The tech entrepreneurs translating their business success to philanthropy

Johanna Småros, after helping to build one of the first technology unicorns in Finland, decided to set up a philanthropic foundation with her co-founders dedicated to protecting biodiversity simply “because we could”.

Relex, the supply chain and data management start-up that she co-founded in 2005, was valued at more than $5bn in 2022. So, that same year, Småros set up the €100mn Relex Foundation, alongside Michael Falck and Mikko Kärkkäinen, as well as one of their first employees, Marko Nikula.

“The success of our start-up had turned into great financial success for us,” says Småros. Establishing a charitable foundation, then, just “felt like a natural thing for us to do”.

The internet and the rapid acceleration of computer technology have created a class of wealthy elites, populated by digital start-up founders, engineers and developers. More than 12 per cent of the 2,781 billionaires counted by Forbes at the beginning of 2024 made their wealth in the technology sector. These entrepreneurs and investors were collectively worth $2.6tn, more than those from any other industry, and included six of the wealthiest 10 people in the world — or seven if you count Elon Musk (Forbes lists the owner of Tesla, SpaceX and X under “Automotive”).

The accidental entrepreneur

The explosive impact of the internet age also means that some entrepreneurs, including Småros, have been able to amass much larger fortunes than they ever expected — and certainly in a far shorter timeframe. That, she says, can come with a strong inclination to “give back”.

Craig Newmark, founder of the listings website Craigslist, found himself in a similar position. “I am an accidental entrepreneur,” he says. In the past two decades, he has made public charitable donations totalling an estimated $400mn.

Newmark was taken aback by the rapid and long-lasting growth of the listings website he created as a hobby while working as a software engineer in the 1990s. “Craigslist just did far better than I thought it would, so I’m in the process of giving away my wealth,” he says.

Newmark’s philanthropy, unlike Småros’s, is not organised under a foundation or fund, but he says he has “built a network” of people who can advise him in his mission “to protect the people who protect our country”. Forbes estimated that Newmark was worth $1.3bn in 2020, but he has since dropped off its billionaires list.

Newmark’s donations have gone primarily towards veterans, military families and, in a growing tie-in with his technical background, cyber security. In September, he pledged $100mn to bolster US cyber defences. Half of the funding, which is still open to grant applicants, is designated for protecting critical infrastructure from malicious hackers, while the other half is intended for teaching the importance of basic cyber safeguards.

Newmark says his technical background helped him appreciate the value of funding these “very unglamorous” issues. “Being a software engineer means that I can better understand issues which involve computer systems,” he says. “I saw how cyber security was a matter of national defence and I figured that, if I want to protect the country, I can do my part by funding cyber defence.”

But Newmark’s philanthropy is not all about national defence and security. He has also donated to various projects contributing to the care and rescue of his favourite creature: the noble pigeon.

Småros, likewise, believes that her background as an engineer and start-up founder was critical in selecting initiatives that had a solid and scalable hypothesis — especially in a field as complex and, in her view, underfunded, as biodiversity. “We are not Bill Gates”, she says. “We have to be strategic.”

The evolution of Silicon Valley philanthropy

Amir Pasic, dean of the Indiana University Lilly Family School of Philanthropy, says that Silicon Valley has given the US its highest proportion of extremely wealthy individuals since the gilded age: the period of the late 19th century characterised by rapid industrialisation and stark social divides.

That is why he believes that examining the cultural trends and philanthropic whims of the technology leaders behind this boom is important — simply “because it has been a long time since the decisions of a single individual have been so consequential”.

World-renowned innovators such as Microsoft co-founder Bill Gates, who launched the $75bn Bill & Melinda Gates Foundation in 2000, and Facebook founder Mark Zuckerberg, who set up the Chan Zuckerberg Initiative in 2015, have made the most eye-catching headlines with their giving. But, less well-known figures such as Småros — albeit with smaller resources — have also increasingly sought to direct their “start-up mindsets” towards the projects and causes they care about.

The charitable ventures of technology innovators have caught attention throughout the 21st century, but Pasic believes that we are entering “a new era of maturity” for so-called Silicon Valley philanthropy — one that has been shaped, in particular, by the growing scrutiny of Big Tech.

Some have taken this level of examination as a call to deliver transparent and evidence-based solutions, while others have retreated into “non-transparent dealings” that “blur the lines between doing business and doing philanthropy”, says Aaron Horvath, a research scholar at the Stanford Center on Philanthropy and Civil Society.

But the common thread, at least according to Pasic, is that entrepreneurs who have built their wealth on the back of technological innovations — people who have found success by being disrupters in their business life — often have more appetite to tear up the rule book when it comes to pet projects and philanthropy, too.

“These are people who have seen entire industries transformed within decades under their leadership, so you can understand their impatience,” he says, adding: “Whether it’s justified, is another question.”

It has been a long time since the decisions of a single individual have been so consequential

Horvath, similarly, warns that technology entrepreneurs too often think that their success in business can be translated directly to philanthropy.

“One of the things that I often find myself laughing at, a little bit, is that, with each successive wave of these folks, they seem to be convinced that they’re the ones who are getting it right: ‘If only we do philanthropy like we do our businesses, then we’ll be unlike our philanthropic forefathers and we’ll be the ones who finally save the world.’”

However, Clare Woodcraft, former executive director of the Centre for Strategic Philanthropy at Cambridge university, argues that technology leaders can bring fresh value to charities and non-governmental organisations by sharing their technical expertise and “start-up” mentality.

“If you’re a tech entrepreneur, the likelihood is that, not only do you have some surplus capital, but you also understand innovation, you understand the value of testing new ideas, and you understand the idea of incubating, piloting and scaling,” she says.

Småros says she aspires to fulfil this philosophy by using the Relex Foundation to help scale a portfolio of innovative charities — in much the same way that venture capitalists help to grow emerging start-ups.

“Foundations can invest in things that are not yet economically viable, and we can then help test out and scale up these ideas, so that they also become attractive to other types of investors,” she says.

Investment or philanthropy?

Other technology entrepreneurs have been more explicit in opting for what Horvath calls “pro-social investment” — generally with the expectation of returns — rather than strictly charitable giving.

Heidi Lindvall, a serial start-up founder, is adamant that her mission-based venture capital group, Pale Blue Dot, which is dedicated to backing climate technologies, is not a philanthropic venture. “Philanthropy is sometimes seen as a pet project,” she says. “This is a smart investment strategy.”

It is an important distinction for Lindvall because she believes that successful technology businesses can have a bigger and more sustainable impact than charities or NGOs. She argues that mainstream investors chasing proven returns offer a more reliable income than charitable giving — something she says will be crucial to funding the breakthroughs required to combat, and to survive, climate change.

Lindvall is exasperated by the way some investors and philanthropists discuss climate tech. “It’s the first time in my career that we’re seeing that the biggest investment opportunity will also have a positive impact,” she says. “But, if we continue talking about climate as a compromise to revenues, then we’re going to appeal to fewer investors.”

Lindvall’s Pale Blue Dot has raised two funds of €87mn and €93mn, including contributions from its three co-founders. The VC has invested in companies including UK-based climate risk analytics company Climate X, sustainable ecommerce delivery company HIVED, and green fuel development company Brineworks.

But, while Lindvall’s distinction between VC investment and philanthropy is pretty clear, there has also been a growing inclination among some technology leaders to label their explicitly for-profit work as philanthropy.

“Some have quite broad views of their private enterprises — claiming that their businesses are doing things that are more important for humanity than any gains that can be made by relinquishing their property,” says Pasic.

Musk is perhaps the loudest and proudest member of this group: “SpaceX, Tesla, Neuralink, The Boring Co are philanthropy,” Musk told TED leader Chris Anderson, in 2022. “If you say philanthropy is love of humanity, they are philanthropy.” 

This article is part of FT Wealth, a section providing in-depth coverage of philanthropy, entrepreneurs, family offices, as well as alternative and impact investment