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Financing Not Fundraising: Break Free From the Starvation Cycle

By Nell Edgington



Break Free From the Nonprofit Starvation CycleThe other day I met with a nonprofit leader (let’s call her June) who has a great idea for an earned income venture that fits directly with her mission, but she doesn’t have the start-up capital to launch. When she explained this to me, she threw up her hands as if to say, “I’m powerless to move forward.”

But from my vantage point she has all the pieces necessary to raise the start-up capital and launch, she just isn’t putting them together. It’s a common refrain — nonprofit leaders complain about being in a catch-22 of not having enough money to raise enough money. But the answer is often right in front of you. To break free from the starvation cycle, assemble the assets you already have in order to raise capacity capital, which is the topic of today’s post in the ongoing Financing Not Fundraising blog series.

The nonprofit starvation cycle is one nonprofit leaders know only to well. Nonprofit organizations rarely have the technology, staff, and systems to function effectively. So they scrape by trying to wring one more drop out of a completely dry rock. But instead of waiting for funders to fix the situation, it is up to nonprofit leaders themselves to break free. And you break free by raising capacity capital.

Capacity capital is a one-time investment of significant money that can help build or strengthen a nonprofit organization so that it can create more social change. Capacity capital funds things like technology, systems, a program evaluation, revenue-generating staff, start-up costs for an earned income business. It is money that strengthens the organization so that it can do more.

But often nonprofit leaders, like June above, don’t recognize that everything they need to raise capacity capital and break free from the starvation cycle is in right in front of them.  Here are the necessary pieces:

A Plan. You know what you need in order to do more, so put together a change plan and figure out what elements you need (technology, systems, staffing) and what they will cost. Do your homework so you can speak intelligently about what it will take to get you from point A to point B. June has a great business plan for her venture and knows exactly how much she needs in start-up costs.

Donors Who Love You. When raising capacity capital you want to go after donors who already love what you are doing and want to see more. You must convince them that a one-time investment of capacity capital will enable you to do even more of what they already love. June has a great network of long-time donors, which she could convince to become capacity capital donors.

A Connection Between Capital and More Impact. Make a convincing argument to those donors that capacity capital will create more of what they already love. For example, having a great Development Director in place can bring hundreds of thousands of new dollars each year which means many more people will be touched by your organization.  Or explain how an evaluation of your program will allow you to focus your resources on highest impact activities. June could describe how a profitable earned income venture could increase financial sustainability while delivering more impact.

June has all of these pieces. She has a great plan for an earned income business that could significantly contribute to a more sustainable financial engine and thus allow her nonprofit to reach more people, a clear articulation of how much capital she needs and for what, and a committed group of donors who love the organization. For her, and for most nonprofits, it is simply a question of connecting the dots.

If you want to learn more about the power of capacity capital, download the Enormous Opportunity of Capacity Capital e-book, the Creating a Capacity Capital step-by-step guide or the Raising Capacity Capital webinar.

Photo Credit: PublicDomainPictures

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About the Author: Nell Edgington is President of Social Velocity (www.socialvelocity.net), a management consulting firm leading nonprofits to greater social impact and financial sustainability. Social Velocity helps nonprofits grow their programs, bring more money in the door, and use resources more effectively. For more information, check out Social Velocity consulting services and clients.


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2 Comments to Financing Not Fundraising: Break Free From the Starvation Cycle

[...] Their newsletter, for example, publishes helpful information such as what popped up for me at the perfect time this morning, a list of things to remember if you’re ready to start writing a grant that will help you avoid some problems in the end. By having a plan, donors who love you and a connection between capital and more impact, grant seekers increase their chance of securing funding (the original article was published by Social Velocity). [...]

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