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Giving Circles Provide Opportunities, Challenges for Fundraisers

(March 5, 2007) A new study has found that while giving circles have much to offer charities, in some cases the funding relationships can be uneven and have yet to reach their full potential.

The report, Giving Circles and Fundraising in the New Philanthropy Environment, was based on interviews with 17 leaders of charitable organizations that had received funding from giving circles and looks at the challenges and opportunities that this new type of funding mechanism presents.

The report was developed by Angela M. Eikenberry, Ph.D., an assistant professor at the Center for Public Administration and Policy, School of Public and International Affairs, Virginia Polytechnic Institute and State University in Blacksburg, Va. The research was made possible by a grant from the AFP Foundation for Philanthropy.

Giving circles are groups of like-minded individuals who each contribute a certain amount of money to join the circle. Members then discuss how the pool of money should be used and which charities should be supported, often asking for applications from prospective charities and going on site visits.

Eikenberry also developed a database of giving-circle funding that includes 1,333 grants made to 878 nonprofit (and a few public or quasi-public) organizations o and 160 individuals, given by 116 giving circles. The average gift from a giving circle was $28,781, with gifts ranging from $90 to $715,000.

Types of Giving Circles

Eikenberry identified three different types of giving circles:

  • Small groups, which consist of a small number of people who pool their funds (typically ranging from $50 to $5,000 per member) and then decide together where to give it away. Because the group is small, leadership is often shared and all are able to participate in the decision-making process. The two major foci of small-group giving circles seem to be social and educational activities, with the social aspects often taking precedence.
  • Loose networks, which typically consist of a core group of people who do the ongoing organizing, planning and grant decision making for the group, and then individuals, who may or may not be considered members, branch off from that group, often participating intermittently. “Members” tend to gather around a specific event such as a potluck dinner or other fundraiser. Individual participants can make funding recommendations but typically do not make funding decisions. There is typically no minimum fee to participate and decision making often occurs in an ad hoc fashion in response to the needs of individuals.
  • Formal organizations, which look like a traditional membership organization structure with a board or lead group at the top, committees, members and frequently professional staff support. They are also larger in size than other giving circles and the cost to participate tends to be high compared to small groups and loose networks—the model amount being $5,000 to $5,500. The grant decision-making process typically involves committees or investment teams making grant decisions directly or making recommendations for a full membership vote. There is also a strong emphasis on direct engagement with nonprofit organizations.

Eikenberry’s earlier research revealed that giving circles generally attract younger and female participants (as well as other groups not historically active in organized philanthropy) to the philanthropic table. Also, participation serves to increase levels of giving while bringing “new money” to the nonprofit sector, especially to small and medium-sized organizations. In addition, members are more thoughtful, focused and strategic in their personal giving because of their educational experiences through the giving circle.

Working With Giving Circles

The overall response from the organizations involved in the study was mixed but generally positive. Many felt that giving-circle members were open, had a partnership mentality and were interested in learning about the recipient organization and its needs. Nearly all felt that the added value that the giving circle could bring to a relationship—visibility, a voice, appreciation, connections, volunteers, business and mentors, to name a few—could be instrumental for most organizations.

Others, however, felt that giving circles were not always consistent about their expectations and what was expected in return for funding, and that giving circles were simply not reliable for sustained and long-term funding.

From the study comes a series of lessons learned about how to approach and develop a relationship with a giving circle.

  • In almost every case involved in the study, the giving circle sought out the charity. In most instances, someone in the giving circle already knew about the organization (and sometimes knew someone at the charity) and proposed that the circle fund the charity. Therefore, if nonprofits want to attract giving circle funding, they most focus on networking, building awareness and public relations. Being able to give presentations and facility tours were cited by several participants, and two individuals interviewed were themselves members of giving circles.
  • Because the giving-circle relationship is often new, fundraisers should expect to spend a significant amount of time on developing it. A fundraiser must be able to adjust quickly to a variety of different personalities within the giving circle. In addition, some participants described some giving-circle funding as “too directive,” with members constantly wanting to get involved in different aspects of the charity.
  • Several participants noted that for more formal giving circles sponsored or associated with a host foundation or other organization, there was often a mismatch between the host’s priorities and application process and those of the giving circle. The philosophy of giving circles can sometimes clash with the already established board governance structure of their host organization, making it difficult for recipient organizations to navigate the funding process smoothly.
  • It can be difficult to count on giving-circle funding from year to year, since a circle’s priorities can change quickly depending upon membership and personalities.

The study also provides a number of suggestions for giving circles provided by the interviewees in the study.

About the Study

A copy of the study is available here on the AFP website.

The methodological process involved first updating the giving-circle database created for an earlier study by Eikenberry and creating a new database of grantees that have received funding from giving circles. Information for this new database was obtained from interviews and documents from this earlier study, as well as through a new search for information using the Internet and article search engines.

From the newly created database, a purposefully selected sample of organizations was chosen for in-depth interviewing. The interview sample of 17 charities represented organizations funded by the three types of giving circles—small groups, loose networks and formal organizations—and giving circles of varying identity groups (women-only, young leaders), as well as different organizational budget sizes and fields (i.e. arts, human services, education).

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