Is this the same program as EFCO?

Yes. The Entrepreneurs Foundation of Colorado (EFCO) rebranded to Pledge 1% Colorado in September 2016 to better align with the global platform we co-founded with Salesforce, Atlassian, and Rally for Impact called Pledge 1%. At the same time, we broadened our program to include pledges of time, product, and founder equity. We’re excited about the latest evolution of our innovative program that began in 2007, led by entrepreneurs who had a social mission beyond their company success. We’re particularly thrilled about the opportunity to engage exponentially more companies in our philanthropic movement in partnership with the global Pledge 1% program.

What is the difference between Pledge 1% Colorado and Pledge 1%?

Pledge 1% Colorado is building a strong community of entrepreneurial giving in Colorado while connecting our members to the larger global network of startup philanthropy via Pledge 1%. Pledge 1% Colorado is a Founding Partner of Pledge 1%. We were the initial incubator of the program until we spun it off to the Tides Center in April of 2016. Pledge 1% Colorado continues to partner with Pledge 1% by sharing pledges, resources, best practices, impact stories, and more. By joining Pledge 1% Colorado, you are automatically recognized in the Pledge 1% global network and eligible for the member benefits provided by that program.

What does it cost?

Nothing. Pledge 1% Colorado doesn’t take any fees. Many companies allocate 10% of their pledged value back to Pledge 1% Colorado upon exit to help us sustain and grow the program. You can do that through the Allocation Form.

Does it matter what kind of equity I use to fulfill my pledge?

Your pledge can be for any form of equity. Pledge 1% Colorado encourages early-stage companies to make grants of stock options (or equivalents). Our warrant form is structured to reflect that.
For founders’ pledges, you should consult with your professional advisors as to the best form of equity to give. If you are past early-stage, consider giving equity (rather than options) to maximize your deduction. If you transfer your gift to the intended nonprofit before an exit event, you can avoid realizing the gain to your income.

What if my company is acquired?

If your company is acquired, the acquisition agreement will typically include some purchase offer to existing shareholders. Again, Pledge 1% Colorado will pass 100% of the value onto your nonprofit designees. Pledge 1% Colorado is happy to oblige the acquisition process in whatever way we can.

How do I convince my board of advisors that my company should participate?

Here are a couple of resources to help you present the concept of Pledge 1% Colorado to your Board of Advisors:

Pitching Pledge 1% to Your Board

Board Resolution Document

How will this ultimately work if my company goes public and the underwriters are asking for lock-up agreements?

Many investment agreements require an equity holder to promise not to sell for a period of time after a public offering, so any transfer of the equity interest should require compliance by the transferee with this lock-up commitment. Pledge 1% Colorado will agree to comply with a lock-up obligation of the transferor.

Are there any restrictions in the organizational documents that must be reviewed, revised, or waived so I can gift stock, warrants or LLC membership units in advance of an exit event? What if my stock is restricted and/or unvested?

Some company charters, bylaws, shareholders agreements, or operating agreements restrict the transfer of equity interests to third parties and require the consent of the company or other equity holders, so those documents must be reviewed to comply with notice, consent or waiver requirements. Normally, restricted shares are unregistered under securities law, and require a securities law exemption on a sale, but not for a gift. Unvested shares or warrants are usually not transferable until they become vested, so the vesting terms of the granting instrument must be reviewed before making a gift.

What if the company never has a liquidity event or it goes out of business?

We hope that all of our pledging companies experience successful exits – but if that’s not the case, that’s okay, too. If you have pledged company equity via a warrant, until there is an exit event, the warrant has no value. While that means Pledge 1% Colorado can’t contribute any cash on your behalf to your chosen charity, you’re not on the hook for a cash donation.

Will you verify we’ve fulfilled our pledge?

The pledge form is the first step in acknowledging your intention to give back to your community. We’ll provide you tools to support your pledge, but except in the case of the warrant for equity options, our pledge materials are non-binding. We want to support you and your team in fulfilling your commitment and we encourage you to track your impact so you can share your story with your employees, investors, and the broader community – along with other members of Pledge 1% Colorado and Pledge 1%. There is no audit function of our program. Once a year, we’d love for you to participate in a program-wide survey to help us measure our collective impact and build a library of successful stories to inspire other companies in Colorado and beyond.

Is there a way to structure the potential exit transaction to minimize taxes and maximize sales proceeds?

A sale of stock will result in capital gains (long-term or short-term) to the extent the sales price exceeds the seller’s basis in the stock. With a sale of assets, the proceeds must be allocated among the various assets of the business, including Goodwill, covenants not to compete, and future services. Any gain on Goodwill or other assets is a capital gain, however anything allocated to covenants not to compete and future services will be treated as ordinary income.

With an installment sale, the gain on the sale can be deferred into future years as the payments are received.

Are there certain shares that I should use to satisfy my charitable gift so as to maximize tax benefits?

Contributing shares with the lowest basis will reduce the gain recognized to the donor on the subsequent sale of the company. In addition, the fair market value of stock that qualifies for long-term capital gain treatment (owned 1 year or more) can be deducted as a charitable contribution whereas the deduction is limited to basis if the stock is short-term.

Can I give privately held stock, and if I do, how might that affect the value of my charitable deduction?

The value of privately held stock may be discounted due to minority interests or lack of marketability. This will reduce the amount that can be deducted as a charitable deduction.

Can investors participate?

Absolutely. The first thing you can do is to encourage your investees to consider joining. Knowing investors support their desire to give back helps companies take the leap to make a pledge. You can also pledge 1% of your investment profits. That can be accomplished either by issuing Pledge 1% Colorado a 1% interest in the GP (a profits interest or a standard member interest) or by making a 1% special allocation out of the GP – this can take multiple forms, but since we are tax exempt we are indifferent to the manner of the distribution.

The owner of this website has made a commitment to accessibility and inclusion, please report any problems that you encounter using the contact form on this website. This site uses the WP ADA Compliance Check plugin to enhance accessibility.