A Tale of Two Valleys: Five Ways Philanthropy Can Change to Make Silicon Valley More Equitable

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Inequality is rampant in the U.S., but perhaps nowhere is the nation’s widening wealth gap more apparent than in Silicon Valley. The year’s Silicon Valley Index found that despite modest gains in median household income, income inequality in the region grew twice as fast as inequality across the state and nation. According to the index, the richest 25% of households hold 92% of the region’s wealth. 

Meanwhile, almost 30% of local residents rely on public or private assistance, including from nonprofits. These local organizations, however, tend to be underfunded. 

In 2016, Open Impact, a strategic advisory firm, published “The Giving Code: Silicon Valley Nonprofits and Philanthropy,” which found that although philanthropists in Silicon Valley are generous, most giving tends to flow out of the region with only about 10% of it going to local community-serving organizations. 

Open Impact recently published a new report titled “Get it Right: 5 Shifts Philanthropy Must Make Toward an Equitable Region,” which highlights five key strategies funders can take to become better community partners and builds on “The Giving Code.” 

While “The Giving Code” focused on local philanthropists’ limited giving to community-based organizations, this new report goes beyond that. “It’s not just about giving to community-based organizations,” said Open Impact co-founder Alexa Cortés Culwell. “It’s about giving in a totally different way. We wanted to think about a report that would give donors a roadmap to that.” 

Although “Get it Right” was written with Silicon Valley and the Bay Area in mind, the advice it offers rings true for the philanthropic sector as a whole.

“We wrote the report to help people think about the impact they’re having with their philanthropy,” Cortés Culwell added. “We’re not talking about practices that will just make you feel better or make everyone else feel better. We’re talking about things that will actually lead to more impactful results.”

The report stems from the combined efforts of Open Impact, which led the research and writing, and Northern California Grantmakers (NCG), which led the action planning for the report and advised on its research and development. The David and Lucile Packard Foundation provided funding for the report. 

A focus on racial equity

A focal point for the report is the region’s stark paradox of inequality — rapid wealth gains for some, and preventable destitution and death for others. 

“We used to lament that in Silicon Valley, the rich kept getting richer while the poor became poorer,” said Russell Hancock, president and CEO of Joint Venture Silicon Valley, in the report. “Today, we must frankly admit that the pandemic has made the rich richer while the poor are dying.”

Due to entrenched structural racism, this widening gap has had a disproportionate impact on Black and Latino communities. The Silicon Valley Index, for example, found that more than 60% of Latino households in the region live below the Self-Sufficiency Standard — a measure of the cost of living for working families at a minimally adequate level — and the poverty rate for Black residents is more than double that of white or Asian residents. As numerous reports have pointed out, the pandemic has also had a disproportionate impact on Silicon Valley’s Black and Latino residents. 

In the Bay Area, 18% of Latino immigrants live below the poverty line, Open Impact’s report found, while 66% of essential workers are Black, indigenous and people of color. 

The report was heavily influenced by recent events that have had a seismic impact on society since Open Impact released “The Giving Code” — namely the COVID-19 pandemic and the racial reckoning following George Floyd’s murder.

“As we were thinking about a follow-up report to ‘The Giving Code,’ we really wanted to think about all of the external context that was happening all around us, and how we would really begin to frame a point of view about what philanthropy needed to do next,” Cortés Culwell said.

Kate Wilkinson, who leads nonprofit and philanthropic strategy engagement at Open Impact, added, “It was really motivated by the fact that our region was experiencing, sort of, waves of crises — the pandemic, wildfires, the racial justice uprisings. So I think there was the sense of, how can we grapple with all these external forces as a sector in a more effective way that would actually transform the trajectory of our region toward greater justice and greater racial equity, in particular?” 

In crafting the report, Open Impact and NCG interviewed 23 philanthropic leaders, centering BIPOC leaders in philanthropy. Among these are Armando Castellano of the Castellano Family Foundation, Crystal Hayling of the Libra Foundation, Gina Dalma of the Silicon Valley Community Foundation and Lateefah Simon of the Akonadi Foundation.

The five shifts

The report outlines five changes funders can make to magnify their impact in the region. While these changes aren’t necessarily new, and many funders have already implemented one or two of them, the report’s value lies in putting these suggestions together. Cumulatively, these shifts make for a compelling picture of how philanthropy can function to best serve a region’s needs.

The first is to shift from donor-centered to community-centered decision-making. High-level decisions in philanthropy tend to be made by boards and trustees, who are often white, wealthy and from privileged backgrounds. The report suggests that donors should instead turn over decision-making to those who are closest to problems, engage in diverse community governance and apply a racial justice framework in making decisions.

“The role of transformation really lies with the community organizations that have been doing this work for a long time,” said Sabrina Wu, a senior program officer at the East Bay Community Foundation, in the report. “Philanthropy is many layers removed from the solutions — its role should be to raise and mobilize resources.”

Second, rather than focus on the symptoms of an issue — Cortés Culwell referred to this as “putting Band-Aids on things” — the report encourages funders to take on a more holistic approach and direct their funding to solving the underlying root causes of an issue, while funding direct services at the same time.

Several people involved in the report pointed out the homelessness crisis as an example. While there is a significant amount of money dedicated to addressing homelessness in California, much of that funding focuses on providing immediate relief, such as temporary housing, and offering resources and supplies. 

“We haven’t, as a sector, really focused on systems that perpetuate inequities,” said Dwayne S. Marsh, president and CEO of NCG. “And so we can address symptoms that we see and maybe beat back the tide a bit, but the truth is, until we change systems that produce equitable results, particularly those that produce them by race, we won’t be able to reverse course, and we’ll continually find ourselves fighting in these deficits and communities, these disparities, trying to… put a salve on things that are just going to continue to happen again and again.”

The report notes that place-based philanthropy can take on a leadership approach by backing innovation and experimentation that can then encourage the government and private sectors to take action.

The third recommendation is for funders to shift away from working in silos and toward a more collaborative approach, working in tandem to drive change in other sectors. 

Collaboration takes time, Cortés Culwell said, and often, funders don’t have enough time or resources to collaborate with others. It’s often messy and difficult. As such, funders often prefer to operate independently. 

“The problem is, if we all still continue to do that, we’re never going to get to the solutions, because none of our money alone is going to solve the problem… It’s really going to take collective action,” Cortés Culwell said. The report suggests pooled funds and donor collaboratives as means of working together to amplify the impact of funding.

“We’re fighting centuries of racial injustice, systemic racial injustice, and so we know it will not be solved in a day,” said Gina Dalma, SVCF’s executive vice president of community action, policy and strategy. Dalma pointed to the importance of bringing everyone to the table to solve community issues, including philanthropy and nonprofits, as well as the public and private sectors.

The report also stressed that philanthropy must do two things at once: offer immediate relief while at the same time investing in the future.

“Foundations and donors frequently tinker around the edges of billion-dollar issues with grants that fail to address either the timeframe for, or true cost of, structural change,” the report reads. It notes that ultra-wealthy donors donate on average just 1% of their total assets, and many donors look at grantmaking in annual cycles instead of giving across longer timeframes, which are often necessary to make an impact.

As its fourth recommendation, the report suggests deploying capital in multiple ways to achieve impact. That includes philanthropic giving, using invested assets like endowments and impact investment funds, leveraging social capital, and making use of real estate.

“When you talk about leveraging the full potential, the capital investment of philanthropy, it means stepping outside of just thinking about our grant investment and what percentage of our endowment we do to other kinds of resources that we can also bring to the table and bring others to bring,” Marsh said.

Finally, the report recommends moving away from outdated practices like strict reporting requirements and toward things like trust-based and inclusive grantmaking, centering diversity, equity and inclusion (DEI), and crucially, being more urgent about deploying funds.

“It’s unacceptable that foundations are so slow,” said Lateefah Simon, president of the Akonadi Foundation, in the report. “Our sector is the least accountable — we don’t make decisions; we just keep meeting and talking, while nonprofits and communities struggle.”

The report stresses that organizations must make serious commitments to “learn, reflect, reckon, heal, and repair” racial inequities in their own organizations. This includes not only hiring staff members who have diverse lived experiences and hail from a variety of cultural and ethnic backgrounds, but empowering them, as well. 

One way to do this is by bringing program officers into board meetings, which would allow them to serve as “translators and advisors” to board members. The report recommends that foundation boards themselves should include people with lived experiences relevant to the foundation’s work.

This isn’t just about the Bay Area

Taken together, the report’s five recommendations reflect ways of thinking about and doing philanthropy that have been on the ascent for a long time, particularly over the past several years. Nevertheless, while some of them have become quite ubiquitous in commentary about where the sector should go, actually putting them into practice has largely been left up to individual funders. Talk thus regularly outpaces actual change in foundation boardrooms and grant portfolios.

“I think what’s been resonating for folks is recognizing those five [shifts] in concert can really start to move us, not just as individual philanthropies, but as the sector, and we’re only going to have change on this if we really move as a sector,” Marsh said. 

It’s important to note that while the report is written with Silicon Valley and Bay Area funders in mind, its suggestions can — and should — be applied to the philanthropic sector as a whole. While it’s true that Silicon Valley has one of the widest economic equity gaps in the nation, the issues prevalent there — homelessness, racial inequity, ongoing threats to democracy, the health and economic impacts of the pandemic — are felt throughout the nation.

“When we talk about these kinds of practices, I think a lot of donors will dismiss it to say, ‘Well, are these really going to help me get better results?’ And so I think that’s the deeper conversation we need to be having: how more equity-based practices are going to help change communities in ways that they have not [changed] before,” Cortés Culwell said.

NCG has pledged to be a leader in championing the five shifts outlined in the report and encourages others to follow suit. 

“Despite this huge existential crisis we’ve been having as a society, wealth has expanded phenomenally and concentrated incredibly over the last three or four years,” Marsh said. “This is not a question of resources. This is a question of methodology. This is a question of relationships. This isn’t a question of commitment. And so we have no one to blame but ourselves if we can’t figure out how to strengthen our actions in this moment and have greater impact in the communities we care about.”