Establishing a good foundations program can be daunting, but the initial investment of time and energy pays off in the long run.
My first fundraising job out of college was as a grants manager for a nonprofit with a $2 million/year budget. My marching orders included keeping at least $500,000 in pending grant proposals in the hopper at all times—this was in addition to renewal proposals. While there is some merit to this fast-paced, high-volume approach, I have enough experience now to know that taking the time to build meaningful relationships leads to more success in the long run.
But back then, I had to heed my boss’s goal of raising at least $50K in new foundation grant money each year in order to replace donors lost to natural attrition. Her math checked out: most foundation programs have a 10% success rate, so $500,000 in proposals should lead to $50,000 in new grants. But, that 10% success rate depends on you doing a lot of things correctly. Conduct your research, attempt an introductory phone call or meeting, submit a letter of inquiry, add key foundation contacts to your regular communications and invite lists, follow up politely and persistently, then, huzzah, get invited to submit a proposal! All that work just to eke out a 10% success rate. A good foundations program takes a lot of manpower and launching a new foundations program can be daunting.
Lo and behold, a lot of nonprofits are daunted. I’ve increasingly come across nonprofits who look at that time investment and eschew foundation support for the “quicker” money of major gift solicitation:
“I can talk to five millionaires and get at least three checks in the time it takes me to draft a proposal to a foundation that won’t make a grant decision for another three months!”
True. An individual can be convinced to write a check after one or two meetings, whereas a foundation is likely to make you jump through several logistical hoops before you hurry up and wait for their next board meeting for a final decision.
But here are three reasons not to neglect building a systematic foundations program:
1. Grant money can be an important, sustaining part of your base. The latest Giving USA Report found that foundation giving accounts for 15-20% of total charitable giving in the U.S. This percentage has been slowly increasing over the years, reflecting the growing impact of foundations on philanthropic success. “The Great Wealth Transfer” is estimated to result in $30 to $68 trillion flowing from the baby boomer generation to their heirs over the next few decades, and has no doubt played some part in the increasing amount of foundation giving. If you’re not careful, you risk missing out on the largest
2. Foundations lend credibility to your cause. Foundation support can significantly enhance the credibility of a nonprofit, making it an important aspect of a nonprofit's overall strategy beyond just the financial impact. This credibility boost stems from the thorough evaluation process foundations often undertake before granting support, the signaling effect to other potential funders, and the alignment with established, respected names in the philanthropic sector.
Some foundations go beyond financial support by offering capacity-building services, training, and networking opportunities. This type of support can strengthen the nonprofit's operations, strategy, and impact, further enhancing its credibility in the sector.
3. Foundations are loyal donors. While overall nonprofit donor retention usually hovers around 50%, 75% of foundation donors giving $25K or more renew. So, while it’s challenging to secure that first foundation gift, once you’ve secured it, you’re (more or less) set up for success. As some principled foundations sunset, they won’t take on new grantees but will simply increase their grants to their existing portfolio. Foundations take more initial legwork than your average individual giver but have massive relative returns. Cautionary note: you do have to maintain your foundation relationships and submit any grant reports requested in a timely manner. You would be surprised by how many nonprofits neglect basic reporting! Stand out from the crowd and ensure loyal grantmaking by being grateful and transparent in your reporting.
The amount of time and energy a good foundations program can take might seem intimidating, but you don’t necessarily have to take on the legwork of research, writing, and securing meetings alone. Feel free to email me at whitney@amphil.com so we can talk through how you can spend more time on task talking to foundation executives and board members about what lights them up and makes the world a better place—your mission.