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“Fundraising is more heart than science. Relationships trump everything. It really is about not just finding the right fit with a funder, but thinking about what assets you can bring to strengthen that relationship.”
– Alex Bernadotte, Founder & CEO, Beyond 12
Fundraising can feel like a black box. Yet, even with all of its unknowns, awkwardness, and challenges, nonprofit fundraising matters. A lot. Especially in the beginning. Tech nonprofit revenue is often structured like a media company. The customer using your product is typically not the customer paying for your product. In addition to finding product-market fit with your customers, you also need to find product-market fit with donors. Welcome to the world of tech nonprofit fundraising! Let us be your guide.
The Nonprofit Fundraising Spaghetti Method
When you’re getting started, the truth is that you won’t know who is going to fund your product. Therefore, you have to ask every type of donor, also known as the spaghetti method (you know – throw it against the wall and see if it sticks). In the words of master fundraiser Evan Marwell, Founder and CEO of EducationSuperHighway: “Fundraising is a numbers game. You gotta knock on enough doors, because you don’t know which door is going to open.” It takes work and a lot of tries to find the funding relationships that are successful.
A good place to start is with a donor or funder who has a problem themselves that your organization is uniquely positioned to solve. For example, let’s say your organization has thousands of global digital volunteer opportunities. That’s an opportunity you can “sell.” In this case, it would be wise to focus your fundraising efforts on corporations with a global workforce eager for employee engagement opportunities. Or say your tech nonprofit works in a public system like juvenile court, focusing your fundraising efforts on foundations that have a track record of funding technology in justice court systems is a smart path to pursue.
Before you find perfect product-market fit with funders, you need money to get started. Open calls like accelerators, prizes, fellowships, contests, and RFPs (requests for proposals) are great opportunities to get resources in the door while you’re building out a donor strategy.
Types of Funding Sources
Private foundations usually have funding from a single source, like a family or a corporation. Private Foundations do not (typically) fundraise. They grant funding to nonprofits working almost anywhere on any and all issues. Corporate foundation grants are generally distributed through Corporate Social Responsibility (CSR) department budgets, marketing budgets, human resource budgets or a company’s foundation. Follow a private foundation’s Twitter profile or email newsletter to stay in the know about new opportunities.
Public foundations include community and/or issue-based foundations. Public foundations have to raise money every year, as they aren’t endowed by a singular source. Usually distributed annually, the rigor of these grant applications span a wide range.
Governments are a big nonprofit fundraising bucket. This includes funding opportunities from government organizations ranging from school districts to health and human services departments. Depending on your issue area, keep an eye out for ways to partner with government agencies.
In-kind donations are donations of a particular product or service, rather than funding. Think: access to a CRM (customer relationship management) software or space for an event.
Matching grants are when donors, foundations, and/or companies offer a “match” to donations made by employees. These matches are most commonly 2:1, but they can go as high as the donor wishes. If the match is coming through a company, employees usually have to submit paperwork to HR, and then like magic, you receive double the donation! A gem in the nonprofit fundraising space.
Individual donations range in monetary amounts. You should always have a way for individuals to give, regardless of the amount, and a system set up to provide them with a formal donation acknowledgement letter. This will include a statement declaring your nonprofit’s tax-exempt status, the donor’s name, the donation amount, the donation date, and a description of the purpose of the donation. When a donation is bigger – or over $5K – these are referred to as major gifts.
Crowdfunding is a form of nonprofit fundraising that rallies friends and family (and – if you’re doing it right – their networks!) to support your mission. Crowdfunding enables you to set a targeted goal and leverage creative storytelling to persuade supporters to join your cause.
Earned Revenue is a stream of income your tech nonprofit receives for providing goods and services. More on this in Chapter 14: Sustainability: Partnerships & Revenue.
Do Your Research
Now it’s time to put on your research goggles. There’s a whole world of possible funders out there who may be interested in your model – and it’s your job to find them.
Make a Nonprofit Fundraising Plan
Ready to take action and start your nonprofit fundraising journey? Here’s a four-step game plan to get you started:
- Make a plan. How much is this thing going to cost? Start by building out a financial model. This will help you strategically think through the costs associated with your venture, and enable you to plug in different scenarios. Luckily, we created a financial modeling template for you.
- Map your network. Who are you connected to within one or two degrees of separation that could give you money to work on this? These contacts could be individual donors, friends who work at companies with foundations or CSR departments, or a former colleague who knows someone that works at a foundation. You get the idea – no one is off the table. You are going to ask a lot of people to invest in your vision. For all the donors you plan to court, you need to be able to answer the following questions:
- What do they get out of funding you instead of another great organization?
- What is their typical range of funding?
- What is their disbursement timeline? Plan your ask around the date their fiscal year or giving season starts.
- What is the best approach to connecting with this person? An introduction from a shared connection is often a great place to start.
- Implement a donor tracking system. In the beginning, your donor tracking system could be a spreadsheet to keep track of your research and communication with possible funders and supporters. Keep all potential donors and their contact information in this pipeline. Soon, it should become a CRM system. Prioritize this. Connect your CRM system to your email system so all correspondence with a donor is tracked automatically. Nonprofits live and die by their donor pipelines.
- Create a donor communications calendar. This will enable you to stay on track of – and personalize – communications. Donors rarely (really, really rarely) give sight unseen. Remember – people give to people. The funder is going to need to meet you and like you and what you’re building in order to give you a significant amount of money. Help funders get to know you. As you communicate with donors, add timing to aim for in terms of a next touch point and/or deliverable with the donor.
The rule of thumb is seven touches to an ask. What we mean by that is that it’s important to communicate regularly without an ask on the agenda. This includes sharing updates, asking for in-person meetings to get advice, set up quarterly “investor” calls, invitations to events, article sharing, etc. Even if you are dealing with a high-net worth donor who only has time for a single meeting, keep the communication cadence up with their staff. The starting line for touches is with the gatekeepers.
Get a Meeting
They say that luck is when preparation meets opportunity. We say the same goes for how to get a meeting with a possible donor. When it comes to getting a meeting, warm intros trump cold outreaches. Do some LinkedIn sleuthing and see if you know someone who knows someone who might be able to introduce you to the person you want to meet with.
Great! You’ve scheduled a meeting! Now, make sure to abide by these rules of etiquette:
- If you are asking for help, the other person should get to choose the time. Never, (we repeat) never send a donor a link to a virtual appointment calendar without checking with the donor first.
- Once the individual has chosen the time, send over a calendar invite. Make it easy for the donor to meet with you.
- Before the meeting, research the landscape and latest news on the person and/or institution with which you’re meeting. You should know things like: what are their current initiatives? Have they had any issues in the news they’re trying to recover from? Have they recently announced a new grantee or grant round?
- Always be early. At least 10 minutes.
- Dress a little bit nicer than expected. Business casual is always a good route.
- Show that you’ve done your homework. An easy way to do this is by referencing any shared connections.
- If they offer you food or drinks, follow their lead. You definitely don’t want to be pitching with your mouth full. Remember that this is not a typical coffee meeting or lunch date – you need to be putting your best foot forward.
- Don’t forget to bring a photo ID if you’re meeting in a large office building (this is often required by security) and printed materials you can leave behind. Consider materials like a business card, your impact report from the previous year, a flyer or brochure from a recent event, etc.
- Respectfully make the ask. More in the Make the Ask section below.
- Send a thank you note within 24 hours of the meeting. Personalize it. Highlight something you learned in the meeting and, if appropriate, outline what was discussed and any follow up items.
In terms of getting the other person to engage, it’s key to remember that humans become interested when we’re the ones talking. Not the other way around. Make your goal to get the other person talking and you will shift the engagement level in the room. Along those same lines, position the thing you’re trying to “sell” in terms of what the other person wants to fund. How do you do this? By listening. People will tell you what they’re looking for – it’s up to you to hear them. Then, position what you’re selling using the words they used to describe what they want to support.
Pitches, Decks, and Everything in Between
As you’ve gathered by now, if you’re a founder, you’re a fundraiser. What do all fundraisers need in their toolbelt? A few pitches and an arsenal of assets to complement the pitch. Note: you will need different pitches for different types of donors.
The In-Person Pitch
In-person pitches usually happen in spaces like Demo Days or when you’re formally seeking to persuade a funder to jump aboard. The pitch should be sharp and not exceed three minutes – you want to spend the rest of the time in conversation (remember, people get engaged when they are talking).
We’ll get more into the visual and text elements that should go into a deck in the section below, but first, let’s dive into some basic guidelines for the in-person pitch:
The deck should not tell the story for you. Nor should what you’re verbally saying be explicitly written out on the slides. Think of the deck as a visual guide to keep people engaged. As we said, people give to people (read: not your deck).
- When designing the in-person pitch deck, lean on photos, illustrations, and bold text.
- You can have more than one slide per element. You control the clicker!
- During the pitch, be authentic. We’ll say it again – people give to people.
- No notes. The audience needs to see your eyes.
- Something will go wrong. Roll with it. Only you know what was meant to be.
- Practice with your deck. You can do it 10 times in 30 minutes.
Pitch Deck 101
At its core, a deck is a visual aid that helps your audience understand the story you’re telling. Outside of the in-person pitch, you’ll likely be called upon to share your deck in a few other ways:
- The Preview Deck. Depending on the funder, you might use a deck as a preview before a meeting. With a preview deck, it’s important to share highlights, but still leave space for curiosity. By highlights, we mean that you shouldn’t share everything – just enough to leave the funder excited to meet you.
- The Follow-Up Deck. A nice way to tie a pretty ribbon on a meeting is by sending the funder a follow-up deck, which should basically look like a preview deck.
Every deck should have the following elements, tailored based on the presentation:
Take your pick from the following ways to make your audience care: Vision / Story / Hook / The Scene / The Why / A Statistic / Ah-ha Moment
What problem are you seeking to solve? Include the market size and why it matters.
What thing are you bringing into the world? If possible, share a visual aid of the product and features.
Who are they? How do you know they want or need your product? What’s your go-to-market strategy?
Why you? Convince your audience that you (and your team, if applicable) are best poised to solve the problem.
How much are you raising? For what? Don’t forget to end your slide deck with a thank you and your contact information (create a [email protected] email address).
The Most Important Aspect of Nonprofit Fundraising: Make the Ask
Has this ever happened to you? You’ve done everything right: you made a list of potential donors, you captured their contact info, you’ve emailed with them, you got a “get to know you” meeting, you shared your work, you sent a thank you note, and nada, bupkis, radio silence. What did you forget?
You forgot to make the ask. (It’s ok…everyone has made this mistake.)
Nonprofit fundraising is sales. You’ve got to close. And you can’t close without making the ask. The truth is, you are not really fundraising until you are asking for money. We know – it’s hard. But the only way to do it…is to do it. Practice asking. Lay out what your organization is setting out to accomplish and the funds you’ll need to get there.
Phrase the ask like you’re asking this person or organization to join you in partnership – because you are. You are asking a donor to work towards something alongside you.
Types of Funding
As a tech nonprofit, you’ll receive a variety of funding types. Different types of grants afford you different levels of flexibility. It’s crucial to both understand the terms of a grant, and to know when to say no if a grant is asking too much of your time or for you to stray too far from your mission (more on that in the It’s Okay to Say No section below).
The two main types are unrestricted funds and restricted funds. Simply put, one restricts the way you’re allowed to spend the grant, and one does not. Some funders only make restricted donations, while others only make unrestricted donations. Some do both.
Restricted funds are tied to a specific budget line item. It could be a program or person. Restricted funding must be spent on those pre-agreed upon line items.
Unrestricted funds (also known as general support revenue) are gifts that can be applied to your organization’s overall operating expenses without needing to itemize expenditures in your accounting. In general, unrestricted funds are preferable because they give you more flexibility and make your accounting easier. It’s possible to seek unrestricted grants for specific projects or initiatives. In this case, you should write an agreement outlining the work the funds will support and/or utilize an MOU. Even with unrestricted funds, you should be super clear with your funder what the funds will support and what outcomes you will report on at the end of the grant term.
Remember that your budget is an extension of your theory of change. Your budget should clearly demonstrate how each line item contributes to your organization’s mission. Tech nonprofits spend a lot of money on what is sometimes mis-categorized as overhead or administrative expenses, which include things like payroll, contractors, and tech products. Traditionally, funders have a bias towards funding programmatic expenses and initiatives directly impacting your beneficiaries. But for tech nonprofits, where your impact is achieved via the tech you’re scaling, those costs are actually programmatic expenses and should be represented as such.
Gratitude is a Keystone of Nonprofit Fundraising
Fundraising partnerships work best when we operate in service of one another. Expressing gratitude is an important way to embody that attitude. The simplest way to show gratitude is to always send a thank you for the opportunity to meet or connect. In truth, most founders screw this part up. It’s important to send a thank you note within 24 hours of meeting, but ideally the same day.
Helpful tidbits to share in a thank you note are insights gleaned from the meeting. Perhaps it was some idea you walked away thinking about, an extra thought you wanted to share, and the like.
If you owe the person a few follow-ups, don’t let that hold you back from sending a thank you note. Send a prompt thank you along with a recap of what you’ll get to the person and by when. Also, make note of a commitment or follow up that the donor promised. It’s very helpful to have written, time-stamped documentation of what was agreed upon verbally during the meeting. It also confirms that you heard the person correctly and gives the donor a chance to correct any misunderstandings.
When to Hire a Development Director
Almost all early stage founders complain about nonprofit fundraising and want to know how soon they can hire someone to take it off their hands. Hard truth: as a founder, you will always have to do some fundraising. Over time, the types of fundraising tasks owned by the founder will shift, but it never goes away entirely.
Here’s why you won’t want it to go away completely: powerhouse nonprofit fundraising requires strategic thinking. Fundraising deals will often shift product roadmaps, hiring strategy, marketing and communications, and ultimately, impact. As the founder, you should want to lead some of those conversations.
When your organization is over $1M in annual revenue, it may be time to bring in professional nonprofit fundraising support to double the impact of the founder’s fundraising efforts. This person can keep the deals in motion and act as a thought partner on funder strategy. Founders shouldn’t outsource all fundraising strategy. The founder will likely need to participate to initiate deals, get them closed, and provide ongoing external communications.
Professional fundraisers bring in money, so they tend to be expensive hires. In the early days, you may want to contract out some of the fundraising tasks, but not take on a full-time employee. We’ve heard from many founders that it is helpful to hire an office administrator or executive assistant before hiring a development director. This enables the founder to spend time on higher-order fundraising tasks.
Here are the elements of nonprofit fundraising that you can eventually hire for:
- General communications: quarterly updates, thank you notes, etc.
- Grant writing
- CRM management
- Research for pipeline prospects
- Donor meeting scheduling
It’s Okay to Say No
Yes, yes, yes, it’s okay to say no. Here is a list of reasons you should say no to a funding opportunity:
- It’s okay to say no to money that isn’t the right fit for your organization.
- It’s okay to say no to money that would cause your organization to not act in the best interest of your beneficiary. Your priority is your beneficiary.
- It’s okay to say no to money that requires you to do added work outside of the scope of your mission, also known as mission creep. It’s easy to get blinded by the prospect of funding and fall into mission creep, so always ask yourself how the work being funded would support your organization’s theory of change.
- It’s okay to say no if saying yes would mean your organization would have to walk away from work that’s critical for your beneficiaries. You should always weigh out the opportunity cost of new money.
- It’s okay to say no to funders that ask for too much of your time. Time is your most valuable resource and it’s your responsibility to protect your resources. Even well intentioned funders will ask founders to speak at their conferences, attend client or trustee dinners, participate in retreats, and the like. If this is a resource drain for your organization, it’s okay to say no.
- Note to underrepresented founders: it’s okay to say no to funders who feature your face or your work, but give you a fraction of what they give other organizations. It’s okay to request an equitable share.
Some Final Words on Funders
When fundraising, always under-promise and over-deliver. Be realistic about what you can accomplish with the funds within the agreed upon time frame. To that end, whenever you write a proposal, think about the grant report you’ll have to write at the end of the grant term (i.e. one year). When you’re reporting back on your progress on each deliverable, you want to report that you accomplished your goals – or even surpassed them!
It’s important to spend your time and energy on potential funders who seem excited by your work. If it’s clear early on that a funder doesn’t understand your issue area or solution – and isn’t willing to be convinced – don’t waste too much time trying. Put your energy into the prospects who respond to your emails, show up to your events, and ask follow up questions. Delight them!
When you do land a grant, keep in mind that a funder’s job is to collate every important context, impact metric, and story about your organization. It enables funders to advocate for your organization with their boards. Make this easy for them. Provide relevant numbers, stories, photos, etc. Help them tell a great story. The better you are at making their job easier, the more likely you are to continue getting funding.
On that note, funders are people too. Treat them as such. Personalize your communication and be friendly. Understand the needs and priorities of funders before you determine if you fit into them. And remember that funders talk to other funders. If you impress a donor, that donor can become your strongest advocate. If you piss off a donor, that donor will tell their friends. This is especially true for institutional funders; they rely on peer funders for reference checks and that can help or hurt depending on your relationship with that donor. Always behave above board even when it’s painful to do so.
A final word – whenever you feel the pitter-pattering fear of asking for money – which we all feel from time to time – take a beat and move through it. Remember, you’re not asking for money for you. You’re asking to help the beneficiaries you’ve committed to who don’t have the opportunity to ask for this support. Get over it and get the grant!