Glen McLaughlin, co-founder of Silicon Valley's Band of Angels, practices old-style venture capitalism
Photograph by Kathy De La Torre
Venture Philanthropist
Saratogan invests in start-ups and charities with the same hands-on commitment
By Kara Chalmers
Photographs By Kathy De La Torre
Glen McLaughlin, 65, among other things, is a venture philanthropist. Like his work as a venture capitalist and an "angel investor"--someone who helps promising companies that are just starting out by bringing in business experience, as well as funding--McLaughlin is a philanthropist, but in a very hands-on way. He spends about half his time running his business, Venture Leasing Associates in Saratoga, and the other half figuring out ways to raise for and donate money to many local charitable activities.
In the Silicon Valley, there is an enormous amount of money accumulating, and, while some of the nonprofit groups here are saying that they are not getting their fair share, McLaughlin says this is not the case.
"There's lots of people here in Saratoga, especially in Saratoga and in other communities, that are quietly helping and sponsoring a lot of things that really don't get this kind of credit," he said. "I am not unique in doing this. There's lots of others here."
Still, McLaughlin is a great example. He started giving when he was in college in the 1950s, when he hardly had anything to give. His brother, a minister, needed money to pay for the steeple of a church he was building in Sacramento. McLaughlin borrowed money to give to his brother.
"In the past, most people would just leave money in their will," he said. "Well, to me, that's too late and, of course, you don't have the fun of seeing what happens with it ... in my own career I started early with giving money away."
Today, McLaughlin is actively involved in youth development, specifically the Boy Scouts. In the early 1980s, McLaughlin began volunteering for his son's Boy Scout troop and led the drive to computerize the Scouts' office. He remains extremely involved with the organization today. Since the local Boy Scouts needed help with fundraising, McLaughlin supports the salary of a full-time fundraiser at the Santa Clara County Council.
He has served as the president of the Santa Clara County Council, as the president of the Northern California and Nevada area and as the president of the Boy Scout Foundation. An Eagle Scout since 1949, McLaughlin received the Distinguished Eagle Scout award in 1994. Today, he serves as the endowment chair for the Western region and is the vice president of endowment development for the Santa Clara County Council. He is the vice president of investments and a trustee for the Boy Scout Foundation.
McLaughlin and his wife, Ellen, led the Western Region Endowment Campaign from 1993 to 2000, raising $1 billion for local councils in the Western region. The McLaughlins themselves donated more than $1 million. McLaughlin has also served as president and chairman of Junior Achievement of Santa Clara County.
He has personally funded a computer program at the Mexican Heritage Center in San Jose. Although corporations had given the center personal computers, there was not a program in place to help kids use the computers, so McLaughlin funded the hiring of a program manager there.
"To me that's kind of an exciting thing because you've heard about the digital divide, and haves and have-nots," McLaughlin said. "For them it's a big deal, so this is a way to help solve that issue."
McLaughlin calls venture philanthropy the process of not just writing checks, but actual involvement in organizations
"It's where you don't just passively write a check, you can apply the skills that you have and try to help the organization achieve its objectives," he said. "It's the same concept as angel investing in companies."
McLaughlin has founded 15 companies and has served as a director of 32 corporations, nine currently. In the 1970s, McLaughlin was the vice president of finance for Four-Phase Systems of Cupertino.
He founded Venture Leasing Associates in 1986, and today is the president and chief executive officer of the small leasing company, which provides equipment lease financing to promising start-ups. It has provided more than $250 million of financing to companies since its inception.
McLaughlin was a co-founder of the Band of Angels in Silicon Valley in 1995, which he calls "old-style venture capitalists."
Photograph by Kathy De La Torre
Glen McLaughlin collects maps showing California as an island, but the venture capitalist shows by his good works that he adheres to the philosophy that no man is an island.
From the 1950s through 1970s, venture capitalists were mainly operating people who had direct business experience, McLaughlin said, and they brought that experience, along with money, to help entrepreneurs get their new businesses up and running. This persisted until the early 1980s, but in the 1990s, McLaughlin said, there are so many funds and the funds are so large that present venture capitalists do not have as much direct operating experience, meaning that they never ran a company, never had to meet payrolls, or to motivate people. Since McLaughlin feels that this experience is a plus, he started the Band of Angels with 12 other people to address the void.
"That was one of the earliest [angel investor] groups in the valley, and it is still probably the largest and most prominent, by far and away," he said. "Other groups have sprung up, but the Band of Angels is clearly the most prominent, I don't think there's any question about that."
The Band is a group of venture capitalists who are retired, or semi-retired, but have had heavy operating experience--either running companies or leading divisions of companies--and who feel they can bring their experience to help companies get launched. They sponsor an investment, participate on boards and do enough work to be able to convince their peers that they should invest in the companies.
"One of the rules of the band was that a sponsor of an investment would have done enough work and would have done enough due diligence to stand up in front of their peers and say 'I have investigated this situation, this project, and I am sponsoring it and I am making a significant investment and I am participating at a board or management level,'" McLaughlin said. "So you have peer pressure, because if you sponsor duds, people will not follow you."
For example, McLaughlin sponsored MorphICs Technology Inc., a wireless communications company. A core management team assembled around some technology in 1998 and needed money to get going. McLaughlin became the sponsor and raised $1.5 million, the second largest funding to that date in the Band of Angels. McLaughlin said he raised it the old-fashioned way, he had a dinner to introduce the company, and then the company made a presentation and had a lunch where investors could ask management many more detailed questions. There were indications of interest and then deals closed. He led the process and contacted investors.
McLaughlin uses the same skills to help raise money for his pet charitable organizations.
McLaughlin is head of the order of the Knights of St. John, a worldwide order of chivalry dating back to 1099 that built the first hospital in Jerusalem for the Crusades. He is helping to raise the money to build the Knight's Inn, an infirmary at Camp Okizu, a summer camp near Chico for children with cancer and their families.
"Our mission is to provide support for the poor and the sick," he said. "A tangible way of manifesting that is building the new infirmary at the camp."
The infirmary is the order's current project. Before that they helped to refurbish the recreational room at the Veterans Hospital in Menlo Park.
Camp Okizu is similar to other summer camps, with boating, swimming, hiking in the woods, camp fires and cookouts.
"But it's different," McLaughlin stresses. "Because normally they have to go to the hospital and get their shots, or they have a regimen of treatment at home, they get tired of seeing white-coated men and women, and they don't see that there."
He has agreed to raise $500,000 to build the Knight's Inn and to complete the fundraising in two years. Members of the local order have already donated $220,000 to date.
The McLaughlin family also has donated $2 million, what McLaughlin calls the largest gift he's ever given, to help pay for a new 20,000-square-foot science building at Gould Academy in Bethel, Maine, where McLaughlin's son went to school. The center will be called the McLaughlin Family Science Center. To date, the McLaughlin family has raised $1.5 million, and McLaughlin did it by writing to 50 people to ask for support. The center will cost $4 million. Donors to the new center will have their gifts matched on a one-to-one basis by the McLaughlin family.
For the past 20 years, McLaughlin has voluntarily taught some classes--venture capital, corporate finance, angel financing--several times a year for the finance department of the business school at Santa Clara University with professor Meir Statman.
McLaughlin attended the University of Oklahoma and received his degree in accounting in 1956. There, he was senior class president, elected to Beta Gamma Sigma and awarded the Gold Leitzer Award as the Most Outstanding Senior Man. He went to business school at Harvard University, earning his MBA degree in finance in 1964.
Photograph by Kathy De La Torre
Glen McLaughlin talks with Susana Hernandez, 18, a student at James Lick High School, about her Internet research at the Mexican Heritage Center.
In 1998, McLaughlin began funding a national prize, administered by the School of Accounting of Price College at the University of Oklahoma, for professors who do original research on ethics as applied to business.
"The concept of doing that is to restore the teaching of ethics back to college," he said. "The reason I want to do that is to get people thinking about ethical issues and teaching it to kids in class. We've had horrible examples of ethical lapses here in the valley."
The award is called the McLaughlin Prize for Research in Ethics in Accounting and Taxation, in the amount of $10,000, that annually honors the best paper dealing with ethics. He also funds the McLaughlin Research and Educational Development Grant in Accounting, also for $10,000. This grant is awarded to a faculty member in the school of accounting for research, or activities dealing with ethical behavior in accounting and taxation. McLaughlin has provided more than $300,000 to endow the McLaughlin Prize and to bring speakers to the campus to talk on topics related to education and teaching in ethics.
In 1997, McLaughlin established the Glen McLaughlin Chair in Business Ethics with a donation in the amount of $500,000. A matching grant from the state of Oklahoma brought the total to $1 million.
McLaughlin says he has a deep interest in business ethics.
"Schools, unfortunately, now delete character development," he said. In the 1890s, Harvard University dropped ethics from its list of required courses, and McLaughlin says he doesn't understand why. He said that when he was going to school in the 1940s, there was always a moral tone of what's right and what's wrong--a moral code to live by. Since then, McLaughlin said, there has been a void in curricula and not as many ways to reinforce character development.
"Somehow people still need to have some sense of right and wrong, and some sense of what has worked over millenniums," he said.
He noted that a Harvard University survey showed that over anything people wanted character in the education, he also noted an article in his daughter's prep school's magazine that stressed morals, ethics and values.
"When I see these schools of national standing emphasizing this, you have to think they're on to something," he said.
McLaughlin isn't all dollars and sense. He has a hobby that has prompted him to become the owner of the largest private collection of maps, depicting the state of California as an island.
He has written a book, The Mapping of California As An Island, published in 1995. He also contributed to California 49, a group of works published in 1999, as part of the sesquicentennial celebration of California's gold rush in 1849. The book traces the history of California through maps, he says.
His hobby began when he was living in London, England, when he was the finance director for Memorex Corporation in the early 1970s. He happened across such a map, an English map from 1663, in Europe and hung it in his entryway as a conversation piece, especially for business colleagues who visited his house and did not speak English.
"When people would come out, they always thought of us as brash Californians, we were upsetting their old, traditional way of doing business," McLaughlin said. "And so we'd point to the island of California off the coast, and a lot of the English people would say well, we still think you guys operate that way, what's changed? It was a way to start conversation and to warm people up."
After that he started collecting such maps and has gradually built quite a collection of these maps. He buys at auctions and from private collectors.
Today, McLaughlin is the co-chair of the Phillips Society Steering Committee for the Library of Congress Map Division.
Saratoga, California Since 1955
