A month ago, myself – along with Unfunded List evaluation team members Daniel Karpantschof, Frances Holuba and Candice Cook – co-hosted a session at the Nexus Youth Summit. Our intention was to provide live feedback to several proposals that had been submitted to the Unfunded List over the past several months. At the onset of the session, however, it immediately became apparent that our intentions were quite lofty, as many of our attendees had general questions about the fundraising, fund distribution, and grant proposal process, and we spent the majority of our time answering them.
Overall, it was a very productive and enlightening Q&A. We learned that many aspiring social impact organizations are looking for clear instruction and guidance on how (and how much) various sectors (corporate, government, individuals etc.) distribute funding. It’s clear that at the outset, many new organizations are so focused on developing and dissemenating their mission that they don’t yet have a full grasp on how fundraising distribution is broken down, and how they should go about managing it by sector. In particular, two key points were especially informative for our attendees:
Corporate giving is dead last
This fact generated the biggest surprise reaction of the day. Interestingly enough, many people assume corporations give the most out of any sector. This is far from the truth. Corporations give the least, and it’s not even close according to the official numbers:
- Individuals: $287 billion
- Government: $135.27 billion
- Foundations: $54 billion
- Corporations: $17.77 billion
These numbers put things in perspective for many of the attendees. If any of them had entered the meeting counting on corporate giving accounting for a significant amount of their funding, they quickly adjusted their expectations. Indeed, the success of most nonprofits depends on their ability to raise funds from the top three sources.
An organization must choose between pursuing foundation or government funding, but not both
Obviously, the top of the giving distribution includes individuals. They are an extremely valuable resource for any organization, but require outreach and marketing capacity to reach a wide enough range of individuals to raise a significant amount of funding.
For many young organizations, this leaves proposal-based government and foundation funding as a major source of support. Many are under the impression, however, they that can go after both sources and effectively manage this funding while satisfying requirements for both the government and foundation sector. This is nearly impossible.
Any organization that procures government funding will have to spend the grand majority of their resources satisfying the requirements set out by the government. These requirements are frequently vast and technically complicated, and failure to meet certain reporting standards, or even just failing to have the right licenses and approvals by the right deadlines, can sink your grant.
Of course, in exchange for this byzantine arrangement, organizations will get stable funding for a fixed amount of time. Just don’t expect to also court funding from the Ford Foundation while you are implementing your first big USAID grant.
Overall, we found that aspiring social good organizations can really benefit from gaining this general understanding about how funding is distributed, and how to manage it once you have it, before they get involved in deeper questions about the funding process. This understanding will be key to aligning their mission with the distribution preferences of each sector.