Attracting 'Big' Philanthropy in a Changing Landscape

Over the last several years, much has been made of the big bets being made by our country’s most prominent philanthropists. The Chan-Zuckerberg Initiative, the Bill and Melinda Gates Foundation and the Edna McConnell Clark Foundation’s Blue Meridian Partners are approaching giving in historically new ways—narrowing investment and making larger gifts to fewer charities—and, as a result, philanthropists at all budget sizes are beginning to follow suit. A recent study from Coutts & Co. and the Indiana University Lily Family School of Philanthropy illustrated that the number of $1 million or more gifts increased by 70 percent in 2015. In short, donors are giving larger gifts to fewer charities.

The philanthropy pie is growing, but the slices are getting bigger. Those slow to the table are going to be left hungry. The evolving behavior of philanthropists will also require an innovative approach from the nonprofit organizations and leaders that seek their investment. Focusing on improvement and activity in three key areas—the case for support, executive involvement in fundraising and investing in fundraising—will best position nonprofits to win in an increasingly competitive market.

Case for Support

A nonprofit’s case for support articulates why an individual or institution should invest their philanthropy with that particular organization. As a sector, nonprofits have come to understand (if not always adhere to) the necessity that this case should contain their theory of change, the metrics by which progress will be measured, along with heartwarming stories of programs in action. Increasingly, however, philanthropists are now also asking to see business plans: How can nonprofits show sustainability over the long-term?

This question is most evident when looking at the initial investments flowing from Blue Meridian Partners. This collaborative of generous philanthropists is making multi-year, eight-figure commitments, but doing so only for nonprofits that can make a strong case they will successfully absorb this capital and thrive once it has been allocated. A sustainable business plan doesn’t need to rely on developing income streams outside of philanthropic inputs (though it could). But good plans must explain how increasing revenue streams—philanthropic or otherwise—can be maintained, and are in fact central to any programmatic or strategic expansion. The flywheel of organizational growth must be designed to feed revenue growth, and vice versa.

The CEO as Chief Fundraiser

A nonprofit CEO must be prepared to act as the organization’s chief fundraiser (not to be confused with its chief development officer—see below). The amount of time a nonprofit CEO should spend on fundraising is variable depending on the particular organization and its circumstances. While I used to answer this common question with a recommendation that a minimum rule of thumb was 20 percent, increasingly I think that minimum now needs to be closer to 50 percent.

Just as in the capital markets, individuals making large philanthropic investments require confidence in the leadership of the organization they are investing in. This requires CEOs to spend time with donors to understand their needs, communicate the vision of their organization and dig in on the business plan, as described above. Seven-figure donors—and often even six- and five-figure donors—want to get to know the CEO, and to understand why they make the decisions they do.

As you will see below, this does not relinquish the need for a strong development team. In fact, the development office needs even greater strength to ensure the CEO’s time is being used effectively. However, it is also imperative now that nonprofits invest in improving senior leadership overall (chief operating officer/chief of staff/chief program officer, etc.), to offset the CEO’s decreasing availability for day to day operations.

Invest in Fundraising

As more sophisticated donors make larger investments in fewer charities, it becomes even more important that fundraising programs are well resourced, and ready to compete. A chief development officer who holds the trust of the CEO, and can stand in to articulate his or her vision, is paramount, as is a well-staffed development team that can meet the needs of donors by conducting greater due diligence and asking deeper questions. And underpinning all of this, nonprofits also need solid systems—a database, communications plan, research capacity—that keeps them moving forward, and that can support the CEO to most effectively and efficiently invest their fundraising time.

The opportunity for nonprofits to attract transformational capital has never been greater. But, simply put, the old ways will not work to capture the attention of this new generation of philanthropists. Nonprofits must evolve in sync with their donors, and focusing on the areas and actions described above is a great first step towards capitalizing upon the historic opportunities that are currently available.