Nonprofits in this situation might complain  that they would like to do more, they would like to upgrade their fundraising function (who wouldn’t?) but there just isn’t a way to do it.  So they continue on this vicious treadmill of killing themselves just to raise enough to survive.  This reality of financially struggling nonprofits is a result of the fact that the sector is undercapitalized.  It would be wonderful if one day we all woke up and suddenly individuals gave 5% of their income to the nonprofit sector, foundations grew 100 fold, corporations began integrating their giving program into their business model and thus gave significantly more money, and the list goes on.  That probably isn’t going to happen any time soon.

But there is a solution.  Nonprofit organizations can raise “capacity capital.”  Capacity capital is the money required to upgrade the organization’s capacity, or in this case, their fundraising function.  By putting together a plan for how they might upgrade their fundraising infrastructure (hire additional staff, revamp their website, purchase a donor database, upgrade their messaging and collateral, etc.) and then securing investors in that plan they can revolutionize how they raise money and dramatically improve their fundraising results.

But where do these investors come from, especially in times like these?  Right in your backyard.  I have yet to meet a nonprofit organization that doesn’t have at least a handful of people who are passionately committed to the organization.  And those people, when convinced in a compelling way of what it is going to take to increase the organization’s infrastructure and thus their sustainability, are more than likely to want to invest themselves, or connect the organization to people in their network that can invest.

Let me give you an example. When I joined KLRU, Austin’s PBS station, in 2005, their revenue picture was bleak.  Individual donors were declining, much as they were at PBS stations across the country.  At the same time, the number of days KLRU interrupted programming to fundraise on-air had grown to an all-time high, and among the highest in the country.  Online giving was almost non-existent and there were few major or foundation donors. I put together a fundraising function upgrade plan which cost $350,000 over 3 years and included a new donor database and online giving software, a Webmaster, staff training, and market research.  We secured a handful of foundation and individual donors (who were already KLRU donors) to fund the project. The result at the end of 3 years was an increase of $1.6 million in annual operating revenue per year.

Not every nonprofit has access to potential donors with $350K to give, but this same scenario could easily be played out on a smaller, or larger, scale. If you’re interested in learning how to create a plan to upgrade your nonprofit’s fundraising function, check out Social Velocity’s upcoming seminar:

June 23, 2009
8:30am-12 noon

Click Here to Register

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. In addition to leading Social Velocity's efforts to accelerate social innovation, she is a regular contributor to Change.org's Social Entrepreneurship blog and speaks at social innovation gatherings.

Related posts:

1. Can PRIs Support Fundraising and Capacity Building?
2. Capacity Capital
3. Overcoming the Bias Against Nonprofit Capacity