In May 2011 I launched an ongoing blog series that profiles Social Velocity’s work with Charlotte Chamber Music, a small performing arts organization that has a big vision, but lacks the capital to get there. Charlotte Chamber Music enlisted Social Velocity’s help in 2010 to create a strategic plan and a capacity capital pitch to raise the money to execute on their big plan. You can read the whole series here.
Capacity capital (or “philanthropic equity”) is the money so many nonprofits desperately need. Capacity capital is dramatically different from the day-to-day operating revenue for which nonprofits are always fundraising. Capacity capital doesn’t fund delivery of nonprofit services (beds for a homeless shelter, new productions in an opera house, books for an after-school program). Rather, capacity capital builds the organizational infrastructure of the nonprofit (technology, systems, administrative or fundraising staff, materials) that allows the organization to become more effective or grow. But you cannot simply go out and ask for capacity capital. First, you must develop a compelling, inspiring, actionable and measurable plan for what you would do with the capacity capital.
In the earlier posts in this series, I described how we developed an inspiring, investable strategic plan, and a budget and operational plan to ensure that the plan would actually come to fruition. Once those critical pieces were in place Charlotte Chamber Music was ready to develop a capacity capital pitch and prospect strategy.
The first piece was the pitch. A funding pitch is an argument for why a donor should invest. In the case of raising capital, the pitch has to demonstrate some key components in a logical way. The key components of a capacity capital pitch are:
- The Opportunity or Need: The community need that exists and why people should care
- Your Solution: The solution that your nonprofit provides to that need and the results you are achieving
- Plan: Your strategy for the future
- Team: The management team you have in place and why they are uniquely positioned to successfully implement the plan
- Budget: The amount of capacity capital you need to implement the plan and what it will be used for
- Ask Amount: How much you are asking a specific prospect to invest
- Projected Social Return on Investment: How the investment of capacity capital compares to the ultimate impact your organization will achieve once the plan comes to fruition
Over several iterations Elaine Spallone, the Charlotte Chamber Music Executive Director, and I came up with a strong compelling pitch that included all of these elements. We created this pitch in both a PowerPoint presentation and in a 2-page leave behind document, or “Prospectus.” Both elements create a compelling argument through text, pictures, and graphical elements. The leave-behind, however, is more text heavy and allows the prospect to dig deeper and explore more on their own.
Then we started in on the prospect strategy. Once you have determined your capacity capital goal, you need to break it into pieces, or investment levels. An investment range chart, like the one below with a goal of raising $100,000 in capacity capital, helps you break a large goal into donor “pieces.” You want your lead gift to be 10-20% of the overall goal and then you create “reasonable” levels below that. A rule of thumb is that it takes 4 asks to get 1 yes, so you calculate the number of prospects you would need at each level. You will see at the lower levels the ratio diminishes to 3-to-1 and 2-to-1, this is because although some prospects at the higher level will say no to that level, they may say yes to lower levels.
Once they had an investment range chart that they were happy with, Charlotte Chamber Music could start to slot prospects at the various levels. For this, they evaluated potential prospects along 3 criteria:
- Capacity to give at the desired level
- Connection to a peer at the organization
- Concern for the mission of the organization
With a compelling pitch and prospect strategy in hand, Elaine and her board set off to start raising the capacity capital they needed to bring their strategic plan to fruition.
In the next and last post in this series, we’ll check in with Elaine to see how they are faring in raising capacity capital and implementing their strategic plan.
If you want to learn more about capacity capital, download our e-book “The Enormous Opportunity of Capacity Capital.”
Photo Credit: loop_oh