Year-End Thoughts and the “January Effect”…

At FoundationSearch, we are frequently asked whether there is a seasonality to foundation giving, as there is in individual giving.

Unfortunately, foundations most often don’t report the exact month of their donations, however we can easily determine their fiscal year-end.

Why is the year-end date of the foundation important? For a few reasons…

“Year-end” is the time that funders must ensure that they have met their minimum required donation amounts to qualified donees. The Internal Revenue Service requires that private foundations donate at least 5% of their assets averaged over a 5 year rolling timeframe. If they have not met this donation threshold, they will most likely be looking to meet it before their year-end. This presents an opportunity for charities to apply at an advantageous time.

Even if foundations have met their minimum giving thresholds, “left over” funds at year-end can leave the impression that those in charge of the grant making process have been unsuccessful in their efforts to locate a worthy recipient. This also presents an opportunity for the grant seeker.

The “new year” for every foundation starts the day after “year-end”, with renewed purpose – and funding. All donation budgets and plans are refreshed and await a new cycle of funding requests, decisions and grant awards. The sooner the grant seeker approaches the foundation after the start of their new year, the better the chances are that funding will be available.

So why did I title this blog “the January Effect”? Because December and January see more foundations ending their fiscal years and starting their new ones than any other months in the year. Of the 122,345 foundations contained in FoundationSearch, 87,424 have their year-end during this period.

So, while we cannot prove that there is a granting seasonality, there certainly is an “opportunity” seasonality awaiting the grant seeker.

If you want to learn more about how to identify the year-end for foundations, please drop us a note and we’d be pleased to help you.

In the meantime, all of us at Metasoft wish you and your families a safe and happy holiday!

Trevor Skillen

For other blogs in this Foundation Fundraising series follow this link.

 

Foundations – Should they be part of your fundraising strategy in 2017?

In the course of speaking with almost 20,000 non-profits each month about their funding needs and plans, we sometimes hear that “foundation fundraising is not part of our focus”.  We believe that there are some very compelling reasons to introduce or re-visit foundations as a potential source of funding for your organization. Those reasons are:

Growth – the most recent GIVING USA report from Indiana University indicates that foundation funding was the fastest growing giving source in 2015, growing at a rate of 6.5%, compared to 3.8% for giving by individual donors. Foundations gave $58.46 billion, in the form of an estimated 832,000 grants – that is one grant for every two charities in the US so your odds of getting funded – if you apply of course – are good.

Stable Giving – Foundations must make charitable grants – in good times and bad – of at least 5% of their assets, averaged over five years. Importantly, foundations frequently INCREASE their donations in challenging times to attempt to compensate for the financial difficulties their recipients may face.

Predictable giving – Foundations exist to donate to charity (unlike individuals and corporations) and often publish giving guidelines relating to geographic and philanthropic areas of giving interest – furthermore, analysis of giving through time indicates that most foundations maintain a strong, consistent focus in the areas they support.

Low risk / low cost – unlike high, upfront expenditure fundraising efforts like golf tournaments and galas, foundation fundraising requires very little upfront investment, typically $5,000-$10,000, and with the average foundation grant amount of $66,300, it provides a cost efficient method of fundraising – all that is required to start is a funding database which identifies good funding prospects, a good letter, and stamps and envelopes.

Low effort – relative to almost any other form of fundraising, approaching foundations requires fewer resources to succeed. This is particularly true of the upfront work in sorting through the over 120,000 US foundations to identify a list of “best prospects” for your project, a task that a few years ago could consume months of effort. Foundation funding information and management systems like FoundationSearch are now able to intelligently and accurately identify a short list of the best prospects for a variety of project funding needs – and recommend a safe asking amount based on the funders prior giving history.  The balance of the upfront effort simply involves writing and sending a letter of inquiry to your foundation prospects to determine their interest in helping you.

Increased credibility for you and your organization – well, once you get funded by a foundation that is. When Metasoft was a small, three person software start-up, we had only one customer – but that customer was Microsoft, and that client said good things about our software and people and opened the doors of more than one hundred other large high tech companies who became customers of our graphics and imaging technology. Similarly, if you were to be successful in attracting a grant from the Gates Foundation, this would open up many doors in the foundation and corporate world for your organization for years to come.

Diversification of funding sources – financial advisors will strongly advise you not to put your life savings into a single stock or sector; for the same reason, having a variety of funding sources—including foundation funding—will strengthen your organization and protect it from the sharp downturns every economy periodically experiences.

Want to learn more or add your thoughts? Feel free to contribute….

With foundation funders, does “No” mean “Maybe”? – Part 1

A sizeable number of the more than 121,000 foundations in the US -19,888- indicate that they do not accept unsolicited proposals.

We also know that a significant number of current and past FoundationSearch members (more than 16,000) do not approach them for that reason. Is there a missed opportunity here?

Many grant seekers believe that these funders are “captive funders” that act to support a single non-profit such as a school or hospital; or they have a small list of charitable organizations they wish to support and are not receptive to solicitations from new charities. In fact, many of our FoundationSearch users “tag” these foundations in order to exclude them from searches and prospect lists altogether.

But is this really an effective or advisable strategy?

Internet research on the topic reveals that Bradley Smith, the President of Foundation Center, wrote about this topic in 2011 in a blog post entitled “Don’t Call us, We’ll Call You”.  In this piece, he addresses some of the reasons why foundations state that they do not accept unsolicited proposals – the two principal reasons he cites are – one, a desire by funders to limit the volume of requests they are receiving, and two, a desire to proactively choose charities to fulfill their strategic goals. Unfortunately, he did not examine how pervasive the issue is with foundations, and we found no other credible research on the matter. So as such, we decided to do our own.

To do this, we conducted a comprehensive review of FoundationSearch data spanning more than fifteen years of US granting history for over 75,000 grantmaking foundations including more than 10 million grants to gain some insight.

This is what we learned:

19,988 foundations indicate that they do not accept unsolicited proposals.

Of these, 4,608 of these foundations – 23% –  provided no grants to new recipients over the period analyzed.  But 15,380 of these foundations – 77% –  in actual fact did provide grants to multiple new recipients over the period analyzed.

So, the good news is that the majority of funders that state they are not soliciting new proposals are, in fact, funding new recipients.

There are two takeaway lessons from this.

First; don’t be too quick to write off a foundation that states that they are not soliciting proposals –FoundationSearch provides detailed charts in each foundation profile indicating new vs repeat recipients by year. A review of these FoundationSearch charts offers detailed insight into grant funding provided to new recipients. These funding trends can be viewed by Value of Grants, Number of Grants, and Number of Recipients.

Comparison of the Value of New vs Repeat Grants Given by the Marvin and Donna Schwartz Foundation
Value of New vs Repeat Grants Given by the Marvin and Donna Schwartz Foundation
Click on chart to view full size
Comparison of the Number of New vs Repeat Grants Given by the Marvin and Donna Schwartz Foundation
Number of New vs Repeat Grants Given by the Marvin and Donna Schwartz Foundation
Click on chart to view full size
Comparison of the Number of New vs Repeat Grant Recipients for the Marvin and Donna Schwartz Foundation
Number of New vs Repeat Grant Recipients for the Marvin and Donna Schwartz Foundation
Click on chart to view full size

Second; for those funders who are in fact funding new recipients year over year, you will need to find another way in the door – more on this in my next blog.

Recommended Ask Amount

You have worked your way through over 120,000 US foundations to find the best foundation funding prospects for your organization (see my previous blogs on how to determine your best funders, and my review of some of the tools available to do this). Now, you need to answer a crucial question: how much do you ask for from each funder?
It’s a question that every fundraiser needs to ask, and more importantly, needs to have the answer to. In this week’s blog post, we’ll review the problem, do a web survey of the prevailing wisdom, and then outline some of the possible solutions.

You may be asking yourself why you should not just simply ask each of your funding prospects for the amount you need to fund your project. The answer is that foundations have both “floors” and ceilings” on the amounts they give — a request that is too small may be deemed too expensive for the funder to oversee relative to the amount donated; too large a request may exceed the funder’s capacity to give. To compound the problem, these floors and ceilings vary by funder, your area of operation, your non-profit category and other factors including the size of your proposed outcome.

There has been little discussion in the sector on the topic of ask amounts for foundations. A survey of some of the advice available online about optimal ask amounts reveals that most advice is geared toward individual giving capacity — how much to ask from individual donors. From blog posts at DonorPerfect (“the secret to asking the right amount”), to gift range calculators from Blackbaud, most of the guidance and recommendations center around how to deal with individual giving. Some of the suggestions can translate to the world of foundation fundraising, but some of it simply doesn’t apply.

A post on TheGrantPlant, a blog site, directly addresses foundation funder ask amounts and suggests the following: do your research for appropriate funding prospects, check the foundation’s giving history, and don’t expect the entire amount to come from a single foundation funder. All of which makes sense in a very basic and time consuming way. Cataloguing a foundation’s giving history can take time, even when you have tools like Foundation Center’s Foundation Directory Online and Metasoft’s FoundationSearch available. Some foundations actually state their desired gift amounts and publish their desired grant range amounts, but most do not. So, a review of the foundation’s past granting history can give good — and perhaps the only — indication of what an ideal ask amount should be. To do this, you would examine all recent grants made by your foundation prospect, select those that were made to your funding category and location, and determine the “median or middle” amount given, and repeat for each funding prospect — lots of work but essential work. If you had originally identified 200 good foundation prospects for your project, this work could take an hour per prospect, or 200 hours…

Grants given by Dave Thomas Foundation for Adoption, to New York state, social & human services category
Grants given by Dave Thomas Foundation for Adoption, to New York state, social & human services category

FoundationSearch is working to take some of the work out of this process, by providing a method of calculating the ideal ask amount automatically, for each funder. Built into its analytic tool for finding the “best funders” for your project, a recommended ask amount is calculated on a foundation by foundation basis by your stated funding category and location. The system reviews the entire granting history for each of your foundation prospects, selects the historic grants that most closely match your project parameters, and calculates the median, maximum and minimum grant amounts made by the funder. The median (middle) grant amount is selected as the “recommended ask amount.” Users can click the amount, and easily view a chart (like the one shown above) of the relevant historic grants and see in which range most of the grants fall.

By asking for a grant amount that is in the middle of the amounts previously granted by the foundation, you lessen the risk of your request being rejected, and you stand a better chance of securing the grant from the foundations you approach. With a list of the best funders, and the optimal amounts to ask from each funder, you are in a much better position to succeed in your fundraising efforts.

(Please feel free to leave a comment, or link/re-post as you like. I look forward to your comments, and opening up the conversation on foundation fundraising!)