|
Frequently Asked Questions
What does EF Hawai'i do?
EF Hawai'i accepts donations of equity from entrepreneurial companies. When a company has a liquidity event, EF Hawai'i sells its shares and uses part of the proceeds to establish a charitable fund for the company. EF Hawai'i also helps companies get involved in community activities that fit their interests and resources.
Back to Top
Who came up with the idea for EF Hawai'i?
John Dean, Managing General Partner of Startup Capital Ventures and former Chairman and CEO of Silicon Valley Bank, co-founded EF Hawai'i along with William K. Richardson, Gregory R. Kim, John Davidson, and Leigh-Ann Miyasato. EF Hawai'i is based on a model developed in 1997 by Gib Myers of Mayfield Fund and other leading venture capitalists in Silicon Valley. John Dean was a founding director of the Silicon Valley EF.
Back to Top
What types of companies should consider EF Hawai'i membership?
Any early stage company that has the potential to achieve a liquidity event is a candidate for EF Hawai'i membership. Membership is not limited to technology companies.
Back to Top
How does a company join EF Hawai'i?
A company's management agrees to donate equity to EF Hawai'i, its board votes on a resolution approving the equity donation, and (if applicable) a warrant agreement is signed. Please contact us to get started.
Back to Top
What kind of equity does EF Hawai'i request?
EF Hawai'i requests fully vested net exercisable warrants. The company may also donate common stock.
Back to Top
How much equity is a company asked to donate to EF Hawai'i?
Companies are asked to donate stock or warrants valued at $50,000 or 1% of the company's shares, whichever is less.
Back to Top
What happens to the donated equity?
EF Hawai'i holds the equity until a liquidity event, at which time EF Hawai'i sells its shares and uses 50% of the proceeds to establish a charitable fund for the company. EF Hawai'i retains the remaining proceeds to make its own grants and to support its operations.
Back to Top
How does the company's charitable fund work?
The company can either organize its own charitable foundation or establish a donor-advised fund. The Hawai'i Community Foundation manages many such donor-advised funds. The company may also choose another administrator. Donor-advised funds are attractive for smaller funds because the administrator handles investment, distribution of grants, bookkeeping, and tax returns, and the company retains the right to recommend donations to charities of its choice.
Back to Top
What if the company is acquired?
If a company is acquired by a non-Hawai'i company, it is EF Hawai'i policy that proceeds from sale of EF Hawai'i's equity are to be distributed to qualified Hawai'i charities chosen by the company's founders or by a committee of the company's Hawai'i employees.
Back to Top
How does EF Hawai'i help companies with community involvement?
EF Hawai'i helps companies organize community involvement activities and programs that are tailored to fit their interests and resources. At the company's request EF Hawai'i will confer with management, survey employees, develop an array of options for community involvement, identify nonprofits to work with, and publicize activities. EF Hawai'i hopes and expects that as the company grows, its involvement in the community will also grow.
Back to Top
How much of the company's time will this take?
The company's management will decide how much time to devote to working with EF Hawai'i on a community involvement program. A simple activity like a food drive at Christmas will take very little management or employee time. Other events like volunteering to paint a school building are more time-consuming but are excellent team-building activities.
Back to Top
Why would a company's board and investors approve the equity donation?
The board and investors will likely recognize that the benefits of corporate philanthropy and community involvement - team building, improved morale, increased pride in the company, a recruiting and retention edge, a better image in the community - are more than worth the minimal dilution caused by the donation of equity.
Back to Top
What if the company never has a liquidity event or it goes out of business?
The warrants are never exercised and the equity becomes worthless.
Back to Top
Does the company receive a tax deduction for the equity donation?
If stock is donated, the tax deduction is for the fair value of the stock at the time of the donation. If warrants are donated, the company takes a tax deduction at the time of the liquidity event, when the stock has appreciated in value and the company probably has tax liability. An IRS letter ruling supports this tax deduction.
Back to Top
What is the expense to the company at the time of a warrant donation?
A charitable expense is recognized when the warrant is granted. The accounting value of the warrant is a fraction of the fair value and is based on the Black-Scholes option pricing model.
Back to Top
Does EF Hawai'i make its own grants to nonprofits?
If an EF Hawai'i company has a liquidity event, EF Hawai'i will use a portion of its proceeds to make grants to Hawaii nonprofit organizations. Please see the Grantmaking page of our website for our policy and criteria.
Back to Top
How is the EF model working elsewhere?
There are now 10 EFs across the U.S. and in Israel. In partnership with these EFs, 700+ companies have created corporate philanthropic funds, more than $15 million in donations have been made to charitable causes, and 18,000 employees have volunteered their time to nonprofit organizations.
Back to Top
What is the relationship among the EF affiliates?
Each affiliate is an independent nonprofit organization, but all subscribe to a statement of Shared Mission, Strategies, Principles, and Practices. The affiliates confer regularly by telephone and meet annually in person to share updates, best practices, materials, and networks.
Back to Top
What is EF Hawai'i's structure?
EF Hawai'i is a Hawai'i nonprofit corporation and has been recognized by the Internal Revenue Service as a tax-exempt organization under section 501(c)(3) of the Internal Revenue Code.
Back to Top
How is EF Hawai'i funded?
EF Hawai'i has been supported by the proceeds of warrants donated by Hoku Scientific, which conducted an initial public offering in 2005. EF Hawai'i has also received generous donations from Hawai'i businesses, foundations, and individuals.
Back to Top
How can I support EFH?
EF Hawai'i is open to advice and introductions from the venture, business, and nonprofit communities in Hawai'i and beyond, and financial support is always welcome. Please see our Donate Now page, or contact us for more information.
Back to Top
|
