Steve and Jean Case's Transformational Giving

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STEVE AND JEAN CASE’S TRANSFORMATIONAL GIVING

SPECIAL FEATURE | COVER STORY

DISRUPTING PHILANTHROPY

Steve and Jean Case are changing the new order of philanthropy and entrepreneurship through the transformative approach of impact investing.

Steve and Jean Case

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t was a chilly night in 1991 and a few hundred propeller heads like me had gathered at the Hard Rock Café in Penn Quarter for free beer and wings to celebrate the first anniversary of a fledgling start-up called America Online.

Attired in blue jeans and an AOL T-shirt, Steve Case was working the room, passing out sign-up disks.

Having earned his marketing chops at Proctor & Gamble and Pizza Hut, the young CEO was promoting the next technological frontier — Internet connectivity — that he confidently said would change all our lives.

For some of us it already had. Our computers were logging on to the chirps of “You’ve Got Mail!” AOL’s gaming modules and chat rooms were suddenly devouring hours of our day.

Steve Case and Jean Villaneuva had been hired by serial entrepreneur Bill Van Meister in the early ’80s, and after 10 years as co-workers,

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they were married in 1998 by the Rev. Billy Graham.

“That night was the kickoff for the 10-city ‘Getting America Online Tour’ and we were launching our Windows product,” recalls Jean Case, who was AOL’s chief of marketing at the time. “That was really a turning point for AOL and the basis of other tours to come.”

The rest is history, and a thing of Washington business legend.

AOL became the biggest online service provider in the world, with 26 million users at one point. At its peak, half the world’s Internet traffic went through AOL and its Northern Virginia servers.

After going public in 1992, the company’s shares took the couple and millions of other investors on a rocket ride — a bountiful 11,000 percent stock romp until famously crashing in 2000.AOL minted thousands of tech millionaires (including a few secretaries who got in early),

exponentially boosting the Northern Virginia economy and establishing the area as the nation’s leading technology incubator after Silicon Valley.

“Growing AOL in Northern Virginia wasn’t just about the tens of millions of people we were benefiting through the online service,” Mr. Case says. “There were at least a thousand people who became millionaires, probably more, so the whole community benefited.

Suddenly houses were being built, restaurants and dry cleaners opened.

The whole economy was lifted by its growth. That allowed us to focus on entrepreneurship and philanthropy in other places that needed it.”

The bounty of AOL stock wealth incubated a new breed of Washington tech philanthropists like then-AOL Chairman Jim Kimsey, former AOL Vice Chairman Ted Leonsis and AOL International Founder/ President Jack Davies. The Cases and Leonsises eventually became billionaires by putting their windfalls to work in startups and advanced-stage businesses, improving the lives of others through philanthropy and seeding entrepreneurship.

In the past two decades, Northern Virginia and especially Loudoun County — where AOL was founded — has surged on every economic level, doubling in population and now boasting the highest per capita income of any county in the nation. Technology now contributes about $60 billion per year in Gross Regional Product (GRP) to Northern Virginia’s economy.

Philanthropy was also impacted. “So many of the folks there for us in the early days have gone on to be great social activists and philanthropists themselves,” Mrs. Case

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says. “So, if we just add it up, we don’t just count how many millionaires were created.

We count how much has been given back.”

After catching up with the Cases last month, it was clear that the passage of time and their accumulated wealth had changed little about them. Kind, humble and polite, Mr. Case had just finished interviews that day with Bloomberg and Fox News Channel, and ever the marketing road warrior, was preparing to hit the road again. This time it’s a four-city bus tour in June as part of a pitch competition to place $100,000 bets on new start-ups in Detroit, Nashville, Pittsburgh and Cincinnati.

“It’s important to remember that America was once a startup and became the greatest economy in the world, thanks to the entrepreneurs who built not just companies but entire industries in the heart of the country, “ he says. “Entrepreneurship is the secret sauce that has powered the nation, and is central to the American story.”

INVESTING WITH IMPACT The “Rise of the Rest” summer bus tour may be about seeding startups, but like everything the Cases do, it is also inextricably linked to the Case Foundation, launched 17 years ago.

“The mission for Revolution is actually the same as the Case Foundation: We invest in people and ideas that can change the world,” Mr. Case says. “We’re looking for big ideas that have big impact.”

Two years ago, the foundation launched its “Be Fearless” campaign, which combines the entrprenurial mindset to philanthropy. It then awarded $670,000 in grants, software and technology for the projects of 20 “fearless” changemakers.

A year ago, the Case Foundation embraced “impact investing” as a guiding principle. The idea is that companies aiming to create social as well as financial returns for their core business need not forsake making a difference in the world. “It’s something we’re spending a lot of time and energy on, collaboratively working across sectors, whether it be government or private initiatives working together for change,” Mrs. Case says.

With the rise of the entrepreneurial-

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inclined “Millennial” class, the Cases are seeing a lot of disruptive innovation. “We have a new class of entrepreneurs, many of them Millennials saying, ‘I don’t want to just start another company, I want to change the world’ and they will start companies that will have impacts in ways we’ve never seen before,” Mrs. Case says.

‘There’s a role for philanthropy, for govenment and for entrepreneurship - the innovative, disruptive attackers who challenge the status quo’ Appointed to the President’s Jobs Council, where he chaired the efforts related to entrepreneurship, and named as the President’s ambassador for global entrepreneurship, Mr. Case has also championed entrepreneurship through his stewardship of the Startup America Partnership, now UP Global.

“There’s a role for philanthropy, there’s a role for government and there’s a role for

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entrepreneurship — the innovative, disruptive attackers who are challenging the status quo,” Mr. Case says.

Disruptive change is vital if Americans are to live in a peaceful, stable world, he adds.

“We need to create hope and opportunity in regions that lack it, such as the West Bank,” he says. “The best hope for Africa is to move past a grant mentality and into more of an investment opportunity — creating jobs and opportunities for people there.”

KNITTING TOGETHER PARTNERSHIPS Bringing broad awareness to causes and highlighting their progress in social giving lends itself to the concept of democratization, Mrs. Case says,.

Two separate Giving Challenges encouraged nearly 200,000 people to donate, and raised nearly $4 million for thousands of local causes. In addition to the dollars raised from the public, the foundation and its partners awarded $1 million to those that recruited the most donors and were most successful in using online and offline strategies to mobilize support.

“The White House and Capitol Hill are a few blocks away, so these public/private partnerships are easier to do because we’re here,” she says.

“That has really allowed us to knit together the different sectors.”

Mrs. Case also serves as chairman of the

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SPECIAL FEATURE | COVER STORY

President’s Council on Service and Civic Participation and sits on the board of the National Geographic Society. Her husband is a regent of the Smithsonian Institution.

“Both organizations are anchored locally but have a broader, global reach,” Mr. Case says. “We both were active in the search for a new CEO of National Geographic and a new secretary of the Smithsonian because we think that leadership matters. We’re helping both organizations reimagine where they’re going and how to best deliver on their missions in this new world.”

THE MILLION MARKER Since its founding 17 years ago, the Case Foundation has donated more than $100 million to charitable causes and provided countless support to pro-bono initiatives. That figure increases dramatically if you include the Cases’ personal gifts outside of the foundation, the sum of which they don’t wish to disclose.

In the foundation’s early years, one of its primarty areas of focus was the $22 million PowerUp initiative, whose goal was to to bring the power of technology and the information age to more than 1,000 underserved communities across the country.

Among their largest gifts, their donations have included $10 million to Habitat for Humanity; $5 million to the Special Olympics and $1 million

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to the Boys & Girls Clubs of America.

The Cases have often discussed the shift of the foundation from a traditional checkwriting approach to running strategic programs, including the Startup America Partnership, Be Fearless campaigns and its impact investing programs. The foundation selects its grantees based on how they align with its programming priorities for each year. Those priorities are set through a competitive business planning process held amongs the foundation’s 18 employees.

In recent years, the foundation has turned to Venture Philanthropy Partners to manage its Washington, D.C.-based giving.

Recent Case Foundation grants include $4 million to City Year-DC, an Americorps organization that provides full-time, yearlong service opportunities for young people; the District of Columbia College Access Program (DC-CAP); and Share Our Strength’s Partnership to End Childhood Hunger in the Nation’s Capital.

The Cases say their biggest tangible successes in philanthropy have been investments in microgiving platforms: Network for Good, Causes, and MissionFish (now part of eBay).

Their investment of a few million dollars in these platforms resulted in more than $1 billion in micro-donations from everyday givers utilizing them, Mrs. Case says. In fact, this year Network for Good reached $1 billion in individual donations through online giving.

Other gifts have been profoundly personal.

In 2002, Steve’s brother, Dan Case, an investment banker who referred him to his job at the company that became AOL, died of brain cancer at age 44. The foundation has given nearly $6 million to Accelerate Brain Cure, a nonprofit that encourages new forms of collaboration to hasten the discovery of a cure for that disease.

A Hawaii native, Mr. Case donated $10 million to Honolulu’s Punahou School to build a new building named after his parents, Daniel and Carol Case.

Along the way, the couple has publicly admitted to a few grant-making failures.

PlayPumps International, a nonprofit focused on providing clean drinking water to rural African villages, was initially “a flop,” by their measure. “We talked a lot about the lessons learned from that failure,” Mr. Case says. “Then

we pivoted, and it ended up being successful.”

The clean water device worked in some communities but not others, so they combined it with another effort called “Water for People” which ended up succeeding.

THE GIVING PLEDGE The foundation’s studied approach to gifting and grant-making has earned praise from the media, with The Wall Street Journal editorially placing the Case Foundation on the same pedestal as the Bill and Melinda Gates Foundation. Warren Buffet lauded the couple on “60 Minutes” after they signed the Giving Pledge in 2010, committing to give at least half their wealth away in their lifetimes. But the couple will not comment on exact amounts.

“We competed against them [Gates and Microsoft] for many years, so we’re happy to finally join forces,” Mr. Case told CBS News’ Charlie Rose. So far, 140 billionaires ages 27 to 98 have done so, tabulating over $500 billion in pledges from the so-called “Billionaire’s Club.”

The couple is one of a handful of signatories from the Washington, D.C. area.

Private by nature, Mr. Case admits that for many years their foundation could not even be found online. “As bizarre as it may seem, we didn’t have a website, even for a foundation which was created by the Internet. The reason is that we had a view that giving should be done privately, not looking for credit.”

In some respects, the foundation is closedlipped about certain details of its giving. There is no endowment per se, as the Cases give annually to the foundation which spends down the money each year. The couple declines to comment on how much they give on average each year. And the application process is closed; nonprofits must be invited to apply.

In May, the couple attended a retreat with others who had taken the pledge,and both said the experience made them “just a little bit smarter and the giving a little bit more impactful.”

They learned that their public commitment to causes could be as vital as the money they distribute. “We realized that we’re not just allocating capital, but also time and reputation for causes we care about,” Mr. Case adds. “This has more impact than if we’re simply writing checks.”

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Mr. Case gives as an example the hybrid giving platform embraced by Revolution business partner Ted Leonsis, who actively promotes his e-Buddies initiative with Best Buddies International and other causes, deploying his stature as chairman of Monumental Sports and Entertainment and owner of the Verizon Center, the Washington Capitals and Washington Wizards.

“The sports teams help excite the community and bring people together,” Mr. Case says.“It also points a giant spotlight on places of real need in the community, and both directly and indirectly drives more support.”

STALKING THE NEXT BIG IDEA The District-based investment firm Revolution LLC now has about 30 businesses in its portfolio of funded companies and makes about $200 million per year in new investments. Its leadership team also includes Revolution’s principal investors. co-founders Ted Leonsis, Donn Davis, David Golden and Tige Savage.

“The four of us have worked together for more than 15 years,” Mr. Leonsis says. “We genuinely like and trust each other and our skills complement each other’s.”

Launched in 2005 and targeting mostly “innovative technologies and disruptive ideas that have the potential to reinvent traditional consumer markets,” the most notable companies in its invested portfolio include LivingSocial, ZipCar, Exclusive Resorts and Miraval.

While many of its investments are directly involved with technology or are technology enabled, others are lifestyle-based. Revolution invested $22 million into Sweetgreen, the locally-based fast-casual restaurant chain which has become wildly popular among the Millennial set, even spawning its own Sweetlife Music + Food Festival concert each May, with proceeds going to local schools and sustainable living concepts.

“We like Sweetgreen because it’s giving people healthier options,” Mr. Case says. “We liked the fact that they are based in D.C. And by the way, they’re big users of technology. About 20 percent of the orders or payments are made through mobile phones. My guess is that in the next five years that figure could be 80 percent.

This will fundamentally change the way people

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think about restaurants.”

At 55, Mr. Case still appears restless — a ball of boundless energy striving to capture the next big idea. He says he’s found it and that we’re on the cusp of the Internet’s “Third Wave.”

Companies like AOL and Intel helped usher in the First Wave, which was getting consumers to understand what the Internet is all about and getting them connected. During the Second Wave, social concept companies like Facebook and Twitter built on top of the Internet.

The Third Wave — perhaps the biggest according to Mr. Case — is just beginning. It’s more about integrating the Internet into our daily lives, with hot new concepts like wearable computer devices.

“Areas like education, energy, health care, transportation and government services are big parts of the ‘new economy’ that haven’t really changed that much over the past few decades,” he says, predicting that “these industries are going to be significantly disrupted.

“So, “ he says, “we’re big believers in that Third Wave of companies, and that’s really what we’re looking to invest in.”

and targeting areas that need innovation, but I recognize that Jean has the heavier lift, because it’s more difficult to build a collaborative effort in the non-profit sector.”

‘WHO’S IN CHARGE HERE?’ In many ways, it’s hard not to discern from Mrs. Case’s equally impressive resume that she has become as big of a force as her husband in the worlds of cultivating entrepreneurship and philanthropy. This creates a unique dynamic.

“We are playfully competitive,” she admits.

“But we learned a long time ago that it was better if we divided and conquered separately. Steve has Revolution as his full time gig, and I have the foundation. There are plenty of areas where we play together, whether it’s investments or different things we take on. But having that division early on, we knew that would bring a lot more marital harmony, instead of sitting across from each other and saying, ‘Who’s in charge here?’”

Her husband agrees. “We know where the buck stops,” he says. “If Jean says we’re going to do something, we do it. It’s not like we have to send emails and then wait for somebody to respond. It’s also about clarity of focus. I’ve often said that Jean has a tougher job than me, because it’s actually harder to give money away in a smart, sustainable way than it is to invest in start-ups. I love what I do at Revolution

CREATING BALANCE The strains on their time, talent and energy might create stress for other couples, but the Cases have been successful at achieving a work/life balance, both for themselves and their five children, one son and four daughters from previous marriages.

“Fitting our children into our schedules hasn’t been hard,” Mrs. Case says.“We’ve always made a priority out of our roles as parents.”

As his youngest daughter moved away last year to start college, “This is the first year of ‘Emptynesterville,’ which is new for us.” Mr. Case says.“It’s enabled us to do more active travel than what we’ve been accustomed to.”

The couple resides at “Merrywood,” the sprawling riverfront estate in McLean that was one of the childhood homes of Jacqueline Bouvier Kennedy Onassis, and that’s where they spend their off-time in healthy pursuits.

“We’re active people,” Mr. Case says. “I was raised in Hawaii and Jean in Florida, so we’re both into biking, hiking and being on the water.”

Who has the cooler day most of the time?

“On any given day of the week, that could be a draw,” Mrs. Case says with a smile.

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