ABC of Fundraising for startup nonprofits

Fund raising is both an art and a science.It is an art to the extent that its effectiveness depends on the creativity of the fund raisers. However it is a science because fund raising has really evolved into a complex system with the development of new and creative instruments for fund raising.

This series of tutorials will delve more into the science aspect of fund raising leaving the art side and the scope of creativity open for you to explore.

The most basic sources of funds for nonprofit organizations are –

1. Individual donors – As per a report published by Giving USA, funds from individual donors constitutes around 3/4th of the total charitable donations in the United States.

2. Corporate giving – Corporate funds can be attracted in two forms –

a) Event sponsorship – which is more of an episodic funding.
b) Cause marketing – which can be a long term engagement.

Corporate funding is now identified as a major source of funding as these corporates are understanding the importance of community service as an implicit tool to attract respect, publicity and customer loyalty.

3. Government grants – Government (at local,state and federal levels) offers grants to a large number of nonprofit organizations. The U.S. Department of Health and Human Services provides a vast listing of Government grants at Grants.gov

4. Fiscal sponsors – An ideal tool for new start up nonprofit organizations, where by another non profit organization agrees to sponsor the programs of a new organization.  For more information : Starting with a fiscal sponsorship.

5. Foundations – There are many kinds of foundations that can be approached for raising funds –

a) Private Foundations – They are further classified into two –

(i) Corporate Foundations – Foundations that receive endowments from corporate entities.

(ii) Family Foundations – Foundations that receive endowments from families. e.g – Rockfeller foundation, Ford Foundation, Gates Foundation etc.

b) Community Foundations – Community Foundations are foundations that pool the donations of several donors who don’t want to set up their own private foundations. Community foundations  are one of the most widely used sources for receiving donor-advised funds for nonprofit organizations.

6) Federated Funds– Federated funds are cooperative structures  which are set up, owned and managed by its constituent member nonprofit organizations. These enterprises raise funds and distributes it amongst its constituent member organizations. This form of fund raising is generally used by well established larger non profit organizations with deep sector linkage.  United Ways is one of the better known federated funds in the country.