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Diversifying Your Funding Stream

by Kieran McTague

Senior Vice President and Director, New York, Principal

Posted August 1, 2019

The Why and How of Increasing Corporate & Foundation Giving at Small Shop Nonprofits

For the first time in at least 50 years, individual giving is contributing to less than 70% of overall giving in the U.S., according to the recently released Giving USA 2018 Report. Many believe the percentage of individual giving may continue to drop in the coming years as we experience the full effects of the revised charitable giving tax codes. At the same time, from 2017 to 2018, giving by corporations increased 5.4% and by foundations 7.3%. Now naturally, numbers will shift over time, and there’s no guarantee that individual giving will continue to decline as giving by corporations and foundations increases. Nonetheless, a diversified funding stream is important in the same way that a diversified investment portfolio is critical to hedge against unforeseen changes in the financial markets.

So, if, for instance, your small shop organization is heavily reliant on individual giving and has not explored the potential of initiating or increasing opportunities for corporate and foundation support, consider testing the waters regarding those funding areas with the following strategies…

Make the Right Pitch

What corporations/foundations have a giving focus that matches your programmatic strengths and geographic focus? Utilize resources like the Foundation Directory and GuideStar to research those corporations and foundations with funding interests that align with the right aspects of your mission and programs. Focus on funders that have supported organizations with similar characteristics to yours, but when developing proposals or letters of inquiry, communicate the ways you distinguish the work your organization does from those other nonprofits (e.g. impact, constituency served, etc.). Such an approach is more likely to result in funding (as opposed, to just pitching your work and hoping they connect to the mission/program). Furthermore, not only have corporations and foundations increased their level of overall philanthropic support, they have become progressively more flexible with their funding, allowing for more unrestricted, capacity building, and budget relief support.  

Consider, for instance, our client The Yard, a contemporary artist residency, performance, and education center serving Martha’s Vineyard and beyond. The Barr Foundation has become a major multi-year funder of The Yard in support of its service to Martha Vineyard residents and the regional dance community with year-round arts programming and public engagement. This funding includes support for operational and staff development and capital expansion. The Yard has been able to leverage its relationship with and support from Barr to engage additional foundations and individual donors as it expands its philanthropic footprint. 

Connect the Dots

Rather than submitting a blind proposal, communicate within your organization to determine if you have constituents who can provide intel or make an introduction to a specific foundation or organization. Develop a list of board members, senior leadership, program contacts, and past or current funding recipients from those institutional funders and communicate this information to your board, volunteers and staff for potential connections.

Five years ago, a client of ours with a focus on educational training and advocacy secured less than 20% of their unrestricted funding from corporations and foundations. Now more than 50% of their unrestricted funding comes from corporations and foundations. This growth happened due to a number of initiatives, but a key component was their commitment to research and a strategic utilization of constituent contacts for introductions and exposure. 

• • •

Now the practice described above is neither new nor innovative. It is, however, timely given the recent surge in corporate and foundation funding and the need for most nonprofits to continually diversify their funding streams. It is also a good exercise to strengthen your case for support through the discipline of understanding what institutional funders require (which is, of course, also important to many individual prospects) and measuring your success rate in a competitive environment.

The takeaway? Individual giving will likely always make up the majority of philanthropic support in the nonprofit sector; however, diversifying your organization’s philanthropic revenue stream is not just financially prudent – it can also create opportunities for more significant and sustainable funding partners going forward.           

Development Guild provides fundraising and campaign counsel services to ambitious organizations across the nonprofit spectrum. Learn more about our nonprofit fundraising services.

 

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