For KKR's Roberts, Failure's One Secret to Great Philanthropy

(Bloomberg) -- George Roberts approaches giving money away the way he made it: by investing in good companies.

The billionaire co-founder of KKR & Co. focuses his philanthropy on supporting businesses that offer training and jobs to people who have trouble getting them, such as former addicts and prisoners.

“So much of giving -- and I’m all for it, I’m not being critical -- is wealthy giving to wealthy,” said Roberts in an interview last week at KKR’s Manhattan headquarters. “Harvard can go raise $9.5 billion. It probably could’ve raised more. Harvard’s a safe bet. People went to school there. People love it because it did something for them. We wanted to do something different. If there’s a true north in someone’s life, it’s the ability to get a job.”

That explains the philosophy behind the Roberts Enterprise Development Fund. The San Francisco-based foundation backs revenue-generating businesses with a clear social mission. Roberts started the organization with his late wife about two decades ago and since then it has helped 27,000 people get jobs. In the last two years, REDF has created 18,000 jobs and the companies it’s backed have earned $180 million in revenue. That money has been reinvested in preparing people for the workforce.

Risk Taking

Roberts, 74, has an estimated net worth of $6 billion, according to the Bloomberg Billionaires Index, and almost all of his fortune comes from profits generated by KKR, the company he co-founded with his cousin Henry Kravis and former partner Jerome Kohlberg in 1976. The firm has participated in some of the largest deals in private equity history. Yet when it comes to philanthropy, his risk-taking hasn’t amounted to the same success, Roberts said.

“The first couple of things we did failed,” he said. Among them was an effort to help homeless women with children get jobs in San Francisco.

Eventually, he went back to what has worked at KKR: investing in companies with capital and operating expertise to help them grow. In the last couple of years, REDF, under the direction of Carla Javits, has taken on a more national focus and now has about 21 companies in its portfolio.

Showing Impact

In Chicago, the foundation has financed Bright Endeavors, a business which helps struggling mothers. The company makes candles that are rented for events like weddings and sold at stores including Whole Foods and CB2. When REDF first invested in it, the business was bringing in $160,000 a year. The foundation helped them adjust pricing, optimize their online presence and introduced them to more buyers. A year and a half later, revenue has quadrupled, according to Javits.

About 60 percent of those coming out of these social enterprises retain their jobs after 18 months, data shows. When they enter the workforce, people can earn about $8 an hour to as much as $45. Aside from increased income, these employees are less dependent on government programs and pay taxes.

“We are leaving a lot of talent sitting on the sidelines,” Javits said, adding that REDF has a goal of helping 50,000 people get jobs by 2020. “We have millions of people who languish on the outskirts of the workforce.”

While there’s growing interest from the government and the private sector in venture philanthropy, it’s still a tough sell.

“I get asked by people, ‘Why are you doing this?’" Roberts said. “It’s like investing. Not everything you do is going to work. But some of the things you do will work, and those that do will have a huge impact.”

--With assistance from Jason Kelly.

To contact the reporter on this story: Heather Perlberg in Washington at hperlberg@bloomberg.net

To contact the editors responsible for this story: Margaret Collins at mcollins45@bloomberg.net, Alan Mirabella

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