Consultant
I would like to introduce Hildy Simmons. Hildy was with the JP Morgan program some years ago. I wanted to thank Clara for helping to design this panel.
Fundraising is probably the best thing to talk about after lunch to keep you awake. We're going to have some questions and have you vote from your seat. Clara will provide an overview of what is happening in this realm and then the panelists will give you a short 5 minutes to share what they are doing.
When they asked me to do this they referred to me as doing an Oprah like program but we don't have a lot in common. In my early life I worked with the NY State Department of Services (which is the prison system). I learned only one thing from Willy Sutton who said, 'go where the money is' and banks are where the money is so I've been in banking ever since.
We're going to ask you a few questions before we begin the presentations.
(For the non-profits in the room)
1. What is your annual level of revenues?
a. Less than $250,000
b. At least $250,000, but less than $500,000
c. At least $500,000, but less than $1 million
d. At least $1 million, but less than $5 million
e. $5 million or more
2. What % does earned income represent of your overall revenues:
a. 5% or less
b. At least 5%, but less than 25%
c. A least 25%, but less than 50%
d. At least 50%, but less than 75%
e. 75% or higher
3. Do you have at least 1 FTE devoted to fundraising/development?
a. Yes
b. No
4. Do you have relationships with individual donors?
a. Yes
b. No
5. Have you ever tried to raise money online?
a. Yes
b. No
(For the funders in the room)
1. Have you ever provided funding to enable a grantee to pursue individual donors?
a. Yes
b. No
2. Have you ever provided funding to enable a grantee to raise money online?
a. Yes
b. No
President, The Nonprofit Finance Fund
Scott had a great fund raising idea. Scott suggested that everyone pass a dollar down to the front and we can then vote for who gets it.
We are a $72m CDFI focused on non-profits. We have a range of financial products beyond loans. NFF Capital Partners is a private placement company.
How is philanthropy changing? What does it need to help non-profits? I was here in 1991 making a presentation at the invitation of Elizabeth Rodriguez. The question then was, 'should social organizations count?' Is it all about red-lining? Non-profits as part of community development is the presentation I did. The relationship between banks and CDCs and charter schools making them livable - that opened up.
The city of NY did a syndicated financing to help us grow. At that time we believed that if we grew we would be more financially stable and that innovation demonstrated at the grass roots would be scaled by government funding - we believed that scale and sustainability were closely aligned and coupled together.
The world right now isn't that. That world is gone. How big do you need to be to be self-sustaining as a CDFI? We thought we needed to be at $10m and we thought that was huge.
There are three trends creating challenges for all of us (funders and non-profits). We're losing the war. There is an increase in the gap between the wealthy and the poor. There is a retreat from government providing basic services and an increase in sub-marginal cost financing. The government was paying 60 to 80 cents on the dollar but now the government is paying 40 to 60 cents on the dollar.
Subsidy based businesses then has tremendous pressures on them. The marginal cost on your business is getting worse.
The third thing is there is a huge rise in the number of foundations and non-profits and that has fragmented the capital markets. As growth occurs you need more capital and the number of units in the source of that capital has gotten smaller.
What is the challenge to non-profits? Growth makes organizations more fragile. In the for profit world if you scale and you don't make it up in volume you go out of business. In the non-profit world you can scale and stay in business even if you lose money on every dollar.
We have a glimmer of hope if we start looking at subsidy as a revenue strategy - with some earned and some raised. The most common subsidy business is fundraising. Since government has reduced pricing the government has become WalMart and is squeezing everyone along the supply chain. We have depended on foundations for filling the gap. It's a fools errand. Foundations are not the answer because it's a fragmented source of supply (between 4-6% of giving in the US). The average grant to a youth serving organization is somewhere near $170,000.
You won't have access to the largest foundations so you have to turn somewhere. The professionals turn to individuals. Harvard is a scaled non-profit and their strategy is to turn to individuals. They have a scaled fund raising effort to wealthy individuals. They have excess fund raising capacity and they have an endowment business, they have a real estate business and they have this school attached to that.
There are a lot of ways to look at revenue strategies. The model that we all use may not be the right model going forward.
If we are going to be affective we have to re-invent the system. Most of the charitable dollars go to serving wealthy and middle income people. It's very tough to touch the generous impulse of individuals - they give for emotional return on investment.
Think revenue strategy - earned and fund raised - but also think of a business that you can imagine as being different. It's like the idea of creating a for-profit subsidiary for every non-profit in the country. We want to open the individual donor market to our world and we want to move beyond these to embrace technology and a collaborative approach and new approaches to service provision.
Senior Associate, Nonprofit Sector Philanthropy Program, The Aspen Institute
I work on a project called the community giving resource. It is a partnership between institutional funders (neighborhood funding organizations) and the Aspen Institute. This was formed because of the big changes that are coming soon. $6 trillion dollars are going to be moved into new philanthropy organizations.
How can we make sure that those dollars are going to low and moderate income communities?
From 1998 to 2002 - 14,000 new foundations with small amounts of assets were founded. From 1990 to 2002 we went from 32,000 to 64,000 total foundations.
Donor advised funds (created by an individual within a fund) have sky rocketed to 67,000 funds.
There are giving circles - lots of them - and they represent about $44m per year.
The community giving resource was started to move funds to CDFI or CDCs or community giving organizations.
What we have learned about individual donors is that there is not a lot of content out there for them.
We thought we would just be a match maker. There are organizations helping people one on one and with tax and legal issues and with setting up a donation but not a lot of people helping them think about strategy. Confidence is a big issue with these folks. We asked if they were giving in low income communities and if not, why not? The barriers that came up is - it's poverty, it's too huge, it's government's job, or it's just so overwhelming.
We designed the community giving resource to be content. We don't tell people how to set up organizations. We want to explain the programs that are going on that help people get jobs, get housing, etc.
Out of our conversations the project emerged. We are starting to spread the word among donors and making the resources we have current and top of the line so that donors can see they can give and make a difference.
The key thing to remember - these donors give locally in their own community (70% give locally). If you invest in a relationship with an individual donor that relationship will last a long time. We want a group of donors that are engaged in the non-profit sector and in the community.
Board Chairman, Network for Good
Will the people or organizations that have not done any fundraising online please stand up. If you have a web site you should be fundraising online.
We have 50 to 60million people that have been trained to give online. Network for Good is an opportunity for individuals to have the ability to give to any purpose they want. The other half of our business is helping non-profits develop strategies for online fund raising.
The pyramid is actually stable. Everyone went after the people with the big money. We now have the ability to focus on raising money by using the internet to fund raise from individuals. My advice to you is, capture email addresses and get one of those buttons on your web site. Even if you don't know what to do with this yet capture it anyway. You don't have to have anything special to send an email. Write a simple paragraph and tell people about what you are doing.
Director, Domini Global Giving Fund, Domini Social Investments
I'm representing the Domini Global Giving Fund. The Domini Foundation is a new foundation. It's a donor advised fund created in partnership with the United Nations Foundation to help improve children's health and preserve the environment.
The partnership is a unique innovation in donor advised funds because it supports UN agency programs. We are setting up a long term funding source for these agency programs. When you set up a donor advised fund you are setting up a funding source for the long term.
Director of Content/Director of Community Finance, CircleLending
Circle Lending documents and services loans between relatives and friends. This was launched about 6 years ago. There is about $89billion outstanding in loans between family and friends at any one time. The default rate on those loans is 14% and we found that if you put together a promissory note and a contract you drop the default rate to 4%. We also do some business loans and inter-family mortgages, etc.
We just exceeded $100m loan volume. Our average loan size is about $30,000. The interest rate is about 7% between non-relatives and 4% between relatives. As an organization we are pursuing marketing and partnerships. We're trying to sell a service that people make decisions about around the kitchen table. We've paid a lot for key words on search engines. Words like promissory note. We also have financial guides for setting up private loans.
The other piece is partnerships. For us to reach the number of customers we need to reach we need to work with people that are already in front of these customers. We have a partnership with SCORE. We have a logo on their web site and they have a logo on ours.
We have a book out available on Amazon about how to raise capital from people you know. We did that with NOLO Press - the legal publishing company.
I hope that you have some food for thought. I'll ask the panelists some questions and turn to you after that.
Let's go back to the issue of raising money from individual donors. Is there anyone that shouldn't raise money from individual donors?
Clara: You have to realize it's a separate business. It's not the primary mission business. It's important to think of it as revenue strategy and to think about how much you have to put into it to get something out of it. It's important to understand the revenue as well as the expenses. It's not that you shouldn't do it but it's a business as any other.
Elizabeth: What's the lead time to cultivate an individual donor? I would say that Clara has it just right. There are many differences in the way you work with an individual donor. It can seem like an incredibly long period of time. There is a calendar for any foundation but there isn't a timeline with individual donors. You typically develop that relationship over time. That individual will have their own needs and passions and you will either hit on that or not. If you get over that hump that individual will give to you for a long time. The timeline has to be an evolutionary timeline. The stories that make a difference to that donor are very important.
Scott: Let's just say I followed your advice. I put that button on my web site. What will that produce? The money will not just show up. It is a long cycle time so I urge you to start. I wouldn't spend a lot of time thinking about hiring someone until you have some experience. The guys at Harvard do this but we're using this opportunity to learn to do this. You also begin to think about telling people to visit the web site and make a donation. You are making a communication vehicle and developing that long term relationship so if you have an emergency you can ask for help. It doesn't take very many of those people to help you get over the hump. It's a start - it's not the end. For 15 minutes a week you can think about what you are doing on the web site. Get all the contact information for everyone you can.
Jean: You talked about a donor giving to causes, what can one do domestically? What suggestions could you have to think about collaborative fund raising?
Domini manages $1.8b and has a network of 40,000 people that give. Not all those people will care about international programs. We bring that network of people to the relationship. The Domini Foundation then gets access to the 36,000 people in the UN Agency network.
The Boston Community Foundation manages a lot of assets. They have some sort of relationship with a local bank. They've been in Boston for years. The bank supports them on a yearly basis and directs their customers to the Community Foundation if they have an interest in giving. I would advise partnering with a bank or a wealth management company.
Elizabeth: if you already have a relationship with the foundation part of a bank; the private side of the bank doesn't know about what the foundation side is doing so you could help them get their clients to know about community giving. Is there a way to broker that relationship?
Hildy: It's a good point. The other point is organizations think of themselves as supplicants. You have resources that might be valuable to someone else. How can you capitalize on what you have and what they have?
I want to open it up to the whole group.
Comment: Getting away from the high net worth individuals was hard. Going back to the average Joe individual donor is important; one thing I learned was the technique called the pre-authorized debit. You let them into your checking account.
Where has the technology gone to turn the one time donor into a sustaining donor.
Scott: We offer recurring donations through our web site. To your other point one thing that we have benefited from tragedy. We found during the hurricanes we raised about $12m; our goal is to level the playing field. We were able to distribute about 40% of our funds to smaller organizations (the other 60% goes to about 3 groups).
Having people discover they could make donations to other organizations is very valuable. We went back out with a focused campaign to tell people the challenges are really the same or worse now. We asked people to make a sustaining donation. We like the idea of talking to people every month.
We moved about $40m to not for profits last year. The technology exists for making recurring gifts and keeping that relationship.
Helen: The branding is one of our partnering opportunities. Putting our logo on your site is a way to provide alternative access to capital to your clients.
Donors are potentially lenders and not just givers. Through the process we've created you can put together a program for a loan and tie the payments to certain milestones. The lender could decide to forgive the payment if the milestone as been met. There are lots of ways to use a platform like this.
Within the foundation world there is a lot of talk for program related investments.
Q: What is your success rate for conversions to recurring gifts?
Scott: What I do know is we moved from 4% to a 15% conversion rate. We get about $100,000 per month from that campaign in a recurring nature. All of the money is going out other organizations (15,000 different organizations).
There is a lot more money out there for a PRI standpoint.
Clara: It takes longer to develop a PRI program but if they keep with it and the foundations are coming to us to figure out how to do this.
Q: I like the idea that fundraising becoming it's own business. What are you giving the individual donors? I was part of creating an artisan advocacy network. How do we give to the donors that give to us?
Clara: There is a business model embodied in all these choices. We did a download of financial data and we looked at all these different business models. Some have chosen a business model that says they are first and foremost individual donor driven. Remember it's all raised revenue. What is a non-profit that has almost 100% earned revenue? The YMCA is an example. The organizations at both ends of the spectrum seem to be larger. If you have diversified revenue sources you tend to be smaller. It's because they have to pay for all that complexity in their business model. If you have a business model of one or two earned revenue sources that is more likely to take you to scale.
Q: We have smaller rural non-profits along with larger sophisticated non-profits. Are you able to bring them along to work together?
Hildy: I'm asking each of the panelists to communicate the kernels of wisdom. What are the one or two take aways to refresh your thinking or cause you to look at this problem differently?
Co-branding = find someone that is reaching the people that you want to reach.
Revenue Strategy = remember there is the amount to bring in and the amount it will cost you to get that money.
Focus = Who is the donor you most want to have involved in your organization? Is there a specific type of donor? If so, learn about them.
Just do it! = Get started. There is no reason not to do online fund raising. 10 minutes a week you can get a strategy.
Partnerships decrease costs = There are significant gains from partnerships sharing strengths.
If you don't ask you don't get = You have to tell your story. Telling your story well is important.
There is a lot to learn from each other. There was a reluctance to share good strategies, etc. with each other and people that care about these issues don't only give to one organization. Typically people have a portfolio of giving and you can learn from each other. You are your own best resources.
