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Fundraising Tactics for Nonprofits
04.05.11

 

This past weekend I was in Colorado at a fundraiser for a non-profit that I'm friendly with, First Descents [link]. I've gotten to know First Descents over the past 6 months or so and have been very impressed. They've got a great cause (helping young adults with cancer through outdoor / adventure therapy like kayaking and rock climbing), it's a well-run organization, and unlike most non-profits I know, they seem to have a great handle on their finances. I have some suspicion that their board members aggressively help them raise funds, secure in-kind donations, and also serve as a source for specific projects. Hard to beat.
 
This fundraiser (their annual event) was quite impressive. They ended up raising probably on the order of $400K or so -- which is a great haul for a small to medium sized nonprofit. Events are a really interesting tactic for non-profits and I thought I would cover off a little more on the different tactics non-profits use and some thoughts on them.
 
1. Events
 
Let's start with this -- here are some of the amounts I've seen/heard events gross: $30K, $75K, $250K, and $400K. Obviously the Robin Hoods (and smaller orgs like Tipping Point which is modeled on them) gross in the millions. They're a lot of work, but they can make an annual budget in one shot. It seems the breakdown of these events are as follows:
 
a) ticket price
 
b) silent / live / online auction
I have a lot of thoughts on these types of auctions and the items that are most meaningful. Just as an example -- a lot of the items I see are for very tangible goods that start at a lower price. A trip. A rug. etc. These are goods you can buy in the real world and now you're bidding at them at an auction -- however, I think psychologically, you're sort of bidding for the non-profit but in reality, you're bidding because it's a bargain. This is one of the reasons it's rare to see this type of item surpass retail price. Another reason I broadly don't like the silent/live portion is because when I see non-profits put items up online -- the $ amounts can go through the roof. It's just a numbers game when it comes to auctions -- more bidders means higher $. Of course, you need some in the actual venue -- but you don't need all of them. (and you can also let the people in the actual venue bid online too.)
 
Another thought on this --  I have a preference for hard to price items. For instance, lunch with [         ] -- this could be a celebrity or someone with functional expertise. (The most famous example of this is how a lunch with Warren Buffett now costs over $1MM -- all benefitting Glide, I believe.) Even something like an autographed script of the pilot for "30 Rock" -- that's relatively hard to price. Very few, if any, of those floating around -- and I wouldn't be surprised for a couple of bidders to really get into it for an item that has particular emotional value and relatively unique.
 
c) pledges -- fairly straightforward but shockingly effective. Tons and tons of pledges at the First Descents ball. Of course, they have a very easy to understand cost structure. $1,000 sends a young adult with cancer to camp for a week. So every increment of that gets X number. $15K opens an entire camp. Easy to wrap one's arms around. Reminds me actually of Smile Train or Wheelchair Foundation who also make it very easy to understand how much X buys.
 
2. Grants
 
I don't have a lot of experience with grants -- or at least not a lot of positive experience. Most of the non-profits I know view grants as this elusive source of funding that they never successfully hit -- writing lots of them and getting few. However, at this non-profit breakfast I was at the other day, I met the ED of a very successful education-related non-profit who raises almost their entire budget via grants. That's their strategy and they made it their mission to get grants. It took them a couple of years to get going, but once they did, they did really well. Of course, once you get 1 or 2 initial grants with some name behind them, then it's much easier to get subsequent grants.
 
3. Donors
 
My one thought on donors is that I've seen few non-profits actually do a really good job cultivating and growing their donor base. There's a handful of pieces of analysis / cultivation I think non-profits should do that I broadly don't see:
 
a) donor segmentation -- this is basically taking the donor base and figuring out what the tiers of donors are (e.g. <$50, $50-$250, $250-$1000, $1000-$5000, $5000+)
 
b) donor cultivation -- this is trying to move donors from one tier to the next and the marketing associated with them. <$50 is basically email. $50-$250 maybe something in the mail? $5000+ should be direct contact with the ED -- but more importantly, a very deep understanding in terms of why they support and if there are leadership type gifts out there that would get them to support even more. This is like sales strategy.
 
c) donor analysis -- pretty straightforward, but just running the numbers. Are there geographic regions where donations are concentrated? Are there particular affinity groups where donations are concentrated? Basically looking at the donor base, understanding what pieces of data are available, and then figuring out if there are trends, signs, or whatever else that the organization can leverage to grow the base.
 
I'm sure there are some non-profits out there that do a really good job in terms of donors. Not to be overly critical -- but I basically don't know any of them. The best place I've seen in terms of raising funds via donors is Princeton University -- hands down. They have one of the highest alumni giving rates in the world and it's because they invest significantly in development and are very thoughtful about how they approach it. I don't know why more non-profits don't do this work in terms of donors. The obvious answer is they don't have the right internal resources to handle it -- a lot of (great) non-profits I know are very understaffed in terms of development. I think there's some natural bias against development (i.e. how can we pay someone to raise money when we can use that same money for programs?) and I think there's also a lack of expertise in terms of development. Princeton, after all, has been doing it for hundreds of years and has a large staff in terms of collective expertise to draw upon.
 
On a slightly separate note, another model that I've seen which is interesting is the Tipping Point model. Basically, the board funds all operations and donors then donate knowing that every dollar goes directly to programs and, in the case of Tipping Point, that money gets redistributed out to non-profits they like. Tipping Point's value proposition is they parachute in consultants / technical resources to help the non-profits best leverage their new source of funds and to scale generally.
 
There also has to be some non-profits that raise a non-negligible source of their funds by doing business (i.e. selling goods/services for a profit.) The only one I really know that does this is Delancey Street (I've used both their moving services and visited their restaurant -- I've had great experiences with both.) They've built a very large non-profit partially based on this model -- I don't know the #s behind it, but it's great to see someone out there taking care of their finances by using traditional business models.
 
The core of this post is not a survey around fundraising tactics for nonprofits. But it's rather around the question of what, at least in my mind, makes a great non-profit? One of the big factors for me is they have the money question figured out to a large extent. Obviously non-profits always want and need more money, but a non-profit (or anyone or any company) simply can't think straight if every conversation is dominated by, "How are we going to raise more money?" So whether it's by events, grants, donors, or some combination -- a non-profit is no different than a startup. They have to figure out the $ question sooner or later if they want to grow and be great.

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