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Palo Alto nonprofit Benetech wins a $42.5M Dept. of Education grant, a nod to founder Jim Fruchterman’s quest to help the blind
Jim Fruchterman, founder of Palo Alto-based nonprofit Benetech, was very relieved when, at the end of September, he received an email from the U.S. Department of Education.
With one day left to go in the federal fiscal year, the department had renewed funding for a longstanding reading program for the disabled, and it had chosen Benetech for the third time to run the five-year, $42.5 million project. That meant Benetech could continue to operate Bookshare, which provides digitally materials to 500,000 students with reading disabilities, including blindness and dyslexia, and Fruchterman could forget about planned October layoffs at Benetech.
No less important for Fruchterman, a buoyant, 58-year-old Caltech graduate with a more or less constant grin, his frequent trips to Capitol Hill are over for now.
“It’s been a huge distraction to have to keep going back to D.C. and say, ‘Hey, we’re the largest program that serves blind and dyslexic kids. We’re 10 times more cost-effective than what you were doing before. Isn’t that great? Both Democrats and Republicans like kids with disabilities, right?” Fruchterman rolls his eyes and laughs at his own frustration.
In Silicon Valley’s hyper-competitive startup scene, Fruchterman is a highly unusual figure, and not just because he spends a lot of time in D.C. or likes to work on social good projects. Back when no one had heard of social entrepreneurship — the idea that the energies and skills of entrepreneurs can be used for social good instead of investors’ profits — Fruchterman was one of the very early pioneers. And unlike wealthy techies in the philanthropic ranks, like Bill Gates or Pierre Omidyar, Fruchterman didn’t wait to do good until he made billions. In fact, he has never made a fortune, and he intentionally dropped out of the Silicon Valley race-to-riches.
Fruchterman instead took a page out of the Silicon Valley playbook to address persistent social challenges, like helping the disabled to read. His approach is to use money from philanthropists in the same way founders use venture seed rounds to get concepts off the ground, and then, if they work out, raise more funding to drive to a self-sustaining, nonprofit revenue model.
Bookshare followed this model to the T, starting with foundation grants to deliver reading tools — by instantaneous, digital means — for the blind and dyslexic who formerly depended on physical products like Braille books and the U.S. mail. Today, the U.S. Department of Education underwrites the service for students, and adults can also subscribe on their own for $75 a year.
Yet Benetech is about much more than Bookshare alone. Fruchterman created the organization to house a number of ongoing projects, including around human rights, the environment and other fields. In fact, Benetech houses an incubator for new endeavors, like a current initiative to make social services as easy to discover as the closest pizza joint, as well as a consulting service for nonprofits in need of technology help.
“No one else does what Jim does with such focus and dedication,” says Sally Osberg, president and CEO of the Skoll Foundation, which has granted nearly $2.6 million to Benetech in the past decade, “His ability to bridge the commercial world of tech innovation and the potential for social impact is his real strength in the field of social entrepreneurship.”
Winning the Skoll Award. Sally Osberg is on the left.
The model works, too. Eighty percent of the $13.4 million annual revenue the 70-employee outfit enjoyed last year came from operating projects like Bookshare. The balance came from donors, most of them in Silicon Valley. And in total, Benetech projects have taken in $9 million in nonprofit risk capital and have since attracted nearly $107 million in either follow-on grants or revenue.
I started from single-enterprise entrepreneur, to portfolio-of-enterprises ringleader, to guy who wants to help the entire Silicon Valley software and data ecosystem transform the world of disadvantaged communities and the social sector that serves them.
Fruchterman has accumulated lots of laurels for his work, including a MacArthur Fellowship and the Skoll Award for Social Entrepreneurship, but in a series of interviews with Fruchterman over the past year those accolades never come up. The conversation inclines to what he’s learning as he “plays CTO for an hour” to other nonprofits, which provides endless fuel for his key insight: the poor or non-existent use of technology in much of the nonprofit sector.
In a recent piece, Fruchterman called for a “software revolution for the greater social good” to address the fact that “the social sector has not fully benefitted from what Silicon Valley does best: Using software to achieve scale and using the data inherent in software solutions to continuously improve services, identify new opportunities and demonstrate impact.”
That’s the Silicon Valley thinker in Fruchterman: The market opening he’s after today isn’t simply helping the blind read, it’s marrying the good intentions to hard technology. “This is part of my career evolution,” says Fruchterman. “I started from single-enterprise entrepreneur, to portfolio-of-enterprises ringleader, to guy who wants to help the entire Silicon Valley software and data ecosystem transform the world of disadvantaged communities and the social sector that serves them.”
Thirty-six years ago, the young Caltech graduate was no less ambitious, though his main interest then was rockets, or maybe winning a Nobel. It was the early 1980s, in a universe far, far away, when the Reagan administration made it legal for private companies to develop rockets and defense spending boomed thanks to “Star Wars” missile defense programs.
Fruchterman was enrolled at the time in the PhD electrical engineering program at Stanford. He and his friends liked to host entrepreneurs for dinner, and one evening Gary C. Hudson, founder of rocketry startup GCH, Inc., joined them at the Stern dormitory. Hudson was looking for engineers, and he had a simple screening test. He asked Fruchterman two questions:
“Who is your favorite science-fiction author?”
“Poul Anderson,” Fruchterman replied, citing the author of A Knight of Ghosts and Shadows, among many others.
Hudson approved and asked, “Who was your favorite Poul Anderson character?
Fruchterman replied that it was Ensign Flandry, the starship pilot-turned-James Bond of the late Terran Empire, in Anderson’s Technic History series.
Hudson shook his head. The right answer, in his view, was Nicholas van Rijn, the libertarian-minded adventurer, another figure in the same series.
1981
Hudson gave Fruchterman a pass on the second question and offered him a job on the spot. Fruchterman couldn’t resist. What sci-fi loving engineer could? In 1981, he took a leave of absence from Stanford and went to work in Sunnyvale for GCH, which had backing from Space Services of Houston, and a real estate investor named David Hannah. Soon after, on August 5, 1981, GCH tried to test-fire its innovative rocket-engine design, Percheron, on a launch pad in Matagorda, Texas. The countdown reached ignition, but the engine blew apart on the launchpad.
Fruchterman picked up part of a rocket fin — a better startup memento than most — then he and a couple of his colleagues headed back to Silicon Valley to try to raise $200 million for a new rocket company. There were no takers, but Fruchterman decided nevertheless that he would not be returning to the PhD program.
“Gosh,” says Fruchterman, sitting in his Benetech office on leafy California Street, roughly a mile from Stanford’s campus. “I realized I found what I wanted to do; I liked…
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