Chronicle of Philanthropy Series/Letting Go of An Endowment Fantasy
From the issue dated June 13, 2002/Philanthropy.com
A CHIEF EXECUTIVE’S VIEW
Letting Go of an Endowment Fantasy
By Yosef I. Abramowitz
We had the perfect plan: a for-profit Internet venture that would yield a $20-million endowment for the charity I run, Jewish Family & Life. With the $1-million a year in investment income this endowment would produce, I would be free to focus on mission — using the Internet and other media to promote Jewish values, ideals, and culture — rather than on fund raising.
Or so we thought.
I now realize that this flirtation with the for-profit world represented my first major misstep as a chief executive officer. When the dot-com economy was hot, this course of action was appropriate; yet the conditions that inspired the exploration radically changed. In hindsight, instead of doing road shows for venture capitalists, I should have been meeting with potential donors. Instead of causing great disequilibrium among staff members, I should have been working with them to build our organization’s infrastructure. My pursuit of elusive investments for nearly two years left a handful of our nonprofit projects without any money at the end of the journey, and the organization is still reeling from the aftershocks of that.
The fantasy of an endowment in 18 months was a terrible distraction, but also a priceless learning experience.
Behind the plan lay two truisms that plague both me and the world of philanthropy. The first is that it is very difficult for me to look someone in the eye and ask for money. It felt easier to do this when I was offering investors the potential for a personal return on their money. The second is that, while it is relatively easy to attract seed money for new projects, most donors and foundations are less interested in providing continuing support for even excellent and proven programs.
I thought I had found a solution to the problem that many of our organization’s start-up grants were coming to an end by creating an endowment through a for-profit venture.
At the time, Jewish Family & Life was on a roll, having attracted support from big-name donors, including the Walter and Elise Haas Fund and Steven Spielberg’s Righteous Persons Foundation. We had just completed our fifth move in three years, to triple the space from our previous, cramped location, and we had tripled our staff. The economy was roaring. We were hot.
The plan, crafted with initial encouragement from Jeffrey Solomon, president of the Andrea and Charles Bronfman Philanthropies, was to work with the Jewish Television Network, which then had three shows airing on 70 PBS stations across the country. Together we would create a new Jewish brand, an unbeatable media team — and an endowment. We would license from our two nonprofit groups (in exchange for equity) our content and properties to a new for-profit joint venture, Jewz.com. Under the plan, the venture would quickly grow and get bought out by AOL Time Warner or Yahoo for $100-million. Each nonprofit group would own 20 percent of the company and, voilà, instant endowment. A total of $40-million would go to the two nonprofit organizations, $60-million to the investors. Even if we reached only half of our selling goal, the plan would have been a stunning success.
While the idea may sound like a long shot today, remember that those discussions were happening during the heady days of the high-tech boom. The Nasdaq had broken 5,000 points. There should be a way, we reasoned, to tap the capital markets to further our nonprofit goals and organizations. And we weren’t the only ones who thought so. Dozens of people from the media and business world validated our plan. An outside assessment of our two nonprofit partners’ assets came in at $10-million.
In the summer of 2000, I moved to Los Angeles with my family for seven weeks and occupied a cramped 10th-floor office overlooking the Hollywood sign on the hill, just doors away from Jay Sanderson of the Jewish Television Network. Jay’s rare combination of vision, ability, and people skills served as my guide, and together we hit the phones to try to persuade potential investors to sign on to the joint venture.
In two weeks we built a prototype of Jewz.com that provided a visual display of how to combine Internet and television for the Jewish community. When a major Internet player agreed to invest and support the initiative, we were able to round up another handful of investors. Three legal teams worked to make sure the deal could move forward without jeopardizing the nonprofit status of Jewish Family & Life or Jewish Television Network.
But our timing was off. By the end of the summer, the market started to turn. The assumptions in the business plan, even though they were conservative, also needed to be adjusted to the new financial realities that were emerging. We ultimately decided not to proceed.
As my focus shifted to shoring up my nonprofit organization, I began to realize the toll my involvement in the for-profit venture had taken on Jewish Family & Life. Our relatively new organization was not as able to weather the exploration as the more established Jewish Television Network.
While the for-profit venture never took off, it has proven to be a fantastic learning experience, one of the many I continue to have as a chief executive officer who is just starting to come to terms with how much my job requires raising money.
I met many influential and wealthy people who I hope one day will become donors or board members. I learned about business planning. I picked up the language of the business world and am now working with corporate leaders — including Michael Steinhardt, the retired money manager and philanthropist, and Jonathan Seelig, one of the founders of the technology company Akamai — to develop a strategic plan for Jewish Family & Life.
The experience has also taught me about my strengths and weaknesses. I realize, for example, that while I thrive on thinking up ambitious plans to help this charity grow, I need help in balancing these ideas against the day-to-day realities of what it takes to achieve such goals. I have learned to listen more closely to my board members, some of whom were doubtful about the for-profit plan at various stages along the way. We now have guidelines and systems in place to make sure that any new adventures that may tempt me have been vetted before they consume so much of my time and energy.
Every once in a while, the viability of the joint venture re-emerges, as in April 2001 when the actress Gwyneth Paltrow told the mass-market InStyle magazine that she liked to visit our prototype Web site, Jewz.com, because it’s “dedicated to Jews and all things having to do with being Jewish.” (While the site is much simpler than originally envisioned, my charity has continued to oversee and update it as resources permit.)
But for now, Jewish Family & Life is back to basics — and I’m back to fund raising. We are building a board and council of advisers from the business world, developing a long-range plan, and working until late at night, six days a week. While some aspects of this charity’s future remain unclear, I do know there are not going to be any shortcuts on this journey.
Yosef I. Abramowitz is chief executive officer of Jewish Family & Life, a charity in Newton, Mass., that uses the Internet, magazines, and books to encourage Jews of all ages to make the religion’s values and culture a part of their daily lives. He can be reached at email@example.com.