If you want to get your nonprofit out of the (all too common) starvation cycle of never having enough money to achieve your goals, you must raise capacity capital. Capacity capital is not the day-to-day revenue you need to keep your doors open. Rather, capacity capital is a one-time infusion of significant money that can help you grow or strengthen your nonprofit. It is money for things like: technology, revenue-generating staff, systems, a program evaluation.
This Slideshare helps you understand capacity capital and how to raise it. And if you want some additional guidance for launching your own capacity capital campaign, download the Launch a Capacity Capital Campaign Step-by-Step Guide.
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Note: This post is the first in the ongoing blog series, Financing Not Fundraising. For more on the Financing Not Fundraising approach, view the Financing Not Fundraising book series and the Financing Not Fundraising webinar series.
I’d like to outline a new vision for how the nonprofit sector gets funded. Fundraising in its current form just doesn’t work anymore. In fact, traditional fundraising is holding the sector back by keeping nonprofits in the starvation cycle of trying to do more and more with less and less.
Really, what nonprofits need is a financing strategy, not a fundraising strategy. By that I mean that nonprofits have to break out of the narrow view that traditional FUNDRAISING (individual donor appeals, events, foundation grants) will completely fund all of their activities. Instead, nonprofits must work to create a broader approach to securing the overall FINANCING necessary to create social change.
What does this new approach to financing the nonprofit sector look like? It looks like this:
- Nonprofits understand that funding programs and general operating expenses is not enough to survive and thrive. All activities that bring money in the door (individual donors, foundation grants, earned income, government contracts, loans etc) are integrated and part of a larger financing strategy that supports the short AND long term goals, as well as the programs AND infrastructure of the organization.
- Nonprofits no longer segregate fundraising from their other activities (programming, administration). All elements of a nonprofit’s operations, including the money-making ones, are fully integrated and moving forward together.
- Individuals, who make up 80%+ of the private money entering the sector, become a greater focus of fundraising efforts, rather than corporate or foundation philanthropy (which make up 5% and 12%, respectively, of the private money entering the sector).
- Fundraising messaging moves from an emphasis on the tin-cup mentality and donor benefit, to an emphasis on the social impact a nonprofit is creating.
- Money is raised to support not only the direct services that a nonprofit provides, but also the infrastructure (staff, technology, systems, evaluation, training) of the organization. Nonprofits understand that they will only get better at delivering impact if they have an effective organization behind their work.
- Other types of capital vehicles (like loans, equity) are added into a nonprofit’s financing mix.
- Earned-income opportunities are evaluated and, if appropriate, launched. Earned income is not right for every nonprofit, but it is worth exploring and analyzing opportunities as they come and understanding and being open to the revenue-generation possibilities.
- The net revenue of every money-making activity a nonprofit engages in (events, individual fundraising appeals, corporate sponsorships, earned income, etc.) is calculated and evaluated. Low net revenue activities are replaced with higher net endeavors.
- Nonprofits move away from “push” fundraising and marketing efforts that force their message on innocent bystanders (like direct mail appeals) and towards “pull” fundraising and marketing efforts that bring interested donors/prospects to the organization (like blogs, Twitter, Facebook, friend-raising events, etc.)
There really is a better way. Nonprofits don’t have to wear out their fundraisers, their donors, their staff and their message. By working towards financing their efforts as opposed to fundraising for them, they can get a lot closer to social impact.
If you want to learn more about applying the concepts of Financing Not Fundraising to your nonprofit, check out our Financing Not Fundraising Webinar Series, or download the Financing Not Fundraising book series.
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