What is Your Funding Strategy?
(Aug. 9, 2011) Can you describe your organization’s funding strategy in one sentence? How about in just two words? Peter Kim at the Bridgespan Group and his colleagues mapped 10 funding strategies of the largest nonprofits in the U.S. Find out how your organization fits into these models so you can better articulate your funding strategy to funders and constituents.
Kim, who will present a session at the Nonprofit Management Institute at Stanford on Sept. 27-28, 2011, co-authored an article in 2009 that outlined these funding strategies. The article continues to be popular on the Stanford Social Innovation Review (SSIR) website because it offers a unique look at the big picture of how organizations get funding. He will unveil his follow-up research at the Institute in September on how nonprofits can apply the models to their own organization.
A Good Match
Here are 10 ways that the largest nonprofits in the U.S. structure their funding. See if your organization is on the right track.
1. Heartfelt Connector – These organizations focus on causes that resonate with the existing concerns of a large number of people, such as in the environmental, international and medical research areas. By reaching out to an ever-larger base of constituents making modest donations (for example less than $50 on average), organizations like the Susan G. Komen foundation hold fundraising events that involve a large number of people in volunteer fundraising for the cause.
2. Beneficiary Builder – Organizations such as hospitals and universities receive reimbursement for services, and then rely on people who have benefited in the past from the services for donations. By building a long-term relationship with the beneficiaries (former patients or alumni) the organization can create supplemental income to further the organization’s mission.
3. Member Motivator – In these organizations, individuals are members of the nonprofit and contribute donations because the organization offers supporting activities for an issue or cause that they already seek out (such as a religious, environmental or arts/cultural organization). Members see a collective and also direct personal benefit from their donations and involvement.
4. Big Bettor – These organizations rely on major grants from a few individuals or foundations for their funding. Often these are medical research or environmental organizations. With a large amount of money invested in the beginning, or with a large infusion of support from a new donor, these organizations grow large and succeed when a huge influx of cash can make a direct and immediate impact. This draws other major donors and creates a sustainable funding model relying on the wealthiest individuals or foundations.
5. Public Provider – Some organizations work with government agencies to provide social services deemed essential, such as housing, human services and education. These organizations contribute to programs to which government has previously defined and allocated funding. A large portion of funding comes from government grants, but the largest organizations have diversified their government funding among federal, state and local sources.
6. Policy Innovator – These nonprofits have developed new methods to address social issues that are not directly in line with existing government funding programs. They have convinced government funders to support alternative methods to addressing social issues by presenting evidence of the program’s effectiveness.
7. Beneficiary Broker – In this model, nonprofits compete with one another to provide government-funded services to beneficiaries. The beneficiaries have a choice as to which organization’s services they wish to use. These organizations cover areas such as housing, employment services, health care and student loans.
8. Resource Recycler – These organizations collect in-kind donations from corporations and individuals and distribute these goods to those in need. They must raise additional funds to support their programs. The majority of these organizations is involved in food, agriculture, medical and nutrition programs and is often international in focus.
9. Market Maker – These organizations generate the majority of funds from fees or donations directly linked to a service that a for-profit company cannot legally sell, such as organ donation and other health/disease related services. Some also operate in the area of environmental protection. These organizations must have a trusted program that people are willing to “buy” into for a service that a for-profit is not able to provide legally or ethically.
10. Local Nationalizer – These organizations have grown large by creating a national network of locally based operations, such as Big Brothers Big Sisters of America. The organizations offer services needed by communities across the nation local governments do not provide. Most of the money is raised locally with individual and corporate donations and special events.
“During tough times it is more important than ever for nonprofit leaders to examine their funding strategy closely and to be disciplined about the way that they raise money,” write Peter Kim, William Foster and Barbara Christiansen in the article Ten Nonprofit Funding Models published in the Stanford Social Innovation Review (Spring 2009).
“The funding paths that nonprofits take will vary, and not all will find models that support large-scale programs. The good news is that all nonprofits can benefit from greater clarity about their most effective funding model, and it is possible for some nonprofits to develop models that raise large amounts of money.”
Peter Kim will present more information on how nonprofits can use funding models to strengthen their own funding at the 2011 Nonprofit Management Institute at Stanford, Sept. 27-28, 2011.