Archives for posts with tag: fundraising

I know a lot of people who’re starting up new nonprofits, and most don’t have any prior experience with fundraising. That was me!, back in 2007 when I took over the Wikimedia Foundation. And so, the purpose of this post is to share some of what I learned over the past eight years, both from my own experience and from talking with other EDs and with grantmakers. I’m focusing on restricted grants here because they’re the most obvious and common funding source for nonprofits, especially in their early stages of development.

Restricted grants can be great. Grantmaking institutions fund work that’s socially important, that’s coming out of organizations that may have no other access to funding, and that is often risky or experimental. They take chances on people and organizations with good ideas, who may not yet have a track record. That’s necessary and important.

But restricted grants also pose some specific problems for the organizations seeking them. This is well understood inside nonprofitland, but isn’t immediately obvious to people who’re new to it.

Here are the five main problems with restricted grants.

Restricted grants can be administratively burdensome. At the WMF, we actively sought out restricted grants for about two years, and afterwards accepted them only rarely. We had two rules of thumb: 1) We would only seek restricted grants from organizations we knew well and trusted to be good partners with us, and 2) We would only seek restricted grants from organizations that were roughly our size (by staff headcount) or smaller. Why? Because restricted grants can be a lot of work, particularly if the two organizations aren’t well aligned.

Big institutions have a big capacity to generate process: forms to fill out, procedures to follow, hoops to jump through. They have lots of staff time for meetings and calls and email exchanges. They operate at a slower pace than smaller orgs, and their processes are often inflexible. People who work at grantmaking institutions have a responsibility to be careful with their organization’s money, and want to feel like they’re adding value to the work the nonprofit is doing. Too often, this results in nonprofits feeling burdened by expensive process as they procure and report on grants: time that you want to spend achieving your mission, instead risks getting eaten up by grantmakers’ administrative requirements.

Restricted grants risk overwriting the nonprofit’s priorities with the grantmakers’ priorities. At the WMF, we didn’t accept grants for things we weren’t planning to do anyway. Every year we developed our plan, and then we would (sometimes, with funders we trusted) seek funding for specific components of it. With funders we trusted, we were happy to get their input on our priorities and our plans for executing them. But we weren’t interested in advancing grantmakers’ goals, except insofar as they overlapped with ours.

Too often, especially with young or small non-profits, I see the opposite.

If an organization is cash-strapped, all money looks good. But it’s not. Here’s a crude example. Let’s say the WMF knows it needs to focus its energy on mobile, and a funder is interested in creating physical spaces for Wikipedians to get together F2F for editing parties. In that context, agreeing with a funder to take money for the set-up of editing cafes would pose a distraction from the mobile work the WMF would need to be doing. An organization’s capacity and energies are always limited, and even grants that fully fund a new activity are necessarily drawing on executive and managerial attention, as well as the organization’s support functions (human resources, accounting, admin, legal, PR). If what a restricted grant funds isn’t a near-perfect fit with what the organization hopes to accomplish regardless of the funding, you risk your organization getting pulled off-track.

Restricted grants pull focus from core work. Most grantmakers want their money to accomplish something new. They’re inclined to see their grants as seed money, funding experiments and new activity. Most successful nonprofits though, have important core work that needs to get done. At the WMF for example that core work was the maintenance and continued availability of Wikipedia, the website, which meant stuff like hosting costs, costs of the Ops team, site security work and performance optimization, and lawyers to defend against censorship.

Because restricted grants are often aimed at funding new activity, nonprofits that depend on them are incentivized to continually launch new activities, and to abandon or only weakly support the ones that already exist. They develop a bias towards fragmentation, churn and divergence, at the expense of focus and excellence. An organization that funds itself solely or mainly through restricted grants risks starving its core.

Restricted grants pull the attention of the executive director. I am constantly recommending this excellent article by the nonprofit strategy consultancy Bridgespan, published in the Stanford Social Innovation Review. Its point is that the most effective and fastest-growing nonprofits focus their fundraising efforts on a single type of funder (e.g., crowdfunding, or foundations, or major donors). That’s counter-intuitive because most people reflexively assume that diversification=good: stable, low-risk, prudent. Those people, though, are wrong. What works for e.g. retirement savings, is not the same as what works for nonprofit revenue strategy.

Why? Because organizations need to focus: they can’t be good at everything, and that’s as true when it comes to fundraising as it is with everything else. It’s also true for the executive director. An executive director whose organization is dependent on restricted grants will find him or herself focused on grantmaking institutions, which generally means attending conferences, serving on juries and publicly positioning him or herself as a thought leader in the space in which they work. That’s not necessarily the best use of the ED’s time.

Restricted grants are typically more waterfall than agile. Here’s how grants typically work. The nonprofit writes up a proposal that presumes it understands what it wants to do and how it will do it. It includes a goal statement, a scope statement, usually some kind of theory of change, a set of deliverables, a budget, timeline, and measures of success. There is some back-and-forth with the funder, which may take a few weeks or many months, and once the proposal is approved, funding is released. By the time the project starts, it may be as much as an entire year since it was first conceived. As the plan is executed the organization will learn new things, and it’s often not clear how what’s been learned can or should affect the plan, or who has the ability to make or approve changes to it.

This is how we used to do software development and in a worst-case scenario it led to death march projects building products that nobody ended up wanting. That’s why we shifted from waterfall to agile: because you get a better, more-wanted product, faster and cheaper. It probably makes sense for grantmaking institutions to adapt their processes similarly, but I’m not aware of any who have yet done that. I don’t think it would be easy, or obvious, how to do it.

Upshot: If you’re a new nonprofit considering funding yourself via restricted grants, here’s my advice. Pick your funders carefully. Focus on ones whose goals have a large overlap with your own, and whose processes seem lightweight and smart. Aim to work with people who are willing to trust you, and who are careful with your time. Don’t look to foundations to set your priorities: figure out what you want to do, and then try to find a grantmaker who wants to support it.

Donors Choose thank you letters from kids

This past March at TED we were given $100 gift cards for Donors Choose, the online non-profit that connects donors with American classrooms that need money. I’d heard of Donors Choose, but I’d never donated through them, so I was happy to get a push. I’m not an obvious prospect for their work —I don’t have kids, have no particular interest in the primary school system; I’m not even American— and I probably would never have given, without the card.

So I did some poking around the Donors Choose site, and ended up putting the money towards a Grade 4 science class in New Mexico that wanted to buy a model of the solar system. Frankly I didn’t put a lot of thought into it: I just did a search, made the donation, and forgot all about it.

Months passed. Then last night, when I picked up my mail I had a big envelope from Donors Choose.

Crap!, I thought. They have my address. And now I’ve gotten a big envelope of shiny advertorial spam. I’ll never donate again, but I’ll be on their list forever.

But when I opened the envelope, what spilled out was dozens of handwritten letters from Grade 4 kids, addressed to me. “Sue Gardner,” they wrote, “thank you for the money you sent us.” “You are very nice.” “We worked in pairs on the project. Manuel and I learned a lot.” It was the opposite of direct mail: a bunch of utterly unique, handmade letters complete with creases and smudges, misspellings and crossed-out bits, awkward sentence structure and sloppy handwriting. Not from a fundraising staffer at Donors Choose, but from real kids.

It was awesome. I actually cried a little, it was so cute and so moving.

So I tried to figure out why it worked so well.

1) It was a happy surprise. I had ticked off the box in the donation form asking for letters, but by the time they came I’d forgotten all about them.

2) The letters came from kids, so their lack of perfection made them more appealing, not less. This means nobody from Donors Choose needs, I assume, to do any heavy-handed expensive quality control.

3) It’s actually good for the kids too. My mother used to have her primary school classes sponsor poor kids through World Vision, purely so they would learn about charitable values and the importance of gratitude.

4) There was no ask! It’s irritating to feel obligated and coerced, and it felt great to get something from a non-profit that didn’t do that. It also didn’t trigger transactional feelings in me: the letters weren’t a quid waiting for the quo of a new donation. They felt like a gift: pure pleasure.

5) I hardly ever get handwritten mail, but when I do, it’s pretty much always thank you cards or letters from family. “Handwritten” has purely positive associations.

6) There’s something joyful about handcrafted, tactile, physical objects, especially for those of us who spend a lot of time online. Kids writing something on paper and it coming to me through the postal system feels archaic and surprising, which adds to the charm.

I donate to lots of non-profits, and this was by far the best experience I’ve had.

It’s normal for the donation process itself to feel good, but the experience afterwards generally sucks: you either get a form letter thank you or no thank you at all, and then a series of generic e-mails, seemingly published on a schedule, demanding attention and money. “Policy and Advocacy Update: What’s Happening in Sacramento.” “We Need Your Help For Auction Donations: Help Now.” “Highlighting the Devastating Consequences of the Republican Plan and what you can do.” It’s depressing, it’s exhausting and it’s boring.

So I think there is lots to learn from Donors Choose. I started writing a list, and then I realized it really boils down to one big idea.

Conventional fundraising is inherently oppositional and makes the donor feel bad not good. A situation is dire, your help is urgently required, we will hassle and shame you until you give. That kind of fundraising works, but it doesn’t create a very enjoyable experience for the donor. Nobody opens a fundraising appeal in a spirit of joy and curiosity.

My Donors Choose experience, by contrast was pure pleasure. The package I got was surprising and fun. It didn’t create any social obligation from me. It felt like a gift.

And it worked.

I immediately gave again, a hundred dollars to a seventh grade teacher who wants to buy Judy Blume books for her class. I found myself calculating what I spend on clothes and dinners out, and what proportion I might reasonably divert to Donors Choose. Not just because the kids need my money (although I’m sure it helps them, and I feel great about that), but equally for my own pleasure.

In terms of maximizing my own happiness, Donors Choose was the best hundred dollars I’ve ever spent. Kudos to them: the system they’ve built is great.

I haven’t posted here for a while because I was on a long and slightly gruelling trip, timed to coincide with Wikimedia’s 2010 fundraiser. (Which has just successfully concluded with more than a half million people contributing a total of USD 16 million, exceeding our goal in our shortest annual campaign to date: you can read more about it on the Wikimedia Foundation blog. My thanks to everyone who donated / helped with the campaign, and congratulations to Zack and the fundraising team!)

The gist of the trip: Between November 20 and December 6, I was in Stockholm, London, Dubai and Delhi. I spoke at three conferences, was interviewed by 16 journalists, and met about 50 Wikimedians as well as a few supporters and friends at cultural institutions, and I interviewed candidates for the Wikimedia Program Director for India. Afterwards I went on three weeks of holiday in India, including a 10-day silent Vipassana meditation retreat in Karnal, north of Delhi. The trip had multiple overlapping goals — to advance awareness of Wikipedia (particularly during our fundraising season) and encourage people to try editing, as well as to support chapters and find out a little more about the challenges and opportunities faced by editors in the Middle East. On the whole, the trip was successful and we’ll probably aim to do similar ones in future, building on lessons learned this time. I’ll blog more about it here as I get my notes organized.

Now, I’m back in San Francisco, and catching up on the 650-ish e-mails that accumulated (and didn’t get responded to) while I was away. Happy 2011 :-)

Every non-profit has two main jobs: service delivery (which is the mission work, the reason the non-profit exists) and revenue generation (how you pay for the costs of service delivery).  If a non-profit is lucky, the two are aligned and support each other.   But that’s rare — it’s more common for them to be completely disconnected, and often they’re in flat-out conflict.

When I started working at the Wikimedia Foundation in 2007, I wanted us to experiment with revenue generation.  So we spent about two years doing a bit of everything: making friends with grant-making institutions, cultivating major donors, developing business deals, and running various forms of online fundraising including our annual campaign, mobile giving, and so forth.

The stand-out winner was online fundraising.  It makes perfect sense: Wikipedia has 371 million unique visitors every month, and if even a tiny fraction of those people donate, we will easily cover costs.   And that’s exactly what happens.  New graduates give us 50 or 100 dollars for helping them as they go through school.  Little kids donate, or their parents donate on their behalf.  And all kinds of ordinary people around the world give every day, because they used Wikipedia to help them plan a trip, or understand a medical condition, or settle a bar bet, or get a job, or satisfy their abstract intellectual curiosity.  People use it and they like it, so they want to make sure it sticks around.

So, the “many small donations” model makes sense for Wikipedia, because it aligns fundraising with the rest of the Wikimedia movement: it makes it global, and it empowers ordinary people. It also enables us to stay focused on our own mission and strategy, rather than being pulled off-course by large funders’ needs and desires.   It makes us independent. It creates the right incentives: it supports us being accountable and responsive to readers.   It reduces the risk that donors will grow (inappropriately) to be more valued by us than editors. It’s scalable, it minimizes risk and it’s replicable and transferable – so, it enables us to help equip our chapter organizations to fundraise too.

So, newly this year, the Wikimedia Foundation is reorienting our revenue generation strategy towards small donors, away from institutional support and earned income. This is good: there are lots of happy consequences.  One is that I personally will have more free time.

Practically all Executive Directors complain that they spend way too much time fundraising. I never really felt that way.  Wikipedia has never spent a single dollar on advertising, and so it hasn’t necessarily been well understood.  I find people have all kinds of misconceptions about Wikipedia, and there are lots of interesting things about it that they don’t know: I’m happy to help them understand it better.

But there is an opportunity cost to fundraising – essentially, any hour that I spend thinking about donor cultivation, is an hour I’m not spending thinking about the work we’re trying to get done.

So I’m happy that beginning this year, I will have more time to dedicate to talking to Wikimedia editors, and thinking about the work Wikimedians are engaged in. This blog is part of that.  I plan this year to do more “office hours” on IRC, to have more unstructured time to talk with Wikimedians, and to spend some time writing here.

I’m looking forward to it :-)