Why Don’t Foundations Build Capacity in Fundraising?

Article Highlights:

• Nonprofits with more independent funding sources can avoid backseat driving by foundations.
• The problem with foundation money.
• Earned income, corporate support, memberships in grassroots organizations.
• Other examples:
• Still rare.
• So why don’t foundations fund fundraising capacity?
• For funders who want to begin investing in this work, here is how to get started:

Nonprofits with more independent funding sources can avoid backseat driving by foundations.

“The most significant regret I have in looking over my 15 years as a leader of two big philanthropies is that, while we thought a lot about sustainability at the Open Society Foundations and at the Atlantic Philanthropies, we rarely made grants to strengthen organizations’ fundraising.”

So said Gara La Marche in an op-ed in the Chronicle of Philanthropy. (Gara is president of the Democracy Alliance and vice chair of NCRP’s board.)

The problem with foundation money.

The problem, of course, with grassroots organizations relying too heavily on foundation funding is that sometimes foundations and their grantees have different ideas about goals and strategies. When grantees have little independent funding, their hands are tied. If they want the money, they need to work on the issues foundations are willing to fund and employ foundations’ preferred strategies.

Former executive director of the Neighborhood Funders Group Spence Limbocker put it this way: “As long as community groups are totally dependent on grants from foundations and other funders, they will be controlled by the whims of their major supporters and the ups and downs of the stock market. This is why it is important that community organizing groups develop a diversified funding base and that grantmakers support these efforts.” (emphasis added)

Earned income, corporate support, memberships in grassroots organizations.

Limbocker’s article details the work of the Washington Interfaith Network (WIN), an affiliate of the Industrial Areas Foundation, to build an earned-income strategy with a real-estate development company. This income stream has the added benefit of being mission-critical, helping to provide housing options for low-income families.

Other examples:

• National People’s Action (NPA), which recently released a report documenting their early experiments to build a street canvassing operation that will bring in new members and contributors, and they’re helping affiliates ask members and allies for support well beyond basic annual dues.

• The Center for Popular Democracy (CPD) has also been running fundraising experiments with its local partner organizations. Their forthcoming report — which they shared with me — shows both promising success stories and a few failures in memberhsip canvassing efforts. (Full disclosure: I serve as vice chair of CPD’s board.)

• Groups affiliated with the Direct Action and Research Training Center (DART) have been among the least dependent on foundation funding over the past two decades. Many DART affiliates raise the vast majority of their funding from membership dues, individuals, and local corporations. For the network as a whole, 58%of revenue came from non-foundation sources last year – a figure that is quite high for organizations of this kind.

• Organizing groups affiliated with the Gamaliel Foundation raise about 45% of their revenue from non-foundation sources, a combination of membership dues, fundraising events and individual donors.

Still rare.

My inquiries have uncovered only two foundations – the Ford Foundation and the Marguerite Casey Foundation (MCF) – that consistently and systematically invest in building the capacity of community organizing groups to raise money independently.

At Ford, program officer Jee Kim reports that he is investing about one quarter of his portfolio in these fundraising experiments, about 1.5 million per year. “I invest in this work because the future of our democracy and the health of communities depends on having strong, sustainable and independent grassroots power.”

MCF provides multi-year general-support grants to nonprofits to diversify their funding bases, and in a recent survey, almost three-quarters (74%) of grantees agreed that, as a result of MCF’s support, they have done so. In addition MCF funded 18 pilot projects for more than $2.6 million. Grantees tested initiatives including social media campaigns, apps, street canvassing programs and town halls to build membership. Almost across the board they found that low-income families were willing to pay at least a nominal amount to be members, and that an approach that incorporates both face-to-face and online contact is most effective.

So why don’t foundations fund fundraising capacity?

Why don’t more foundations invest in helping their organizing grantees develop independent funding streams? Here – as with many issues grantees face – even a little targeted capacity-building support would go a long way.

Several people I respect have suggested to me privately that foundations don’t actually want their grantees to develop independent funding because foundation staff would then lose some of their power to dictate goals and strategies. I don’t share this view — I think it’s more complicated than that, and that the barriers to investing in this work differ from one foundation to the next. However, funders need to recognize that their failure to help grantees develop financial independence looks to some like a power grab.

For funders who want to begin investing in this work, here is how to get started:

• First, have some conversations with your grantees. It’s important to understand what they are already doing to raise independent money and how it’s been going for them. You also need to know what they’ve been wanting to try but haven’t had the chance to yet.

• Second, make some grants as experiments. You’re trying to learn, and help your grantees learn, what works. Be very cautious of paying for consultants – most fundraising consultants don’t really understand grassroots organizing groups and you’ll just be wasting your money.

• Third, figure out how to help your grantees scale what’s working for them. If one approach is producing results, would investing more in that approach produce even better results? If so, make the investment. We don’t always need to go after something new.

Kudos to the few foundations mentioned above who have invested in this important work. Are there other examples I’ve missed? Please let me know in the comments or via email of foundations that are helping grantees develop independent funding. It’s urgent, important work.

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Editor’s note: We learned that the Evelyn & Walter Haas, Jr. Fund in San Francisco is developing an initiative to support nonprofit fundraising based on what they’ve learned from UnderDeveloped: A National Study of Challenges Facing Nonprofit Fundraising by CompassPoint.

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