he started called Nutmeg, who actually recently just passed away, which is quite sad. He's the first person I talked to about it. And I pivoted in the middle of our meeting. We were talking about something else. I don't even remember what it was anymore. But I said, hey, I've got this idea I want to run by you. And I pitched him this idea, a founder's pledge. I didn't have anything to walk him through. It was just the idea. He's like, yeah, he asked a bunch of questions. And he said, if you gave me a piece of paper that said something along those lines, I'd probably sign it.

46:09I said, oh, ah, I said, really? And he said, yeah, why not? It'd be committing to give away something I haven't made yet. And only if I make it, do I give it away. I was like, yeah, that's right. And I asked, you know, okay, I'm going to put this together, and I'm going to send it to you. But in the meantime, who are three other people you think I should talk to who might react similarly? And he gave me three names, and he said, reach out to them and say, I told you to reach out. No, he did not offer to introduce me. And he said, you know, you might consider reaching out to these three people.

46:40And I did. And I got two meetings and two said yes. And then they had that proof of concept. It became a thing pretty quickly. And Founders Forum were very good to me. And they gave me access. As soon as I got the proof that people were interested in this, they basically said, okay, well, you can grow this within Founders Forum. Come and talk at our next event in June. and launched Founders Pledge there. That's incredible. Yeah, I did. Very generous of them. Very generous. It wouldn't exist without them, for sure. Brendan, are you still involved with them? I mean, a bit. So we spun Founders Pledge out of Founders Forum in the very, very early days.

47:21We've been independent since 2015. But I think we're still part of the family. Maybe the extended family now, but I go to most of their events still. and they have been and continue to be very generous with their wonderful network and they don't have to. When you first told me about Founders Pledge,

47:43I was not only impressed by the novelty of the idea of pledging something that you don't have yet, which is brilliant, but I was also really impressed by how you make the decisions later, what causes to give to. Can you please walk us through this? So Foundry's pledge at the start was just, let's get people to commit to give and see if we can get enough people to do so that we could actually build some momentum in the space and become a bit of a, create a zeitgeist. And it soon became clear that it wasn't just enough to get people to commit to give, they needed to give better. um and um and at the same time there was this real desire i found for community and not just community which is like you know we're fintech entrepreneurs or yeah um you know b2b sass or whatever it is they there was this nascent desire to have community with people who were on the same journey and i don't want to say spiritual journey because it's not spiritual but it's like purposeful like sitting at the sort of the heart of who a person is and their desire to have success often is this idea that we can affect the world positively with the success.

48:54So Founders Pledge started as this pledge and then became a lot more. And so once someone pledges, they become a part of a community. We do lots of events and convenings for a year. So this year we'll do about 30 events all over the world just for our members, or we bring them together to explore issues of relevance to the group. So they're typically small groups, 10 to 15 people around one of our members' kitchen table with a leader, a thought leader or expert, you know, guiding a discussion, something relevant. And then we used to do big forums. But the idea of community brings people together around thematic areas, and they arrive as strangers and leave as friends.

49:34How many people in each event usually? So the dinner is 10 to 15, sometimes 20. Yeah, so they really have a chance to get to know. Absolutely. It was important that they be small enough that you can talk to everyone there, everyone can speak and have their voice heard and share their perspective. And so we do a lot of these now. The community of members is almost 1 ,850 now from 40 countries. Amazing. And so we have this community educational program that runs forever. Someone can join as they raise a Series A or just having signed an LOI that they're going to sell their company and still participate in our community and learn something from it.

50:17And then the final bit is actually helping our members to get better. And I think that's what you were alluding to. Not just enough to commit to give and then give, but we should give as effectively as possible. There's a problem that I faced, which is like, how do I do this? You know, I'm not Bill Gates. I don't have Bill Gates money. And even when you do, it's not necessarily very straightforward to give away billions of dollars well. So, you know, I decided to build some infrastructure to enable this impact to happen at real scale. the first piece was actually the how to give better yeah so built a think tank within founders pledge um hired tremendously smart people often philosophers statisticians and data scientists to sort of build out this uh this framework of like how do we do the most good um and that's grown a lot over the years and we've you know really found our voice and our um our path amongst the lots of paths that exist out there yeah and then built the infrastructure the financial infrastructure to enable people to give globally regardless of where they're a tax resident so it actually turns out to be slightly more complicated than you might expect if you're an american to give money to africa or to asia to south america or wherever you're from like typically a government wants to see money stay within its jurisdiction yeah uh but often uh the biggest problems aren't where the most money is made.

51:43That's often the case where if you can pay money in America and you want to really have outsized impact, you should probably be focusing on low and middle income countries. How do you solve that problem? We grow data into the equation, and we help people to make better decisions using it. So we've built a framework that focuses on effective giving, that tries to sort of take a very humanistic utilitarian approach to making decisions, which is all equal, do as much good as possible, follow data, invest our money, invest in air quotes, donate our money in the same way we invest our money for return of capital in markets or in funds, see which funds perform the best, invest in those, make money, invest more money, and it grows over time.

52:34In my view, our view was let's deploy money to the things that we know will do as much good as possible. And we know this because there's data to support it, evidence to support it. Randomized control trials have been run on specific types of interventions that say in a pretty causal way that if we do X, Y will happen. And we believe that Y to be greater than the next Y, Y1 or Y2 or Y3, the other types of interventions that could exist in the world. And so we really tried to be rigorous about understanding how do we affect the poorest of the poor and increase the quality of their life, whether that be in reducing infant mortality or self-reported well-being or reducing the disability burden that they face as people who live in low-income contexts or improving the quality of their life.

53:23And thankfully, there is a large body of evidence, development economics and development aid and the World Health Organization that have been thinking about this space for a really long time and develop excellent hybrid metrics and enable us to compare apples to apples as opposed to apples to oranges to pears to beaches right which all are sort of similarly shaped but are different fruit and um it's hard to make decisions on uh with different metrics so do i understand you correctly that you are very focused on how to use the money efficiently and you determine that by looking at data yes as opposed to emotion for what i feel like uh like doing we really discourage people from taking an emotional first approach um often it's it's easy to do that it feels good at least at the start to take this very like my heart says this or i've met this amazing charity or this amazing charity ceo and i've seen their work yeah which is like a thing that here a lot it's like yeah you really haven't seen her work which is how most charities operate and you mentioned it yourself or they optimize for it right they optimize for the emotional appeal yeah because that works yeah but um if all decisions were made that way then we'd be way worse off we'd have way less um quality of life than we than we actually do because most decisions are not made using sort of emotional markers.

54:51They're made using very rational, considered quantitative decisions. So you mentioned that countries naturally don't want money to go out of their borders. Is there anything you do from the legal standpoint to make it easier for your founders to invest, as you said, into Founders Pledge? So we operate something called the Donor Advised Fund. It's not a new structure or vehicle. There's lots of donor advised funds out there in the world. It's actually the most common giving vehicle in the United States. And I think it's becoming increasingly popular here. This is like a percentage of all giving happens through donor advised funds.

55:36And it basically is like a charity checking account. It allows a donor to irrevocably donate money or assets to a nonprofit, a charity. They get a tax receipt the moment they donate it. And then that nonprofit holds their money, either investing it in public funds or holding it in cash until they're ready to actually give it away. And then the donor advised fund makes the grants on behalf of the donor. Pretty simple concept. And our take was donor advised funds really only ever give within the same tax jurisdiction that they receive assets. Again, very limiting. So our donor advised fund only works with a small number of people, only founders pledge signatories.

56:16So it means we don't have to cater to many, many thousands of people, tens of thousands of people like all the others do. We're focusing on a very small subset and we're enabling them to give anywhere in the world. And so the UK has a very expansive charitable regime, and it means that we can make grants from the UK and also from the US, having conducted rigorous due diligence on the organizations, ensuring that they operate and would pass muster if they were based in the UK, but aren't from a donation perspective. so we can make grants globally. So when someone works with Founders Pledge, they can, but certainly don't have to use our donor-advised fund.

56:58And if they do, they can make grants anywhere on the planet as opposed to just within the UK. And that's the same for our members across Europe and across North America. That's very helpful. Yeah. And interestingly, our donor-advised fund is zero cost, so we don't charge our members fees for using it. I was about to ask you that. So please tell me how it actually works technically. It's very important. Typically donor advised funds are pay for service. And they are typically based on the assets under management. So if you donate a million pounds, you'll pay a fee based on that million pounds. Depending upon the donor advised funds, it could be more than 100 basis points, which is 1 % per year of admin fee.

57:46So it's not an insignificant amount of money. and um but that creates a weird incentive right so if your whole business is built on charging fees based on assets under management AUM yeah then you're optimizing to have as much AUM as possible because that's how you make money yeah but this means that um the donor advised funds have no incentive to get money out the door to charities that actually need them far from it they you know there's a proliferation of what we call zombie dafts or it's just like they hoard money and sit on you know hundreds of millions or billions of dollars of assets that are invested making fees on that money and never push their donors to actually deploy the capital to profits wow and so um this is problematic obviously and rather than creating the same broken system i decided i'd eat the cost of running the donor advised fund so that our incentive actually was to get money out the door so we don't charge how do you eat it exactly i've ripped stuff i raise money from yeah uh from donors to fund founders pledge yeah and with that pay for the entirety of the operations of the non-profit without charging our members anything ever so so uh these founders have a choice whether to support your organization or to send all their money into courses.

59:10And we don't, you know, we don't say, hey, the moment they pledge, leave a percentage of your pledge for us or the moment that they put money in the donor advice fund, hey, you've got money now. Do you want to support founders pledge? Our whole thesis is built on we should be earning or keep and delivering value. Yeah. And if we're delivering value and it's better than anyone else's value, then our members should want to support us of their own accord. And that's proven to be the case. Okay. So we raise money independently of our members and of their pledges every year to keep the lights on. Turns out in the early days, our members didn't have money because they just pledged and they were just like everyone else.

59:44And so we raised money from existing philanthropists with this idea that. You know, we can help our, help people that are going to be very wealthy, be better philanthropists. And they might have been themselves as early donors and sort of increased the efficiency of their giving. And as a result of that, they started to fund us. And as time has gone on now nine years in, the majority of our funding comes from our members because they choose to support us, not because they have to. So you accepted this enormous risk that next year you won't have that money, right? Because there is no formula that works automatically.

1:00:19So you have to go out and talk to people. Every year. Yeah. So like I, in the early days, it was cheap to run. And so, you know, I would spend a month or two every year bringing 150 ,000 pounds to run Founders Pledge. And now we spend about$8 million a year to run. So it means I spend a lot more of my time doing it. But we've, you know, after nine years, we've become very effective. the differential between how much we spend and how much we help our members donate is significant so we'll get to the numbers in a minute but i really want to understand on the personal level yeah how do you keep that desire to do it going for so many years because how many years it's been now right so basically for nine years now you've been living in this extremely stressful situation, trying to raise money for your next year, for your next endeavor.

1:01:19What kept you motivated to do that? Yeah. I mean, it is really hard, right? So it's like raising a series A in perpetuity every year, year on year, for the last nine years from the same investors. But the thing that keeps me going is like, what we're building is important. And it's never been done before in this way. Um, you know, I'm a real believer that if you align incentives well, structurally from the start and do good work, then, you know, you'll, I believe you'll have success if you just put all of your energy into it. And so the reason I've done it this way is to ensure that our entire purpose is built around impact first.

1:02:00And it's not built around making it easy or, you know, raising money because it's emotionally compelling, you know, um, it, the whole idea of founders pledge is that like impact should be everything. Yeah. And we'll figure out how to keep the lights on. And it's mostly like going out, talking to existing philanthropists and convincing them that like, at some point in the future, the differential between what we spend and what we get out into the world will be exponential and it will be worth the investment, right? It's just like, you know, well, it's not just like, but it's similar to how, you know, you raise money from VCs as a tech founder.

1:02:39And you spend a lot of money every year for many, many years, losing year on year. Yeah. Until you sort of hit this curve and you 100x the investment. Yeah. And now, listen, we're not going to 100x the investment. Well, maybe we will, but it's certainly not there yet. The idea was that by investing in the infrastructure of this initiative really early on and continuing to invest, we can just focus on keeping the main thing the main thing and not ever have to sell to survive. Focus on, you know, brutal transparency and honesty and helping people be better. Donors. Yeah. So how much money is currently committed to Founders Pledge?

1:03:21Yeah. So$10.2 billion or so. That's impressive. yeah it's a lot how much of it um has already been employed uh more than a billion one billion and two million or so can you give me maybe your favorite story of how you created impact with that money i sort of assumed when i started founders pledge that i'd have a really long time between when you know i started signing people up and when exits started to happen and it actually started like I figured I'd have like many years and it happened really quickly oh wow so like in year two we saw our first exit incredible and um you know my philosophy was we'll build the infrastructure to deliver impact as we need to right um like I don't want to have a big team in year two working on the research and sort of the think tank before there's money to give away and it just started to materialize.

1:04:20And so we had to sort of spit up operations pretty quickly. And, you know, there was some learning to happen and our really early donors, really early members who had liquidity were like pretty patient, you know, because I... They'd been through startups also, so they could relate. That's right. And we started to produce research and started to find organizations that were doing good work. And our thesis was like find organizations that had or cause areas, at least at the start, that had real scale. There was a really large total addressable market that had solutions that could potentially work.

1:05:02So there was tractability in the space. And importantly, if those two first conditions were met, the third was there needed to be neglectedness. So we didn't want to give into areas that felt, that were like large in scale, that had solutions but didn't need money. So it needed to have all three of these commitments. And it soon became clear pretty early on that mental health was like a very deeply neglected area. Neglected in the sense that like mental health captures like one fiftieth of the funding that goes into HIV, AIDS and low income countries. Like it's a, and when we think about mental health, we tend to think of it as like a global north high income problem.

1:05:43Like, you know, only we people of, you know, privilege have mental health issues. But it turns out not to be the case. It turns out mental health is health and it's a pervasive health issue everywhere. But it gets so much less attention in low income countries. Typically, sub-Saharan Africa, where it's just not a thing that is focused on. So in the year two-ish, sort of the end of year two, year three of Founders Pledge, we identified a nonprofit working across Africa doing mental health treatment and intergroup personal therapy with women and mothers in sub-Saharan Africa. And it had this incredibly beautiful, eloquent model, which was train women who are well-respected leaders in their villages to facilitate more therapy amongst the people in their village.

1:06:43And you can sort of have this spread of mental health. It's called Strong Minds. And we were one of the very, very, very early donors to support them. and gave them catalytic funding that's enabled them to continue to grow on scale. It was one of my really early memories of being like, wow, we really... That's an amazing... We enabled this organization, I think, in a lot of ways to grow, and they continue to do tremendous work, but in an area that is just so historically underfunded. Yeah, I can totally see why. So by now you've seen so many founders who pledged their money, and exited. How do you think the fact that they pledged the money before they exited affected their post-exit journey?

1:07:31Because both you and I know that looking for a new purpose is probably the most painful thing that happens after we sell our businesses. We're usually shocked by it and we feel this need to fill the void. Totally. I think in a pretty real way. So I think most founders start businesses to solve problems. We're natural problem solvers. And that desire to solve problems never really goes away. Most founders, you know, we spoke about this at lunch some weeks ago. Most founders have this exit and then feel empty inside because they're like, okay, now what do I put my energy to? There's still so many problems out there.

1:08:09And so they try to make themselves feel less empty with stuff often and experiences. But it really is just like putting a bit of a plaster on the wound. It doesn't really solve the underlying problem. And I think committing early to philanthropy is actually like a really powerful motivator. It says, you know, my journey is in service of something. It's directional. And when I have this outcome, if I have this outcome, then I know that I've already committed to doing this. And it gives sort of an anchor point of like, this is what happens next. and it's our job as a nonprofit as founders pledge who are trying to take these people on a journey to help them scale up over the course of time so that they're really well prepared by the time they have this outcome or approaching this outcome to be able to think about it well so our events aren't just you know socials and networking events and in fact they're like not that it's about learning and connecting and being more coordinated with peers also on this path.

1:09:15Yeah. Such that you can come to an event and know nothing about neglected tropical diseases or mental health in low-income countries or high-income countries or what the climate crisis actually means or our energy needs for the next 50 years or how to affect air pollution or oral health and leave with much more knowledge and a way to dig into that area if you're interested in real depth. Yeah. Such that by the time there is an outcome, there's like a very clear path for more. So I think, you know, to a large degree, many of our members would have given to charity regardless of us. Yeah. But I think as a result of Founders Pledge, they typically commit to give more.

1:10:02And they certainly give much, much more effectively as a result. For me, there is a very personal, you can even say selfish, benefit from doing that. When we sell our companies, we face this confusion. We're overwhelmed and confused. We lose our structure. We lose our relationships. We don't really know what to do. And I can imagine that if you already have a commitment to founder's pledge, you suddenly actually have a structure and you have relationships. So you solve some of the biggest problems for these people early on. They have something to hold on to. But also what I love about it, I see a direction being very much out from your selfishness and to selflessness, which always feels fulfilling.

1:10:51So I think from my perspective, you actually create this amazing vehicle to help people get to more fulfilling lives and to have greater impact in life without wasting this time after exit. Because my personal mission in life, you can say, is to help post-exit founders, who are some of the most competent and consequential people in the world, to not waste this time and to go straight into solving even bigger problems, solving them better, and getting the benefit of fulfillment. And I see that founders' pledges is a fantastic vehicle exactly for that. Well, you've put it very well. I agree completely.

1:11:34Indeed. I think these people are really sort of some of the most tremendous executors and operators that exist. And if they just stop doing the thing that they're really good at, that they've spent years working on and do nothing, they go stir crazy. Absolutely. Crazy, crazy. Depressed. Talking about mental health issues. And we try to sort of just like funnel them into the next thing. And like, I think philanthropy is a stepping stone. I don't think it's the end. I think that, you know, every good entrepreneur, even if they're, you know, getting up there in years, has another business in them.

1:12:14Yeah. And maybe that next business, as a result of working with us, can be one that's more focused on solving the really tough social problems. And coming back to my time at the Founders Forum for Good, the issue was talent. There wasn't enough talent. Exactly. Or the right talent. Imagine if the people who sold, had these really great outcomes, sold their businesses, made their millions or billions of dollars, understood the world better as a result of doing really effective philanthropy, decided to then start another business focused on solving big problems. Exactly. Instead of making money, how do we solve distribution issue X and country Y?

1:12:52Yeah, because for most of us, actually, earning money is no longer a motivator. That's right. and we're looking for a new one and and you offer that direction which i think is is is uh important um you mentioned something you know profound before that you don't feel um the journey you offer your your founders um is is a spiritual one which i was surprised about because for me spirituality is actually this growing out of selfishness and into certain and giving and um I would like to explore your thinking a little bit because I definitely feel that you are guiding people in the spiritual journey and how I see it from the outside.

1:13:35Well, it may be spiritual, but we don't intend it to feel spiritual. We intend it to feel like rational. So I often say, you know, the heart leads us to give. But that should govern how it's done. if we index too much on like the heart and how we feel okay um then we sort of fall prey to pretty specific problems um that like we can avoid by taking a more sort of rational head-based approach so it's it doesn't ignore spirituality it just doesn't make it the focus of the exploration no now i can see where you're coming from you actually want to differentiate yourself from those charities who sell emotions in a way or sell big ideas spiritual ideas you want to differentiate yourself yet yet again i feel that without advertising it you actually are guiding people there probably in their spiritual journey we just we just don't call it a spiritual journey you and i understand now why because you want to differentiate yourself and i guess there are lots of people who may be also scared by that because they may think our spiritual means religious and that then you open up a whole Pandora box when you start talking.

1:14:44Unfortunately, I'm quite uncomfortable talking about spirituality, and I can see that you don't want to scare them away. But again, I think those who stay with you for a long time, they probably, if they look back, will say, yes, I spiritually evolved significantly thanks to my involvement with this pledge. I bet if you'd ask several hundred people who've had liquidity and have given their money away and worked with us that I bet many of them would describe it as they've been on a spiritual journey. I'm sure. I'm actually really sure about that. This takes us to your next venture, your newest project, which I find very, very exciting.

1:15:29And I would like you to talk more about it and also to educate my audience about what it is. So tell me about Pledge Ventures and how it works together with Founders Pledge. What's the relationship there? Yeah. So I mentioned I do a lot of fundraising to keep the lights on for Founders Pledge. We spend about$8 million a year, every year to operate. And I'm sort of at the center of it. I have a very good fundraising team that supports me. But at the end of the day, I like go out to our donors and make the asks and do the close. And in June of 2021, I had a lunch. I was I'm I just finished lunch I was leaving I was walking back to the office and it was on my phone and I went to step into the street nearly got hit by a bus so I'm I'm from America so I looked the wrong way the bus was coming the other direction I nearly got smashed it was it was a close call and it really like freaked me out and I sort of stepped back I was like okay I didn't die but I nearly did yeah I thought you know my family would be sad but you know they'd get over at what would happen if founders pledged.

1:16:35And I sort of came to the conclusion that it would be in real trouble. Not because it's not well-run, it is. I have a tremendous COO and a tremendous team. They're wonderful. And it works well mostly because I don't do most of the ops. But I do most of the fundraising. And if I disappear, we struggle to pay our team. And so I realized that I can't be a single point of failure anymore. And so something has to change. And I spent a couple of months trying to figure out what that was and what that would look like. And to cut a long story short, I sort of came to this moment where we ask our members to fund us after they've derived value from us.

1:17:13But our members make their money primarily from exits in their business. What would it look like if we went a little higher and made money alongside our members? What would have to be true in order to benefit at the same time as our members did? And the answer was pretty clear. We'd have to be on the cap table. And it was just a hop, skip, and a leap until I sort of realized we needed to start a venture fund, which we did. So Pledge Ventures is a commercial venture fund that was incubated by Founders Pledge. And now it's entirely independent. It was spun out of it, although we share some resource.

1:17:50And the goal of Pledge Ventures is to invest in Founders Pledge member companies with a set of rules. The LPs invest for commercial returns. They're better to make money. But the GP is effectively a nonprofit in that it donates back 85 % of its carried interest, everything that it makes, to Founders Pledge to run the operations. So you have this nice idea whereby Pledge Ventures invests in member companies. And the rules are pretty straightforward. There's three of them. One of the founders has to be a member of Founders Pledge. The company is raising a Series B or later of$20 million or more.

1:18:29and there's a top tier fund participating in the round. So we looked at the data. We found sort of what top quartile performance looks like. And it was B plus alongside top tier investors. And my belief was that we as founders pledge adjacent could invest in our members because we knew them at this very crucial consequential scale moment alongside the best investors in the world and get allocation to rounds that are otherwise totally inaccessible to everyone else, way oversubscribed. But because the GP donates back so much of its carry to charity, we should be able to get a small slice of big rounds very reliably.

1:19:09And that was the thesis. And so I went out and spoke to about 25 or so founders pledge members saying, hey, I've got some cash on my well, you're raising a funding round. Can I participate? And people were like, wait, you guys have money? I'm like, are you sure you have enough to do that? I was like, yeah, yeah, no, it's good. Don't worry. And these are people who are actively fundraising at the moment. And every single person said yes. They said, yeah, of course. We'd love to have you participate in our round. And I was like, cool. Well, I don't actually have money to invest. Just kidding. um but i wanted to like confirm that if we did you give me allocation these are all over subscribed rounds and so i was like i did 25 it's like i should probably talk to another 25 i cherry pecked i was like these are the people that i know but i went out to like a wider array of people um and spoke to another 25 so about 50 um and like 22 23 people were like insta yeses like yes we'd love that's quite incredible i mean they really they really must feel you're given that value and yeah i mean so and the idea was we're not writing big checks we don't do follow-on it's a one-time investment at a very consequential moment um and it's about giving back so the idea was like you could take money from venture capitalists more money or the same amount of money they would have taken or you can take this money from venture capitalists minus a million and a half or two million dollars and take the rest from us and we'll participate in your success alongside you and when you have money the fund will be successful and when the fund is successful founders pledge makes money from it um so it's a nice idea so i did this testing at the end of 2021 um and then realized there was really something here um i told people obviously in the same conversation that i you know pretended that i wanted to invest that we're not actually going to but i want to start a venture fund and over the course of these conversations we like got a fair bit of commitments as LPs.

1:21:12Like I wasn't intending to fundraise, but we got really early traction with people on a single phone call. So you basically, in that concept, you made two major assumptions. One was that the target companies will welcome you, but the other one was that the world's best investors will also welcome you into their rounds. How did that work? Did you prove that part of the concept? end of 21 times were still pretty good start of 22 and became became the change and um and so yeah we spent a year trying to figure out actually how to do this model and it hadn't ever been done before where you have like a commercial lpgp venture fund with a 220 structure but the gp donates to charity it needs to be tax efficient how can there be effective control by a non-profit without there being too much control and too much linkage that it creates conflicts of interest.

1:22:09So we spent like nine months with lawyers trying to figure it out and eventually did. And in that nine months, the world really changed. And we went from like the biggest bull run to like the dark times of winter, where we're like still there. But, you know, we raised$43 million. We're still fundraising. We'll do our final close at the start of 2024. but we started to invest so to answer your question like how do other investors view us pretty favorably actually i think and um but i was prepared to fight for every allocation in every in every round um my lps were like you're gonna have to fight and i was like yeah no i know like that's what i've been doing yes for the last decade i can i can keep on keeping on and um But it turned out not to be that much of a fight.

1:23:02So we're investing really alongside top tier investors. But, you know, in hot companies that are raising oversubscribed funding rounds, they're oversubscribed because the companies are great. I mean, the companies are really great and they're really oversubscribed. Founders have a lot of control. And these are founders who've been on a journey with me and with Founders Pledge. And they, you know, have derived value from us over the years. And we've never asked for anything back. And so, you know, we've accrued nine years of goodwill. And we're asking for a million, a million and a half, 500 ,000 of around 30 or 40 million.

1:23:38And when they say to their lead investor, this is important to me, the lead investor always lets us in. We've not had an issue yet. We've done six investments so far. And it seems to be working. Yeah, it is. You have to wait for a while to really see if you get enough money that way. So I assume for now you're still very busy fundraising to keep the lights up. Yeah. I mean, and to be fair, like it's hard, but we have people who really believe in us. We support, you know, many families and family offices now with their philanthropy. So we've sort of expanded just from working with pre-exit founders to we support philanthropists with our research and our resource.

1:24:21um so walk me through this i assume they don't pledge equity because that's not how they're structured so they just directly give you money yeah to support the organization yeah so we we work with um families and family offices and ultra net worth individuals for whom a traditional pledge like we'd have you know a congerford signed um that doesn't really make sense but um we have a couple of programs that enable us to work with existing wealth in a nice way. So we have a program called the Foundry. And so this is like a multi-year program to fund Founders Pledge because people believe that we're important to exist in the world, the global public good.

1:25:05We produce research. We help people give better. The research that we produce is all public. There's no paywalls. It's all on the open internet. So you don't actually have to be a member to take advantage of it so people fund us because we're just very effective as far as leverage goes so when someone makes a multi-year commitment to fund founders pledge they become a member by that commitment yeah and then if they are you know are giving away more money throughout the year then they can work with us our advisors and our research team to optimize their giving for impact and so we have i think 12 or 13 families now that are part of the foundry this giving program that we help with their philanthropy.

1:25:42And then we have another program for people who are giving away much larger sums on a yearly basis. We built bespoke research programs for them. Typically people giving in the order of 5 million plus per year, we can really help them to build foundational knowledge if they're just getting set up or if they're doing a pivot out of work that they found is less effective or the strategy has changed. We help people really go from first principles and build real sector expertise on the back of research and active grant making. So we work with several families. And the way you're structured, you feel that the incentives are aligned.

1:26:23Incredibly. There is no conflict of interest in that at all. Because, again, you're not changing any fee. So the Foundry program, people make a commitment to donate to us. And as a result of that commitment, then they get access to everything that we have to offer. So I don't consider it fee for service. As a result of that, like there are lots of philanthropy advisors out there who like charge fees or like an engagement cost up front. And then they're a provider of a service and the people who gave them the money are the client. And the client is always right. Right. So, you know, you go to a restaurant, you don't like the food, you send it back because you're the customer, the client, you're always right.

1:27:01But with philanthropy, it's often like the client is mostly wrong or often wrong. And or needs to update in some way or is liable to make mistakes absent a challenge or provocation. And so we take the view that, you know, when people become foundry donors, they're partners, they're not clients. They're not a provider of a service. They're a member. And so we work with them like members. And when they are potentially making decisions that, you know, the data doesn't support or that seem wrong, we challenge them on it. Now, they can still make those decisions because they're people with agency and they don't have to follow our advice.

1:27:41But if presented with data that says this isn't good and this is 12 times better, so it's the data, people tend to make the more rational decisions and follow the recommendation that actually makes the most sense. So we like, we consciously complicate conversations so that, you know, people can be better donors, expand their moral circle, and as a result, be more effective. So why would someone give money to pounders pledge? Yeah, I think there's like probably a couple of reasons. But maybe the most compelling one is we create leverage. So you could give a dollar to a charity. A charity does a dollar worth of good.

1:28:21One for one. I guess that's fine. But if you give a dollar to us, we will, at the very minimum in year, create 23 more dollars of charitable giving that go out into the world. So we're a machine for leverage. The difference between what we cost to run and the amount of money that we help our members to donate every year is so significant that funding us means 23x more goes to charity as a result. Incredible. If you care about specific things like global health and well-being or mental health or climate philanthropy or improving the quality of science, a large portion of the money that we help our members give every year goes into these areas.

1:29:00And so, you know, at the very least, you're getting some multiple on your money that otherwise wouldn't happen if you're just giving directly to a nonprofit. So that's probably, for me, the most compelling reason to support. The other is, you know, we're really helping to improve the efficiency of giving and the impact that happens as a result of it. you know the research lead that we publish is is truly in um and actually public so everything we do is on our website that's pure all reasoning transparency and um so anyone can go there and utilize the resource at any time and it allows us to sort of remain laser focused on this without having to sort of monetize our membership or create you know weird incentives that don't help anything aside from so your incentives are aligned with your members and that that's hugely important because that's i think is a fundamental problem with charities i after my exit i gave to charities a lot just to realize that i'm not happy about it and and i felt horrible about myself because i thought i'm such a selfish person i'm not getting much out of uh you know i'm it doesn't make me happy i don't get fulfillment from helping others and i think it is just because the incentives are not aligned and it doesn't work that you had a cognitive dissonance yeah yeah it's broken the industry is broken and i love it that you what you are thinking about it very differently you're thinking about how do we align our senses how do we do good together that's right right and then and then the community bit is very important because i think people will reinforce each other's commitments because I asked you before what sustains your drive towards your true purpose and oftentimes I find that if other people around you are not on a similar journey that it becomes very lonely and then you can just lose focus and you're less driven you have less energy going that way yeah but the community helps people stay focused yeah and it's it's really nice to get the odd message from someone who we've been working with for many years who's had that liquidity event you know finally the overnight success after 10 years right um and it's been it's a life-changing event and um they often you know feel hollow and alone and empty even with family and kids and um and then we help them figure out how to give and take them on this journey and you know i i get the occasional note that says you know thank you for helping me find myself again.

1:31:39And it's just like, it really sort of hits right in the middle of the chest. I get that emotional feeling. But it's so important because without that, you'll probably give up because it's too hard. You have to have that, that feeling to keep going. Yeah. And, you know, I think the other part of it is we've not even scratched the surface of the potential that we have yet. You know, nine years in, it's been a long journey. It's been hard. Like, you know, we really have ground our way to 10, 10 billion dollars of pledge value. We've ground our way to a billion dollars of actual donations, but it's a drop in the bucket, the bucket's floating in the ocean, and all of the water is money.

1:32:15And we have the ability to really impact the world at real scale. Yeah. And we're just starting to hit that real exponential growth curve in a way that I've been promising to my donors we'd hit, but 2022 and 2023 are looking to be the years that it actually really takes off. Oh, fantastic. Yeah. I can't wait to see. the results but to me also a very attractive thing about your model has always been this efficiency just knowing that every dollar i give will be used for the right thing that it will be as it will be used as efficiently as possible because the people who make the decision have this experience and have this mindset which is very much aligned with my mindset it's like how do we use every dollar most efficiently for a business but it's the same mindset just a different purpose we don't actually make the decisions on behalf of our members we We help them make better decisions using ADA.

1:33:08So often people think that when they pledge that they give away control of their money. And it's definitely not the case. So when someone pledges and they donate, they have total control over where they give to. They can give to anything they want, regardless of its effectiveness. If we consciously complicate a conversation and make a challenge saying, hey, maybe you shouldn't give to this butterfly sanctuary in Adyascar. Maybe it's not the most effective use of your money. People can say, yeah, that's okay. But I want to. You should do what you want with it. You can do what you want. We'll make the grant on your behalf.

1:33:42So it's important to just note that people have control. We just empower them with data and try to help them make better decisions. We don't always succeed, but that's also okay. So to summarize, what differentiates you from other charitable enterprises out there? So leverage, you described it beautifully. The fact that your members keep control of their money, which is great. you help set up a legal structure which takes that work out of you know it's not their problem anymore because you have a very efficient tech structure that's right help them what else am i missing community of course we do events and convenings um and really try to coordinate people so that they aren't doing this alone and often it feels very or it can be very um well uh harrowing to have the responsibility of stewarding wealth.

1:34:36And of course, there's no fee. There's no fee. So people are basically free to use the money the way they want. They keep the control. There's no fee. There's like really no downside for somebody to... When do people make the commitment in minutes at a meeting? Or like a multifamily office set up exclusively for entrepreneurs that focuses exclusively on philanthropy and charges nothing for its service. Sounds good to be true. It does, but it's not. When something is too good to be true, it's worth investigating. I think so, yeah. Dave, thank you so much. My pleasure. Thanks for having me. This was wonderful.

1:35:10Thank you. Thanks.