Bill & Melinda Gates Foundation History

Address:
P.O. Box 23350
Seattle, Washington 98102
U.S.A.

Telephone: (206) 709-3100
Fax: (206) 709-3252

Website:
Non-Profit Foundation
Incorporated: 1994 as the William H. Gates Foundation
Employees: 200
Total Assets: $21.8 billion (2000)
NAIC: 813211 Grantmaking Foundations

Company Perspectives:

The Bill & Melinda Gates Foundation places a major focus on helping to improve people's lives through health and learning. We will continue to look for strategic opportunities to extend the benefits of modern science and technology to people around the world, especially where poverty serves as an obstacle to participating in these benefits. As in the past, we will invest in partnerships with individuals and organizations that bring experience, expertise and commitment to their own efforts to help people through better health and learning. Key Dates:

Key Dates:

1994:
William H. Gates Foundation is founded.
1997:
Gates Library Foundation is founded.
1999:
All Gates foundations are folded into one organization.
2000:
First Millennium Scholars are chosen.

Company History:

The Bill & Melinda Gates Foundation is the world's largest charitable foundation. Its assets of approximately $22 billion dwarf most other foundations, including such well-known giants as the Ford Foundation, the Carnegie Corp., and the Rockefeller Foundation. The Gates Foundation gives away approximately $1 billion annually. Its overarching philanthropic goals are to promote education and health for the world's underprivileged. The Gates Foundation funds a variety of health initiatives in the developing world, such as the search for vaccines for AIDS and malaria. Its educational initiatives include a minority scholarship program and a campaign to provide computers to needy public libraries across the United States and Canada. The Gates Foundation's assets are provided by Bill Gates, founder of the computer software firm Microsoft, and his wife Melinda French Gates. Top executives at the Gates Foundation include Bill Gates's father, William H. Gates, Sr., and Patty Stonesifer, formerly the top female executive at Microsoft.

Funding a Foundation with the Microsoft Fortune in 1994

The enormous endowment of the Bill & Melinda Gates Foundation springs from the fortune of the computer magnate Bill Gates, Harvard University's most successful dropout. Gates left Harvard when he was still only 19 and founded a computer software company in 1975 with a longtime friend, Paul Allen. Their company, Microsoft, was chosen by IBM in 1980 to write the operating system for the computer maker's new personal computers. Microsoft's operating system, called MS-DOS, became the standard operating system used on all IBM-compatible personal computers. Microsoft reaped vast amounts of money from the licensing of its system. In 1986, Microsoft went public. Gates's stake in the hugely profitable company made him a billionaire, and he was soon touted as the world's richest man. His fortune was estimated at around $65 billion at the end of the century. The company continued to grow and expand into the 1990s, as it developed or acquired many new software products. Microsoft was the world's leading software company, an indomitable competitor in the booming software industry.

Microsoft generated great wealth, not only for Gates and cofounder Allen, but for scores of executives whose stock in the company made them rich. Many Microsoft executives were young, and they found themselves able to retire comfortably by age 40. According to a July 24, 2000 article in Time, dozens of Microsoft millionaires set up charitable foundations in the 1990s. "The status symbol of the '80s was a BMW. The status symbol of this decade is having your own foundation named after you," claimed a Microsoft employee quoted in the article.

Gates himself became one of the richest men on the planet while he was still in his 30s. Gates was instrumental to the running of his company and seemed to have no plans to step back from the extraordinary business he had founded in his teens. Yet Microsoft's competitive clout in the 1990s won it much criticism. Antitrust allegations soured a major acquisition the company planned to make in 1995, and in 1998 the United States Justice Department filed a far-reaching antitrust suit against Microsoft. The perpetually boyish, bespectacled Gates was also at times reviled as the personification of a company perceived by some as greedy and rapacious. He was called a miser, for holding on to his personal fortune. Microsoft had initiated a giving program as early as 1983, which at first focused on funding computer and science education scholarships. Gates arranged for charitable giving of his own wealth in the mid-1990s, when he announced that he intended to give away most of his money before his death.

Gates established a foundation for the charitable disbursement of much of his wealth in 1994, shortly after his marriage to Melinda French. This was known as the William H. Gates Foundation, and it was run by Gates's father, a Seattle lawyer, initially from the basement of his home. Apparently, Gates's marriage to Melinda French spurred the billionaire to find a way to give back some of his money. French grew up in Texas and studied computer science, engineering, and business at Duke University before joining Microsoft in 1987. While working as project manager at Microsoft, she also volunteered her time at a Seattle high school. On the eve of French and Gates's marriage, Gates's mother read the couple a letter that seemed to prod them to consider what to do with their plenty. As paraphrased in an article in the New York Times Magazine (April 16, 2000), it read, "From those who are given great resources, great things are expected." The magazine also went on to claim that French was the instigator in the move toward building the Gates Foundation.

Administering Several Foundations in the Middle to Late 1990s

The William H. Gates Foundation began with an endowment of $106 million. Gates's father, who had retired from his law firm, volunteered to run the organization. Though active in local charity works, Gates, Sr., had no actual background in running a foundation. Although Gates was urged to hire someone with a professional background in charitable giving, the Gates Foundation continued to be overseen by Gates, Sr., Bill, and Melinda, and since 1997, former Microsoft executive Patty Stonesifer. Over its first several years, Bill and Melinda Gates added about $2 billion to the foundation. Some of its first projects were oriented to the Seattle and Pacific Northwest area. The Gates Foundation contributed $2 million to the Seattle Area YMCA, $20 million to the Seattle Public Library, and $1 million to the Tacoma Art Museum. Aside from programs that benefited the Northwest, the Gates Foundation also began to target educational programs and issues of global health.

In 1997 the Gateses endowed a separate charitable program, targeting $200 million for the Gates Library Foundation. The object of this charity was to overcome the so-called digital divide, where wealthier people had access to technology and information and poorer people did not. The Library Foundation planned to bring computers to poor and underserved public libraries across the country. The Library Foundation not only provided the computers, but also furnished Internet access and gave training and technical support to librarians. While both Gates Foundations were run by a very small staff, the library initiative required a flock of hundreds of paid technicians to do the installation and training across the United States and Canada. Patty Stonesifer, an old friend and coworker of Bill and Melinda, ran the library program. Over the next three years, the library initiative installed more than 22,000 computers in roughly 4,500 libraries in the United States. An additional 1,400 libraries in Canada were provided with some 4,000 computers total. The library program was expected to take until 2005 to serve all the needy North American libraries. After that, the foundation expected to expand the program to libraries worldwide.

Gates and his wife both had a consuming interest in computers and technology, given their work for Microsoft. A program like the library initiative seemed a natural place to spend a fortune made in software. But the Gateses became aware that simply giving people technology was not always effective charity. Gates recounted to the New York Times Magazine a trip he took to South Africa in the mid-1990s. Inhabitants of a poor ghetto eagerly showed the Microsoft billionaire the town's only computer. Gates noticed that the town also had only a single electrical outlet. Gates told the magazine, "I looked around and thought, Hmmm, computers may not be the highest priority in this particular place." Gates and his family members began researching other areas where the Gates Foundation might make a difference. In the late 1990s, the Gates Foundation began funding a variety of healthcare programs designed to improve conditions in the developing world. This was an area where money was sadly lacking, due to market forces. Pharmaceutical companies had little incentive to spend research and development funds on Third World diseases such as malaria. Despite the vast numbers of people affected by malaria (about 200 million yearly), drug companies could not expect to make a profit from customers in the world's poorest nations. Thus the amount spent on vaccine development was fairly low. Worldwide spending on malaria vaccine research in the mid-1990s was about $60 million. In 1999 the Gates Foundation funded a $50 million Malaria Vaccine Initiative, making it the single biggest backer of malaria research. The Gates Foundation also funded a $100 million Children's Vaccine Program. This was to distribute vaccines in the Third World that were already commonly in use in the developed world. The vaccine program would buy and distribute vaccines for common childhood diseases such as tetanus, polio, whooping cough, diptheria, and measles in countries where existing healthcare programs were inadequate.

The Gates Foundation also funded research on a vaccine for AIDS. Seventy percent of AIDS sufferers were in sub-Saharan Africa, in poor countries where drug companies did not expect much return on their research investment. At the international AIDS conference in 1998, the Gates Foundation announced an initial gift of $1.5 million for its International AIDS Vaccine Initiative. The Gates gift promptly attracted other donations, one from the British government and one from the Elton John Foundation. The Gates Foundation increased its AIDS vaccine funding to $25 million the next year. The AIDS initiative targeted promising research, and helped drug manufacturers speed the work to clinical trials. In exchange for funding research, the Gates Foundation expected the pharmaceutical companies to provide resulting drugs or vaccine at low cost to developing countries. The AIDS Vaccine Initiative left the drug companies free to charge what they wanted for their new products in the United States, where there was some hope of profit. AIDS researchers agreed that the search for a vaccine seemed very difficult because of the peculiar nature of the AIDS virus. The Gates Foundation was able to provide money to researchers much more quickly than other organizations like the National Institutes of Health, and so gave needed momentum to a difficult project. The Gates Foundation gave money to other, similar healthcare projects as well. It funded work to detect and cure cervical cancer in 1999, giving $50 million to an existing network of care providers in Africa. The foundation's total spending on global health initiatives was estimated at around $400 million annually by 2000.

The Gates Foundation also was interested in helping disadvantaged students in the United States and elsewhere get access to quality education. In February 1999 the Gateses endowed a new foundation, the Gates Learning Foundation. Like the Gates Library Foundation, the Learning Foundation aimed to bridge the digital divide, providing access to technology for people who otherwise might not be exposed to it. With $1 billion, the foundation announced that it would provide college scholarships to 20,000 minority students over the next two decades. The foundation ran its Millennium Scholars Program through the United Negro College Fund, the Hispanic Scholarship Fund, and the American Indian College Fund. To be eligible, students had to be enrolled in a four-year college program and studying within certain specified fields. The winners received a grant to cover the difference between their financial aid package and the actual cost of their college education, including housing and books. The first winners for the program were picked in 2000. That year, the foundation also announced a similar scholarship program, to pay for graduate study at the University of Cambridge in England. The $210 million fund was intended primarily for students from developing countries.

Consolidation into One Foundation in 1999

By 1999, the Gates fortune was spread between three foundations: the William H. Gates Foundation, begun in 1994, the Gates Library Foundation, and the Gates Learning Foundation. These three had overlapping goals of providing opportunities for healthcare and education. In August 1999, the three foundations were folded into one, under the name the Bill & Melinda Gates Foundation. The foundation moved into a new building in Seattle, leaving the elder Mr. Gates's basement at last. Gates and his wife also stepped up the rate they gave to their foundation, infusing quarterly chunks of $5 billion and $6 billion at a time. In October 1999 it had assets of $17.1 billion, which made it the richest endowed foundation in the world. A year later, its endowment had reached $21.8 billion. According to Time magazine (July 24, 2000), Bill Gates had given "more money away faster than anyone else in history." Its largest programs were the $1 billion Millennium Scholarship Program, the $750 million grant to the Global Alliance for Vaccines and Immunization, and $350 million earmarked for teachers and schools in the United States for a variety of educational improvements. Even its smaller grants were huge, such as the $50 million for malaria vaccine research, another $50 million for groups working for the worldwide eradication of polio, and $25 million for a group fighting tuberculosis worldwide. Most of the Gates Foundation's projects were long-term, with results not expected for years, or even decades. So by 2001 it was still too early to see concrete results, such as the actual development of a successful AIDS vaccine. Yet in the few short years of its existence, the Gates Foundation had already had a marked impact, putting millions of dollars into areas that might otherwise have received little attention.

Principal Competitors: The Wellcome Trust; David and Lucile Packard Foundation; Carnegie Corp. of New York.

Further Reading:

  • "The Art of Giving," Business Week, October 25, 1999, p. 80.
  • Cantrell, John, "Father Gives Best," Town & Country, December 1999, p. 210.
  • "Giving Billions Isn't Easy," Time, July 24, 2000, pp. 52--53.
  • Hardy, Quentin, "The World's Richest Donors," Forbes, May 1, 2000, p. 114.
  • Lewin, Tamar, "Gates Foundation Names 4,100 Minority Scholarships in 2-Decade Program," New York Times, June 9, 2000, p. C10.
  • Reis, George R., "U.S. Philanthropy Boosted by High-Tech Billions," Fund Raising Management, August 1999, p. 5.
  • Strouse, Jean, "How to Give Away $21.8 Billion," New York Times Magazine, April 16, 2000, pp. 56+.
  • Tice, Carol, "Gates Fund Earning Nonprofits' Respect," Puget Sound Business Journal, February 16, 2001, p. 13.
  • Waldhole, Michael, "Group Pledges $150 Million in Bid to Boost Children's Vaccinations," Wall Street Journal, September 21, 2000, p. B2.

Source: International Directory of Company Histories, Vol. 41. St. James Press, 2001.