From IPO to NPO: How tech flotations benefit social causes

Riskified IPO Photo: CRC Media
Riskified IPO Photo: CRC Media

Through Tmura's options donation model, Israeli non-profits will gain some NIS 40 million from Outbrain and Riskified's Wall Street IPOs.

The past year-and-a-half has been a difficult period for non-profit organizations that help the needy and people at risk in Israel. While the coronavirus pandemic led to higher demand for the assistance that the charities provide, it reduced their ability to raise money, and they were hampered by the absence of a state budget.

On the other hand, the past two months have been a peak period for IPOs by Israeli companies on Wall Street. A growing number of Israeli companies is reaching the US stock market at valuations in the billions of dollars, raising hundreds of millions, and generating handsome profits for those who invested in them, at first on paper only, because of the lock-up period in which they are prevented from selling shares. But what if it were possible to connect the success of the technology companies to the charities' plight? Well, it is possible, and in fact this is what Tmura - The Israel Public Service Venture Find does. The fund is having one of its busiest years.

Tmura, headed by chairperson Yadin Kaufmann and executive director Baruch Lipner, bases its activity on receiving options from startup companies just setting out. If the companies later hold IPOs or are sold, Tmura reaps the benefit. It transfers its gains to various charities, at the choice of the contributing companies. Until this year, the largest amount that Tmura realized, $1.6 million, came from the sale of navigation app Waze.

Sources inform "Globes" that two large IPOs by Israeli companies recently held on Wall Street broke the record for contributions to Tmura. Content recommendations company Outbrain, floated at a valuation of $1.1 billion, donated options to Tmura that were worth $2.3 million, and e-commerce fraud prevention company Riskified, floated at a valuation of $3.3 billion, donated options that were worth a record $10 million. This means that some NIS 40 million will be channeled to non-profit organizations of the companies' choosing.

Youth at risk, assault victims, and children with disabilities

Kaufmann adopted Tmura's model of collecting donations in the form of early-stage startups from Silicon Valley. As reported by "Globes" earlier this year, 2020 was a peak year for the fund. It sold shares to the tune of $1.9 million, money that went to charities, up from $1.4 million in 2019 and about $500,000 in 2018.

Lipner, who manages the fund, told "Globes" how decisions on distribution of the money were made. "There are companies whose employees volunteer at a particular charity and want to support it financially, which is excellent. Any idea that companies have about social action is welcome. Other companies say 'We'd be glad to meet you to find the appropriate project.' In the case of Outbrain, we held a meeting with all the company's employees several months ago and asked for their help. Each employee was allowed to state a choice, and it was decided that eight non-profit organizations would benefit from the money."

Among the organizations are Krembo Wings, a youth movement for children with and without disabilities, Educating for Excellence, the Center for Victims of Sexual Assault, and SAHI, which organizes young people at risk to help the needy. "SAHI works with youth at risk," says Lipner. "They go into difficult neighborhoods and reach kids who have just about dropped out of school, and through a unique model they turn them into the givers rather than the receivers.

"'We want to distribute food around here,' they tell them, 'but we don't know the people, help us.' They build a team with esprit de corps. During the coronavirus pandemic the kids went to visit the elderly, and there was even an instance in which a child who was visiting an old person regularly, noticed that he didn’t answer, and she called the police, who found him in a severe condition, but still alive."

Krembo Wings, Lipner says, is a model unique in the world. "In general," he says, "we try to find non-profit organizations with a unique model that is scalable, that is, at a fairly early stage but that can expand later, opening new branches. Krembo Wings is a classic example. It was set up by a teenage girl who was tutoring someone with special needs, realized that there was a need in society, opened one branch and then another, and now it's a youth movement in every respect."

"Companies should make ESG part of their DNA"

Lipner believes that companies should start thinking about ESG (environment, society, and corporate governance) right from the start. "Today, companies are starting to think and act in the right way when it comes to social involvement. Both Outbrain and Riskified donated options at the beginning, and that's the right thing to do. There are venture capital funds that take ESG into account, and companies are better off not waiting until the last minute, but making this part of their DNA."

Funds take ESG into account when examining investment in companies?

"This is much more developed overseas. In Israel, it's only beginning. I wouldn't say that they make investment conditional on it, but there are certainly funds that look at impact, at how the company regards its environment and at employee involvement."

Are Riskified and Outbrain's donations still blocked?

"We have a lock-up period of six months from the date of the offering like everyone else - the funds invested in these companies and the employees."

Tmura's current portfolio contains more companies that could reach IPO status or be sold, some of them already unicorns (i.e., privately held companies valued at $1 billion or more). Among the names mentioned by Lipner are Drivenets, Gong, Vast Data, and K Health. "The more companies we have in our portfolio, there more successes there will be. It's just a matter of numbers. At present, the rate is over sixty companies a year."

"We want more partners in our success, in the community and society"

Given the difficulties that the third sector currently faces, are you receiving more approaches from non-profit organizations?

"They approach us all the time. Unfortunately, in the nature of things, it isn’t possible to respond to all of them. We don't know how much money will come in and when. We are not a party to the deals (flotations and mergers) and can't predict them. But every time there's money, the organizations are happy to receive. So although we don’t know how much money there will be to distribute each year, the budgets only grow, and the model is such that the amounts that come in are not the kind that people write checks for.

"The money that flows to the non-profit organizations is of course important," Lipner adds, "certainly at a time like this, when the demands, the needs and the challenges are constantly growing because of the pandemic, while it has become harder to raise money, so this is very important 'oxygen.' But beyond that, the social involvement is important. The employees of the companies and those associated with it are aware of the donation, and that encourages giving and volunteering, so there's another level to it."

"As a high-tech company, we found in Tmura's model a marvelous way of contributing to the company," says Outbrain co-founder and CTO Ori Lahav. "What's good about the model is that you can contribute very substantial value on the basis of shared belief in the future success of your company, and the understanding that you want this success to have more partners, in a significant way, in the community and in society, on matters that are important to you and to the employees.

"We think that it's a model that can apply to almost any startup, and can very much assist in bolstering the strength of civil society in Israel. At the same time, our ability to involve the company's employees as well - in proposing and selecting the organizations and causes that will benefit - gives added value to the process."

Published by Globes, Israel business news - - on August 12, 2021

© Copyright of Globes Publisher Itonut (1983) Ltd. 2021

Riskified IPO Photo: CRC Media
Riskified IPO Photo: CRC Media
Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018