A couple of weeks ago, I gave a presentation at the Global Good Fund Conference in DC on how I raised $2 million in two years and posted a photo after the event that generated dozens of questions on how I did it and what I learned. I also held my last set of office hours as an Entrepreneur-in-Residence at Cornell University and was asked many of the same questions, so I figured it prompted a post. This piece should be mandatory reading for any new budding social entrepreneur. If you’ve ever started a 501(c)3 – that is just the legal term for nonprofit organization – you know that fundraising can be extremely difficult. There are thousands of organizations in the world that are doing incredibly impactful work and people are being solicited by them all the time. Your job isn’t just to demonstrate to people that your mission is important, but to also prove to them that their donation is going to have more of an impact on the work you’re doing than it will at one of the other organizations they could potentially being giving.
I could probably take these lessons and turn them into a book and charge a lot of money for them, but I think I could do more good by giving them away for free. To date, I haven’t found a primer that has been this comprehensive, yet manageable. I trust that many people know people who have great intentions starting nonprofits and just need a little bit of guidance. So here it is. A bit longer than I originally anticipated, and in no particular order, but very much needed. Here are fifteen of the many lessons that I learned with several resources intertwined:
#1. The majority of giving in the United States comes from individuals.
This takes a little while to sink in. Most new nonprofit founders come up to me and ask me about the secret to getting grants and how we got all of the grants we needed to fund our organization. There are usually a few things that are wrong with that. First, they are assuming that the majority of our funding came from grants, which, in fact, is not the case. More than 50% of our funds raised came from individuals. I came across this mini-blurb in my fundraising journey and it drastically changed how my team allocated its time within fundraising:
“According to Giving USA’s Annual Report on Philanthropy, in the year 2000, more than $200 billion was given to the not-for-profit sector. Of that $200 billion, only 5% came from corporations, 7% from foundations, and 80% from individuals. The bulk of the giving comes from individuals, and from those people who give 88% of the money, 75% of them made less than $150,000 yearly.”
It proved that spending too much time with high net worth individuals wasn’t worthwhile. In fact, they were the ones being asked the most often. Though they have larger giving capacities, they don’t give as much or as often in most cases. Our time was better spent asking people with more modest means to support the greater good. The National Philanthropic Trust usually has the most up to date giving statistics.
Second, most foundations don’t make hundreds of grants a year. They tend to have a portfolio of organizations that they give to or support and they continue to support them year after year. Unless the amount of money in the foundation increases, they usually don’t look for new organizations. Foundations don’t tend to invest in new organizations because of they tend to be more risk-averse and investing in new organizations is very high risk. With that said, if there is an individual who emphatically believes in your work and they happen to sit on a foundation board, you can bypass most of the traditional bureaucracy involved with getting money.
#2. You don’t need to have a nonprofit status or a 501(c)3 to start raising money from individuals.
I would actually highly discourage people from getting their own 501(c)3 during their first year of operation. It is a lot of paperwork and most organizations don’t last long enough to reap the reward of going through all of that hard work. Instead, I strongly advise that organizations consider finding a fiscal sponsor. Having a fiscal sponsor allows organizations to leverage another nonprofits tax-exempt status to take on donations from individuals. You can learn more about fiscal sponsorship and an organization that provides such services here.
#3. When you’ve met one individual, you’ve met one individual.
Everyone gives for different reasons and the level of involvement and engagement they want to have is also different. One of the biggest mistakes you can make is trying to treat two people in the same way or using the same method to get two different people to donate.
#4. Communication trumps impact.
This is a sad truth. You don't have to like it, but you have to appreciate it if you're going to be successful at fundraising. If you do incredible work and no one hears about it, then it is rarely going to get the funding that it needs. I’ve heard horror stories of organizations that have had very little impact, yet had incredible story tellers and communicators that would bring in way more money to support their work. The one thing I will also mention is that those organizations are eventually exposed. So doing good work that has an impact is really important.
#5. People give to people not necessarily causes - especially in the very beginning.
Trust is the most important quality to exude. Having strong leadership within an organization is important. The leaders of an organization have to be able to deliver results and impact. In the earlier days of an organization before the viability of the concept is proven, people are investing in the founder and the leadership team. You have to be willing and able to ask people for money to support your mission. More importantly, you need to connect with the people who are giving you money. Even though the person making a donation is giving to support a cause, they know that it is a person who is leading the charge. There is nothing wrong with helping someone spend their money for a cause you both believe in. The one thing that is guaranteed is that if you don’t ask, you won’t get anything. The best metaphor I’ve heard around fundraising was illustrated using a car. The metaphor says that the social entrepreneur is the car maker/manufacturer, the car is the actual product or service, the donor is the gas station attendant/manager, and the donation/money is the fuel. The social entrepreneur needs the donor to be able to drive their car forward. Lynn Twist authored a great book that examines individuals’ relationship with money titledThe Soul of Money.
#6. Friends asking friends is powerful.
Building off of the last lesson learned, when people ask their friends to support a cause they are donating to, they are more likely to give than if they get a solicitation from an organization. It is also much harder to say no to your friend who is a real person, then it is to say no to an inanimate thing (the organization in this case). There is a huge body of research and consulting companies out there that help advise organizations on fundraising from friends. They call the field “peer-to-peer” fundraising. One with a free blog that has some pretty cool information is Plenty. I’ve personally raised over $75,000 from friends making donations of $5 - $500. Don’t underestimate the power of sending a message to all of your Facebook friends and Linkedin connections. Every time you connect with a person on Linkedin, you automatically get access to the email address they have on file for their Linkedin account. This video shows you exactly how to get access to it. This was how I built my initial list.
#7. Fundraising is like sales.
You have to convince people that your work is worth supporting. More importantly, you have to follow-up. Persistence is key. Most people don’t like to think about giving away money so they have to be constantly reminded that it is the right thing to do and that your organization is the right place to give the money. Unfortunately, I don’t think most people follow-up. I know that is definitely the case in sales. I also rarely get multiple solicitations from individuals who are raising money for a charity. Psychologically it makes total sense. You need to have thick skin. You need to genuinely believe that people should be excited about giving you money. You need to internalize that you’re not annoying people, but rather helping them to live out a socially conscious and important part of their lives.
Recently, the team at Signals by Hubspot launched an entire slideshare based on the Referral Squirrel data that showed:
- 2% of sales are made on the First contact.
- 3% of sales are made on the Second contact.
- 5% of sales are made on the Third contact.
- 10% of sales are made on the Fourth contact.
- 80% of sales are made on the Fifth to Twelfth contact.
- 48% of salespeople never follow up with a prospect.
- 25% of salespeople make a second contact and stop.
- 12% of salespeople make three contacts and stop.
- Only 10% of sales people make it more than Three contacts with a prospect.
#8. The Benevon Model works.
If you don’t know what the Benevon model is, check out this free 10 minute video. In essence, this is great for helping you build your network through friendraisers if you don’t have a particularly large network. If you have a large network already, this model can have an exponential effect on your giving. It also allows other people within your circle of friends to get involved with your work.
#9. Make sure you believe you’re the right person to be doing your work.
Do the thorough reflection on why you believe your work is important, urgent, and why you’re the right person to be carrying it out and not someone else. Those questions will come up time and time again. There won’t ever be a right or a wrong answer. Just an answer that you believe. If you sincerely believe it, then hopefully you will speak with the conviction necessary to compel other people to support your vision and mission. I did an entire podcast segment on this on Entrepreneurs on Fire that you can listen to here.
#10. Diversifying your funding streams does not increase your odds of succeeding.
In 2007, Stanford published a study that showed that more than 200,000 nonprofits had been started in the U.S. since 1970, but only 144 of them had reached $50 million in annual revenue. Contrary to common logic around diversification, they actually raised the bulk of their money from a single type of funder and they built professional organizations that were tailored to the needs of their primary funding source. I highly encourage people who are starting to think about growing their nonprofits to read these three Stanford Social Innovation Review articles: Ten Nonprofit Funding Models, Finding Your Funding Model, and How Nonprofits Get Really Big.
#11. Hiring a development person too early is a waste of money.
When you’re first starting an organization, people don’t want to meet with your development person (for those not in the nonprofit space, development is another term for a fundraising professional). They want to meet with the founder. They want to hear about your vision and why you’re taking on this risk and sacrifice. What will ultimately wind up happening if you hire a development person too early is that they will just become an over paid assistant. They will be reaching out to people in your network with very little success. Trust me, I made this mistake. Instead, hire an assistant to help you free up your time from menial tasks so you can focus your energy on building relationships and engaging more people in your mission.
#12. When you can’t get in touch with someone, hand write them a letter.
With the hundreds of emails super busy people receive every single day doing something unconventional like handwriting a letter will almost always get you an answer. I don’t advise you hand write a letter to 100 people or anything like that. Instead, target 3 – 5 people who you think would be compelled by your work or mission based on what you know about them and make sure you have some sort of connection to them (i.e. same alma matter, similar interests, crossed paths somewhere before, etc.). Then, write them requesting a meeting. If they take your meeting, more often than not they will find a way to support you. If they take the time from their super busy schedules to talk, they are already signaling that they are invested.
#13. Overhead is necessary to grow, but most people don’t understand the concept of it outside of the nonprofit space.
In a traditional for-profit, it is easy to understand that you need to invest in people and infrastructure so you can deliver good customer service and incredible products. That isn’t the case in the nonprofit space. One of the most engaging videos I’ve seen on this subject was a TED talk by Dan Pallotta where he talks about how our mindset and the way we think about charity being dead wrong. Nick Kristof and his wife Sheryl WuDunn co-authored a book that uses Dan Pallotta and other trailblazers in the space as a case study. The findings around purchasing mailing lists, and how donors respond to images in their book A Path Appears is another book I’d highly recommend.
#14. Real change requires mobilizing people.
If you’re curious about how to start a movement, I’d highly recommend this TED talk by Derek Sivers. You need exceptional people around you to accomplish extraordinary things. I’ve been incredibly fortunate to have had an incredible team and support system at Practice Makes Perfect who helped make this possible. Lastly, I’m incredibly grateful to many of my friends and friends of friends who stepped up and supported our work to create educational equity. Without them, our work and progress would not have been possible.
#15. Learning is the key to success.
You need to be actively learning and seeking out resources. I’m only in a position to be able to provide this information with you all because I’ve taken the time to seek it out. The field is always changing and new innovations will continue to disrupt how things are done. A few of the lessons here should stand the test of time, but many of these may not be relevant in five or ten years. Also, for every one resource I mentioned here, I’ve easily gone through fifty others. Make sure you continue learning!
I’m sure there is probably a bit of paralysis after getting through this thoroughly because there are so many places to start. Some of you may be thinking that you can’t replicate my success. Full disclosure, I did not come from a wealthy family, but I did attend an elite private school for college, which probably gave me a huge advantage. Outside of that, I wouldn’t say I had an upper hand or any special connections. My mom would often joke that I should be raising donations to support our family. We’re finally past that point.
If you want to take this conversation a bit further, connect with me throughClarity. Good luck with your fundraising endeavors!