There are five types of funding available, which one should you pursue?
The funding ecosystem in India is changing drastically. International donors who once supported new and underserved thematic areas are being asked to roll back their programmes, domestic donors are getting more focussed on specific thematic and geographic areas that may change over time, there is a stronger emphasis on demonstrated scale ability, and meticulous tracking of impact metrics is more important than ever. All this is in addition to the backlash being faced by nonprofits and the changes to the FCRA rules.
Needless to say, there is an urgent need for nonprofits to diversify their domestic sources of funding. In our experience of working with nonprofits for 20 years, we’ve seen that nonprofits are usually good at convincing donors to initially support their programmes, but when that first three- or five-year grant comes to an end, they find themselves struggling.
The need for a diversified fundraising strategy
There is a need for organisations to think about fundraising, not as something that helps them find money to implement a programme, but instead as a strategic function that will allow them to do much more. For example, it can help them become independent, innovate, create financial reserves, and build a community of like-minded supporters.
So what can nonprofits do to move towards creating a diversified funding pipeline? Start by understanding the five kinds of funding and the resources that each of them requires:
1. Institutional funding
What it is: These grants are typically made by philanthropic foundations and trusts. They often have some kind of thematic focus under which they seek projects. They add huge value to deepen or expand specific programmes, are usually for a period between three to five years, and could cover the cost of the entire project.
What you need: To effectively fundraise for and execute on an institutional grant, a nonprofit would need a project proposal writer who understands their programme very well. Having a dedicated resource to do this would allow organisations to:
- Map relevant domestic and international opportunities and apply to them in a timely manner.
- Carve out parts of the programme for different grants.
- Have a consistent point of contact for all donors.
- Ensure that reporting is done on time and that donors are regularly updated on key milestones.
An interesting initiative called Tamuku offers a service where they curate institutional funding opportunities, amongst other forms of support, and send these to subscribers.
2. CSR funding
What it is: This is usually in shorter bursts (one year) and is programme/theme focussed. Often, this funding has a specific focus area and prefers projects that are centred around service delivery.
What you need: To find the right companies to approach for CSR funding, nonprofits need to map out the landscape of corporations and the sectors that they typically support. This can either be outsourced or done via board members/corporate friends who are well networked.
If your organisation is looking to branch into CSR funding, it’s useful to keep the following in mind:
- CSR funding works well for programmes (or programme aspects) that are flexible in terms of geography.
- Corporates like being able to offer their team members volunteering opportunities.
- They are favourable towards programmes that can demonstrate, very simply, the change made at an individual/on ground level.
- A lot of corporates like to set up programmes in the vicinity of their own site offices or factories. Alternatively, they like programmes that can benefit the people working in these offices and factories.
3. Grants from high networth individuals (HNIs) and philanthropists
What it is: This kind of funding takes the form of a medium-sized or large donation made by an individual who is convinced about the cause, the project, and the people involved.
What you need: The key role here is to map HNIs (preferably, offline via referrals), understand their interests and funding priorities, and try and get a meeting with them. Building trust and forging a deep relationship is time consuming but once it’s done, these funders could be convinced to fund something innovative and risky, the development of new systems, and the salaries of non-project staff.
Importantly, cultivating relationships with HNIs needs to be done by the head of the organisation with the support of someone who has excellent people skills and a deep understanding of the programme.
4. Retail fundraising
What it is: This usually takes the form of small sums (INR 500-1000) of money from large numbers of people, on a regular basis. It is done by speaking to several people a day (on the street, via text, phone call or Zoom) and convincing them to join your community of givers. The most valuable aspect of this type of fundraising is that the money raised is unrestricted – it is not tied to an activity or project.
What you need: This kind of fundraising is resource heavy. You would need:
- A trained fundraising team that can reach out to potential donors and effectively retain existing ones, on a monthly basis.
- A data analytics team to trawl through information and identify how to improve the acquisition and retention of donors.
Most nonprofits start out by outsourcing this work. Then, once they have learned how to carry out these functions, they can choose to build it out in-house. The size of the team needed depends on the money you have to invest. For example, an organisation like Greenpeace would have about 10 street fundraisers spread across 5-6 cities, along with a communications and data team to support them.
Given the large investment required, the way to estimate the value of retail fundraising is not through the return on investment but instead, through the Life Time Value (number of donors x average gift size) it provides. While expensive initially, the cost to set up this kind of fundraising is often recovered. In our experience, organisations see exponential growth after a period of three years.
5. Digital fundraising
What it is: These are fundraising strategies that use the digital medium (social media, campaigns through giving websites like Ketto and Milaap, and the organisation website) to raise money. It involves driving traffic through online and offline engagements to the platform on which your ‘Donate’ campaign exists.
What you need: This form of fundraising works if the organisation is able to create campaigns that tell powerful stories and get people to take action. In terms of resources, it usually requires a creative content writer who can write engaging copy and a digital marketing team that can push these messages out on platforms like social media.
Creating a fundraising strategy
When you set out to create strategy for your fundraising, here are some points to keep in mind:
1. Keep your vision in mind: This helps you decide the principles and values that will govern your fundraising efforts. For example, you could choose to keep your programme or campaign independent of powerful political voices, or refrain from partnering with companies/industries that are known to indulge in labour violations. This gives you an indication of the sources of money that would be acceptable and those that would not.
2. Assess programme ambition: This helps map out what budgets over a five-year period would look like. An iterative process, this usually starts with a tall ambition and then tempers it down to suit internal capacities, external context, and what is possible. Doing so will give you a realistic idea of the gaps your fundraising efforts need to fill (given current commitments and future investments.)
3. Consider your fundraising mix: Try and work towards a mix that includes diverse project funding (with programmes divided between donors) as well as a small pool of unrestricted funds.
Additionally, it’s good practice to explore approaching funders that would be ready to invest in the process of fundraising itself.
4. Involve the team: A strong fundraising strategy is one that has the buy-in of the whole organisation, where even programme teams see their role and are able to fail and try again.
This article was originally published on India Development Review.
Views expressed above are the author’s own.
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