Foundations as S&T Partners

At first glance, the Baltimore-based Abell Foundation’s quiet contribution of almost $25 million over the past ten years to support local economic development may not raise much interest from state and federal technology-based economic development professionals across the country. However, the reaction might be different after learning that most of the investment was to emerging businesses in the form of venture capital.

The Abell Foundation has created a venture fund to support a variety of industries, and invests in companies either located in Baltimore City or willing to relocate there. The foundation’s approach is to partner actively with the management teams of their portfolio companies, and often helps in hiring, raising further rounds of financing, refining corporate strategies, and even obtaining space and establishing first offices for seed-stage companies. The amount of capital invested in any one company can vary between a few hundred thousand dollars to about $3 million.

Abell’s activities are described by the Foundation Center, a nonprofit organization dedicated to the foundation field, as being part of a small but growing movement called “entrepreneurial philanthropy.” These foundations channel financial support to for-profit businesses through “program-related investments” or PRIs. The companies are expected to make a profit and advance the foundation’s mission or interests.

PRIs have been in existence since 1969, when a change in IRS regulations allowed foundations to lend money or make equity investments to both nonprofit and profit-making businesses. According to the Foundation Center and USA Today, the use of PRIs has been encouraged by the Financial Services Act, which granted more lending powers to non-banking entities.

Foundations, particularly those willing to place PRIs, are logical but under-utilized partners for state and local science and technology programs. Issues of the digital divide and technology deployment are themes shared by many states and several foundations. Assisting businesses engaged in specific technologies that advance public goals, such as environmental protection or health care, also are shared goals among state programs and many philanthropies (see related story in this issue of the Digest).

Program-related investments in for-profit companies are not the only potential method of foundation involvement in state S&T policy development and program implementation. For example, the Lilly Foundation’s recent $60 million donation to two Indiana universities was to encourage research and technology-based economic development in the state (see the October 15, 1999 SSTI Weekly Digest for more details). AT&T’s $1 million contribution for technology capacity at historically black colleges and universities provides another example.

Additionally, philanthropies, like the Ford Foundation, have established impressive records of supporting innovative programs in government. New initiatives in state and local science and technology may be explored through these avenues. The Ford Foundation's support of the Community Development Venture Capital Alliance http://www.cdvca.org exemplifies the benefits and opportunities of partnering with foundations.

The coffers of many philanthropies continue to grow from their endowment investments in the strong stock market. The potential benefits for state and local science and technology policy are only limited by not taking advantage of opportunities presented by these non-traditional economic development partners.

For more information on PRIs, see the Foundation Center's Program-Related Investments: A Guide to Funders and Trends at: http://fdncenter.org