Suffering from “The Gates Paradox”
Terry Richey
Nearly every organization we see has the Gates Foundation on its wish list of donors. The notion is “if we could just get Gates to fund us, we would be on the road to success.” We call that the “Gates Paradox” because if the wish came true, it could spell disaster.
In our last post, we offered a view that five dimensions exist for the funding that a nonprofit organization generates. All of the dimensions affect both an organization’s present as well as its future.
Last issue, we focused on the “adaptability” of funds and the need to create the right balance between unrestricted and restricted revenue. In this post, we focus on “scale” as a dimension of funding. Great fundraising organizations have a clear strategy about gift ranges. In fact, this may be the most important single factor in long-term sustainability of a nonprofit.
The five dimensions of funding:
Adaptability
Scale
Time
Renewal
Cost
We had an opportunity to work with two international nonprofits. One was built on a grasstops strategy. In fact, a small group of donors comprised 95% of their fundraising. Another was built on a grassroots strategy. They had hundreds of thousands of small donors. Despite the volume, the small donors collectively represented only about 20% of their fundraising, and the organization still depended on major gifts. However, the small donors provided three invaluable elements: unrestricted funding, a cultivation source for future major gifts, and credibility that the organization is broadly supported.
Both non-profits are fulfilling their missions. One took a faster path with a more singular focus on major donors. One took a slower and more difficult path of building a broad constituency.
Grassroots or grasstops…how do you find the right mix of strategies for your organization?
As you would likely predict, the organization built solely on a grasstops strategy suffered mightily from its funding rollercoaster. The other organization had built-in shock absorbers in the form of many small donors to protect from its ups and downs.
Scale also plays out the opposite way as well. With the rise of online giving, text-to-donate, crowdfunding, and many other relatively “anonymous” ways of donating to a cause, some newer organizations find they can raise substantial funds from online sources or events but then are challenged to build a major gift program on a relatively impersonal foundation. The broad constituency is not sufficiently engaged with the non-profit to provide a base for moving up the gift range. In these cases, retooling the donor experience to make deeper connections is vital to grow a more sustainable fundraising program.
Does your organization have a gift range strategy? Have you confronted the Gates Paradox? A good place to start is with a rigorous analysis of your gift range from the previous five years to understand trends that may be shaping your future. Loaded with that information, you can begin to shape a strategy across a range of gifts that will support your future goals.
Visit our blog in the months ahead as we explore the other three dimensions of funds: Time, Renewal, and Cost.
Visit our website (www.TimberlineStrategy.com) and download the “Five Dimensions of Funding” tool we use to help nonprofit leaders shape their fund development strategy.
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