The first in a series of posts outlining a new fundraising strategy for Mozilla
Types of Non-profit Money
Traditional non-profits have access to three types of revenue:
1. Grants: Restricted funding from governments, foundations, and other institutions.
2. Major Gifts: Restricted or unrestricted gifts from individuals and family foundations.
3. Donations: Unrestricted, small dollar contributions from the public.
Organizations that engage in social enterprise – like Mozilla – add a fourth:
4. Earned Income: Revenue generated from fees, contracts, and other ‘business’ models.
How Most Non-profits Fundraise
Most non-profits try to maximize fundraising by pursuing every form of revenue, with grant, major gift, and broad-based donation strategies operating in parallel. Large organizations pull this off by setting up specialized teams and program streams. Smaller organizations who try to do it all usually fail.
The funding you pursue dictates the nature of your work. Program design, staffing, storytelling, and other decisions are shaped to attract funding. Organizations that constantly shapeshift to secure any and all forms of support lose their focus, then their efficacy, and then their impact. And with these gone they lose their narrative, which is fatal to fundraising.
How ‘Good’ Non-profits Fundraise
As a result, ‘good’ fundraising strategies are admired for their focus on grants, or gifts, or donations. Non-profits shape their teams, programs, and storytelling to specialize in one form of revenue, see an increased return, and gain the stability needed to advance their mission. This has led to the prevailing wisdom that a solid fundraising strategy targets one type of revenue.
We’re Going a Step Further
Specialization works because different types of money are suited to different purposes, present different opportunities, and are based on different relationships. From this, you could conclude that specific types of funding are suited to specific projects. Or you could conclude that specific types of funding are suited to projects at specific stages.
This is how it works in the private sector. Start-ups seek investment. Expanding companies seek financing. Established companies seek profit. The criteria for funding also shift according to your stage of development. Angel investors look for talent. Investment banks look for cashflow. Retail investors look for dividends.
Your mother pays off your credit cards because she loves you.
As a new venture grows, it looks for different types of funding. And it tries to match the strengths, risks, and process requirements of that money to their stage of development. This is what we’re going to do at Mozilla.
We will look to grants, gifts, and donations not as parallel or sole streams, but as sequential streams of income. I’ll detail how (and a bit more why) over the next two posts.
Re: “This has led to the prevailing wisdom that a solid fundraising strategy targets one type of revenue.”
I’d argue that for most it’s either Grants or small-dollar and major gifts; most successful non-profits that I know of that rely on non-grant funding have robust versions of both of those streams.
Gets into the scale of the org and the nature of the outreach and relationship with the donor. Focus of the split in this context is the timing of the appeal as it relates to the maturity of the project, as opposed to the dollar amount.
There are, of course, many exceptions: e.g., Kickstarter campaigns usually seek small dollar donations, but the nature of the relationship is more in line with the deal making of a grant or major gift.
I suppose. I was thinking more about, say, an Oxfam or a NARAL, both of which have established major donor programs but which depend substantially on conventional small-dollar programs, too — especially in times of crisis.
Totally. They fall into the ‘large orgs do it well by building specialized teams’ category.