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Julia Healey, CEO of United Charitable, discusses potential new regulations that could impact donor-advised funds. Waze Co-Founder Uri Levine explains the use of the 30-day test to create a remarkable team for your startup.
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It is Bloomberg Business Week. That's Katie Graefeld in for Carol Masser this afternoon. I'm Tim Steneveek.
Katy.
I don't know if you caught this story last week. Jensen Wong, the president's CEO, co founder of Nvidia, one of the wealthiest people in the world, and he's number thirteen on the Bloomberg Billionaire's list for sure. He and his wife Laurie have a foundation. They've got more than eight billion dollars of Invidia shares in it, but even that figure may underestimate the amount of charitable assets now that the company has at the couple has at its disposal. Documents show that a charity run by Charles Schwab controls an additional four point four billion dollar dollars of Nvidia shares, at least some of which are held in their donor advised fund for the Wongs and their foundation. The reason I'm talking about this is because of these DAFs donor advised funds. The IRS back in the spring held hearings on proposed changes to DAFs and for more. To get an understanding of what exactly is going on, what could be at risk, and just to explain it all, we turned to Julia Healey, CEO over at United Charitable, which, in their own words, is a quote nonprofit that works closely with wealth advisors and their clients to increase a donor's ability to do more with their contributions while minimizing their tax liability through their donor advised funds. Julia joins us from Washington, DC. Julia, how are you good?
How are you?
We're doing pretty well. Thanks. I think we got to start at the just at the basics here with donor advised funds, not everybody knows exactly what they are, so explain for us.
Sure, a donor advice fund is a charitable giving account. Think of that as simply a savings account that's already geared towards charitable giving. The great thing about donor advice funds is that once you donate into the account that that's when you get your charitable tax deduction, and then from there you can wait a year to distribute to charity, or you can make distributions right away. But think of it as a charitable savings account.
Okay, charitable savings account. Who are they good for?
They're good for people that are either building their wealth or high networth individuals who already have their you know, legacy in place and they really want to continue it. They can replace private foundations in certain scenarios. I mean, they're very it's such a flexible vehicle.
What are we talking about? Who does it make sense for?
So again, probably around the five million in undermark, right, so we have clients that start with us at twenty five thousand, we have clients at five million.
So how do the how does how does someone like does someone like Jensen Wong, the founder of Nvidia find four point four billion dollars in a donor advice fund?
And again, there are so many people out there that are using the donor advice funds because nobody wants to deal with the private foundation and having to file all of your tax forms and having board of directors with the donor advice funds. You just become a project or an account of an existing charity. So I run about six hundred and fifty different donor advice funds for all different clients. And again there's no quarterly board reports we vet the charities for us. For them, you just make the recommendation and then we go out and do the work.
And ken for again, for our audience that might not be familiar with donor advised funds, I mean, how do they compare to other vehicles out there that do exist? If you could just compare and contrast here for us.
Sure, a donor advice fund is really compared to a lot of the times to a private foundation. And so with a private foundation you do have to do reporting, annual reporting, board reports, and you don't have the same tax seductibility. Right, So private foundations have certain tax deductibility compared to donor advice funds, which is a public charity, so you get all your public tax station rates. So the real advantages is you get up again a higher tax seduction for the clients that choose to go with the donor advice fund And the distributions though are only to a five oh one C three religious or educational institution in the United States. With a private foundation, you have more flexibility into paying expenses and paying salaries. With the donor advice funds, you do not have that capability.
So what's going on at the irs level here when it comes to these the potential changes that we could see.
Yeah, so we're seeing that the regulations that could possibly be proposed would not allow financial advisors to be compensated for the management of the donor advice funds.
Why is that bad in your opinion?
Well, just because, well, in my opinion, if a financial advisor is advising an account on how to create a legacy, and we have a client, we have a family that's coming in and has decided to put five hundred thousand dollars away, and they want to do distributions each year. But they only want to touch you know, the interests, not the principal. Who a financial advisor then needs to come up with the best investment strategy. Who with the charity would be able to do that. We need investment advisors in their professions to make sure that these accounts are growing and taken care of just like any other investment.
How are they compensated right now?
Management fees.
How high are those fees like.
Seventy five basis points? I mean, we're not talking anything crazy.
And so the conversation that we're having now about potential regulation potential changes, I mean, where did that originate from? And I mean, what's the potential timeline on any potential changes?
You know?
That's great and I wish I had more information for you for that. They have not given us any potential changes. It took them quite quite a while to really come up with these regulations. So I'm hoping we'll see something just because we would like to know too. But we're hoping we'll see something late this year, maybe next year. They haven't given us any kind of information around that.
How are you thinking about the election and who wins in November?
Oh? In election years, people whether your candidate wins or loses, people really seem to care about charity and the charities that they're giving to. So it's kind of an activation year I call it for me because we can see clients whether they're happy about who's you know, who's an office or they're not. They'll really react to it and they'll make their sure that their dollars talk just as much right, they're charitable dollars will go to the organizations that they think will help strength in America.
Do you think that it will change based on who wins in terms of how much people donate, Like, does that on your radar at all?
It's not so much how people donate. I think it just depends what is on going to be on each party's platform, whether they're going to go off tax regulations or stuff like that. That will make a difference. But in general, more people are activated in an election year. They're more they care about the community that's around them, and it makes them very aware of the issues that are going on. So it makes people really activated and wanting to make the world a better place.
And Julia, I'm curious about demographics here. I mean, when we talk about philanthropic giving, etc. It sounds like a much older sort of person who's doing that. But what are we seeing among maybe folks who are less wealthy, who are earlier in their careers and their investment journeys. I'm talking about gen Z for example.
So probably my favorite generation thus far, which is because they're really wanting to match their donation dollars with their time, talent, and treasure they don't just want to give a big check. They want to volunteer or if they have accounting skills or social media skills, they want to help that nonprofit in a very specific way. So we see philanthropy changing a little bit in the sense that the next generations they want to be much more involved. They really want to help, they want to work with companies that are philanthropic. So we're just incredibly excited to see the next generation.
What are the causes that they care about.
So we're seeing a lot of environmental education, but just anything that really that they feel that they create a community. And that's what I've noticed much more is that they do care about the nonprofit social media accounts and what they're doing and what there's community. They're looking into all of that when they're making their donations.
I'm wondering about religious organizations. Is that something that falls into the purview of donor advice funds?
It does?
Are you seeing a shift there because we hear a lot about younger generations not being as interested in going to church or being part of organized religious community, and I know that does take up a significant portion of donations. When you look at it net net what are you seeing what are the patterns You're.
Seeing exactly what you said. We're seeing that becoming less and less. We're seeing human services organization take up more and more of the pie.
Really interesting stuff. Julia, thanks so much for joining us. That's Julia Heay CEO over at United Charitable Works with donor advised funds. She joins us from Washington, DC. We've got back with us. Or Levine, the co founder of Ways. Remember Google bought it more than a decade ago for one point one billion dollars. Or also an investor in the first board member over at move It. Intel A bought that back in twenty twenty for a billion dollars. He's also the author of fall in Love with the Problem, Not the Solution, a handbook for entrepreneurs. Or he joins us from Toronto. Or good to see you. How are you, Thanks, An, how are you. We're doing well. It's good to have you come back with us. Hey, before we get to how you're thinking about entrepreneurship right now, I do want to get an update from what you're hearing, what you're hearing from your fellow members of the tech community in Israel, because you were back on with you were in December back on with US in December a few months ago. And when you were last on with US then it was about two months after the war started, and you talked about how it affected the tech community there. Obviously a lot has happened since then. Just give us an update from what you're hearing, what you're seeing.
So to a certain extent, I would say that the scary part is that we get history and we shouldn't have. But the reality is that the tech nation is back back to normal, and you know, startup scene is as strong as it was before and maybe even stronger. And so in that sense, I would say, all goodness, the political situation is less.
Yeah, well, how is it back to normal? I mean, how does that work when folks are having to fight when there's certainly still the threat? How is that normal?
Right?
So to a certain extent, I would say most of the scene is outside or further away from where the combat actually happens, right, And so in Tel Aviv and major cities there is nearly no impact of the war anymore. And it's mainly up north and in the next to the Gaza strip. In the number of people on military is herb is way smaller now, So at the end of the day, the impact on the startup scene is minimal at this phase.
How about fundraising, Is that back to normal? When you think about the appetite of foreign investors to invest.
In is probably the only thing that is not back to normal.
Interesting, So, and.
The reason is that, Look, you know, we hear about war and then we get scared, and then we basically say, Okay, we don't know, let's wait. And the way is making it a little bit more complex for startups to raise new capital or for new funds to raise new capital and so forth. But at the end of the day, I think that and Israel always ended up to be stronger than before, right, so the more challenges that we have, we ended up to become even stronger and stronger and stronger. And so to certain extent, I would say investing in Israeli startups today is a good idea.
Do you see fundraising ever getting back to levels seen before the war?
Definitely yes. So you know, we look at that twenty one in terms of investing in startups worldwide, writing in particular in the US and some we'll call that the hyper inflation valuations. And you ask yourself, is that going to come back? And then you look at the history and you realize that, wait a minute, In two thousand and seven we say the same thing, and just before COVID we say the same thing, and you know, in nineteen ninety nine we say the same thing, and everything is coming back eventually.
Hey, I want to pivot a little bit and talk about startups and sort of what's exciting to you out there right now. So much of our attention has been focused on AI and this seemingly new, although not really new, but new of interest. I think for a lot of people layer of technology, A lot of your focus has been on the sort of maps and transportation logistics with ways and then with move it. What's exciting to you right now in startups?
So look, at the end of the day, this is about solving problems, end of the day. If you think of a journey for startup, then the purpose is only one creating value, and the simplest way to create value is solve a problem. So therefore, if the problem is worth solving, then I would say this is probably something that excites me. I have eight different active startups today and each one of them is trying to solve a single problem. And some of them are you know, I would say, are going to be my third and fourth unquorns. But they're making significant progress. But generally speaking, each one of them is trying to follow the same philosophy of doing good and doing well, which basically means that you know, if they're successful, then the war will end up to become a better place.
And of course you are the author of falling love with the problem, not the solution. I also see that on your shirt. That a nice plot there. Maybe you could just elaborate a little bit more on what that actually means in practice for some of these startup founders and maybe startup investors as well. Since obviously falling in love with a problem it's a little bit unintuitive.
It's actually very intuitive, right because at the end of the day, the journey is about value creation. The simplest way to create value is solve a problem. Right, So you should start with the problem. Think of a problem, a big problem, something that it's worth solving, and then ask yourself, so who has this problem? Now? If you happen to be the only person on the planet with this problem, you know what I can recommend you a therapist. But prob what you really want to do next is go and speak with those people and understand their perception of the problem, and only then go and build a solution. And the result is that the problem is going to serve as the north star of your journey. And when you have a north star, you're going to make class deviation from the courts and more likely to become successful.
So oh, go ahead.
In particular, the story that you're about to tell is going to be way more compelling. Just imagine that we will be here in two thousand and seven, just before I started ways, and I will tell you I'm going to build an AI crowdsource based navigation system. And you're going to say, oh, yeah, very interesting, But you don't care. If I will tell you I'm going to help you to avoid traffic jams, then you do care. And when your customer cares, they want you to be successful, and if they want you to be successful, then they're going to help you to become successful. Now you're right. I'm getting one hundreds email a month from entrepreneurs, and in the last year there was not even a single one that did not say AI. But I would say in general, ninety five percent of them will start with what they're doing. And I don't really care what you're doing. What I care is why you are doing that, What is the value that you're going Why should I care as a user or a customer? And when you start your customer your story there, it's going to be way more successful.
Give us an example of a couple of the eight startups you're involved with now that you say are finding are finding solutions to problems? What are the problems that are out there that they're solving?
So you know, Pontera is helping Americans to retire richer. Right At the end of the day, if you think about most of the Americans, their retirement saving is through four one k plants, right. And if I would ask a hundred people on the street, what do you invest in your four one k? Probably they don't know. I do know. By the way, in the default whatever was the default when they joined, and the default is not a good idea, right, And the biggest problem is that your financial advisor is unable to help you with your for one k. And so Pontera have created a platform that a law was financial advisors to manage your four one k and therefore brings way better results for you. C three is helping three growers to increase the yield, and this is pretty dramatic, right, And so in particular, if you think of or sugarcane or ecalyptus or whatever, the ability to increase the yield through through a system is actually pretty dramatic for them.
So don't We don't have much time left, and I have to talk to you. Talk to you about the thirty day test, basically one of your ways for hiring employees. Thirty days. Does it seem like a long time to get a good sense of how someone will be as a long term employee?
You are right in terms of the amount of feedback that I got around that. But let me try the following, right. I spoke with many entrepreneurs that their startup fail and actually why what happened? And about half told me the team was not right. And I kept asking, okay, what I mean the team was not right? And I heard, you know, we had this guy not good enough and this guy not good enough, so that was the main reason. And then ask them the most interesting question, when did you know that the team is not right? All of them told me within the first within the first month. Now, in general, I would say this is always the same. Right. So when you think of a small place and there is someone that does not fit, right, and I don't care if that someone does not fit because they're way underperforming or because they're complete jerks, I don't really care. Everyone knows. Everyone knows, and the CEO doesn't do anything. That's the nature of the beast. Now, the realization is that when I speak with people, I ask them when do you know? All of them told me within the first month, even peers, right, or team members and the or team leaders or whatever it is. Then I set the ruler, and I basically say, and the rule is in order to force the decision. Right. So every time that you hire someone new, what they want to do is mark your calendars for thirty days down the road and ask you said one question, knowing what I know today, what I hired So forcing are the sea.
Or we're gonna have to leave it there. Unfortunately, it's in chapter six in his book fall in Love with the Problem, Not the Solution. Orie Levine, the co founder of ways Here, on Bloomberg BusinessWeek,
