The point is that the 1% can potentially turn into a huge amount of money. Let's take the most extreme example: Facebook. If they gave 1% of their equity to a cause in the early stages, it doesn't seem like much. But with their IPO, it's now worth $1 billion. Facebook would never give a $1B donation to charity now, but they are held accountable to what they originally gave in equity.

It's worth noting that Mark Zuckerberg has already pledged to donate more than half of his wealth to charity, in addition to +$100 million he has already given away.

So I still don't see the advantage to facebook pledging 1%. Seems like you just explained why everyone would want to have had 1% in facebook at that time.

> Facebook would never give a $1B donation to charity now, but they are held accountable to what they originally gave in equity.

Perhaps there's a reason why facebook wouldn't give $1B right now. So in hindsight that 1% donated would seem like a bad idea at this stage. So why not (for the startup) just wait and donate what feels right if they do get big?

It's charity. Donating to a charity is, by definition, not supposed to give you (monetary) advantage.

The point is, it's easy to give that 1% when it has no real value yet. Also, it's only 1%, almost a negligible part of a whole. For most of the companies who would pledge it, this 1% would stay meaningless, but every once in a while a startup will grow into something Facebook-big, and suddenly, this 1% means a whole lot of money to charity.

What gives a company the right to determine what non-profit seeking donations is going to be a positive impact on society? Isn't a the company just supposed to do its main thing (whatever that may be) and do it well?

Also I'd imagine the only reason any major company donates to charity is to strengthen its brand in some way. This 1% charity donation for a startup doesn't seem like it would do much that donating $1b later on wouldn't do.

Even if Facebook can't donate $1b for whatever reason, Mark Zuckerberg can still donate the equivalent of 1% of facebook through his own personal shares right now.

1% may not have real value for early stage companies but I doubt most successful founders go in undervaluing their companies or treating 1% like an external evaluator would.

The same thing that gives any person the right to do whatever they want with their money. Contrary to popular belief, companies don't have the obligation to restrict themselves to a particular business nor do profitable things. They can donate the amount they want to the charities they want. If, as a shareholder, you don't like it, vote the board of directors out.

> Also I'd imagine the only reason any major company donates to charity is to strengthen its brand in some way.

Not everybody who bites their nails does so because they are sexually repressed. Not every bourgeois makes organized and self-conscious efforts to push down the workers' revolution. Not all people feign compassion and altruism, but are just jealous of the strong-willed nobles.

So are you saying corporations are people?

The way I see companies is a machine that is specially built to accomplish a specific purpose or purposes.

A public company is usually not one person's property so what charities its assets go to support should not be dictated for the shareholders by giving to one specific charity. This would be underutilization of its assets if it were donated because a company usually isn't formed for the purpose of handing out money

In other words, why not leave the company to do what it's best at doing and let its shareholders who profit off the company donate or utilize the profits as they see fit. If a company chooses to donate to Red Cross for no specific practical business reason then it is essentially robbing a shareholder the right of choosing to donate his share of the profits to another charity, or of his right to spend it on strippers.

Unless the company is donating to further its goals (such as enhancing corporate image or brand), I do not see a place or purpose for arbitrary corporate charity.

The 1% equity however can be seen as a contribution from the founder's personal shares, but even then it makes little sense to commit to that early on vs later on especially if the founder plans on not failing.

Think of it as a lottery. If the company takes off, your lottery ticket pays off, until then it's worth nothing. And the charity that gets the lottery ticket doesn't even have to pay for it in the first place.

This would only make sense if the charities are investing in the startups. If the charities paid to invest then it makes sense for the company as they are just another investor.

If you're handing out free lottery tickets it doesn't make sense for the lottery.

Think of it terms of expected payoff across hundreds of companies donating 1% of equity before they're worth anything.

E(X) = Sum from 0 to n [ 0.01 * exit(n) ]

Where n is number of pledging companies, and exit(n) is their equity value at exit.

There will be a lot of exit(n)=0, but if even just a few hit Heroku, Instagram, or FB exits, 1percentof.com will strike it rich. It's the YC approach to philanthropy fundraising.

Psychology. It's massively easier to get someone to agree to donate a portion of a future windfall they may receive in the future than it is to get them to donate hundreds of thousands/millions of dollars after they cash out.