In our previous Future of Grantmaking piece we established that traditional models are creating a system of scarcity and exacerbating inequality by operating in outdated, top-down approaches that impose insurmountable barriers to many organizations. In this installment we will begin to examine some of the options for how we can begin to educate funders on the changing needs of the sector, and work together to reframe the discussion of funding on human terms.
The Human Service Forum is happy to have Heather Bell and Kelly Minton join this discussion about changing the narrative of scarcity in the nonprofit world. We are proud alumni of their Innovation Accelerator program.
Investing in Trust Pays Off for Nonprofits and Funders
By Heather Bell and Kelly Minto, Co-Founders of Innovation Accelerator
It is a magical and safe place where the walls are bright and colorful, and the break room is stocked with only the best organic food, all free for the taking. The computers, oh, the beautiful computers, sitting on desks where ergonomic chairs swivel effortlessly, ready to nestle your bum. People are playing games, and doing yoga in the designated wellness room, where there is always nitro cold brew on tap—and sometimes even a local IPA!
Sounds just like your office right? No? Well, that’s because you are not a well-funded start-up.
The current funding model for most nonprofits encourages competition between organizations for funds. This rewards organizations who can demonstrate greater outcomes for less investment—driving a race to the bottom that often excludes smaller, grassroots organizations who are led by people of color or serving communities in great need. This model stands in direct opposition to the values of the human services sector, which sees communities as interconnected and complex, and knows that sustained and meaningful change comes from rising up together.
This model has also eroded trust between funders and grantees, between organizations and the people they serve, and between organizations who compete for the same pool of funding resources.
And perhaps, most importantly, the current funding model has created a perception of scarcity that runs deeply in most of the nonprofit world. This perception undermines a sense of safety for organizational leaders and their employees. They worry regularly about their ability to continue because funds are raised annually, and, often, they need to be raised from different sources each year. Changing tactics to better serve people frequently threatens to upset a carefully crafted patchwork of funding.
To thrive and grow people need to feel safe—this safety must be created for the organizations solving human needs. And to create new models that will actually meet the needs of the changing nonprofit landscape, trust will need to be rebuilt, and new styles of collaboration and communication will need to be explored.
So how can we address these challenges?
Funding needs to meet organizations in more efficient and collaborative ways. Currently, the nonprofit sector doesn’t have the cohesive structures, trust, or access to funders that traditional for-profits do. They are expected to succeed the first time (the first year, even). They are expected to grow from a place of scarcity, using a chaotic funding ecosystem. By contrast, the for-profit world has structures and mechanisms that can be adapted to grow robust organizations that continually innovate to solve important challenges and needs.
Some of the structures and mechanisms that create safety and abundance for for-profit companies, especially new ventures, include:
- A standard process for seeking funding. It is universally understood and accepted across funding sources how a team will present and what they need to present. You can find the template anywhere on the web. Just google “pitch presentation template”. You can even find a template embedded in Google Slides and Canva. We can think of pitch presentations as a standard application for funds.
- Businesses talk to funders in groups. Potential investors group themselves together. From idea-stage to scaling-stage, teams present to multiple funders at once creating a more efficient process for both funders and businesses.
- Talking to funders is a real-time two-way conversation. Following the standard presentation, potential funders ask questions. A conversation ensues where advice is given, and networks are opened leading to additional opportunities. Funders often have years of experience, valuable knowledge, and contacts to share.
- Ventures, once proof-of-concept is established, are given ample funding to prove that their ideas work, to develop their business model, to operationalize, and to scale. Funders do not expect companies to be self-sustaining in their first year—often funds are given for three to five years, or more. Amazon, founded in 1994, was not profitable until 2001. And, though investors complained along the way, the company raised funds many, many times.
- Failure is expected and even encouraged. Viewed as an essential part of the process, funders anticipate that not every idea will succeed. And, failure is viewed as a sign of experience, perseverance and tenacity. As an example, Nick Woodman, GoPro Founder, had two significant failures prior to his success with the tethered cameras. The most noted, In 1999 Woodman started a tech company called Funbug. He raised 3.9 million dollars in funding; it was gone by April 2001. That fact did not stop funders from investing in him and his ideas again.
This is not to suggest that for-profits have it easier with funders. They don’t. In fact, sometimes it gets messy. What they do have is a cohesive structure to function within and mechanisms that foster learning and growth, even in the face of failure. Embracing and implementing the tactics above both nonprofit organizations and funders can create a new funding model based on collaboration, trust building, and overcoming the perception of scarcity.
At Innovation Accelerator, we believe that true partnerships between funders and grantees creates more powerful lasting change and innovation. We see the tools above being implemented in small ways across the sector. For example:
- Social Innovation Forum’s Social Innovator Accelerator brings funders and nonprofits into conversation early to create a greater level of collaboration and provide opportunities for collective problem solving.
- Social Justice Partners LA Systems Change Accelerator brings seed funding to new ventures right up front, along with hundreds of hours of pro bono professional support.
- In our Innovation Accelerator program testing new ventures early in the development process is key. No one, truly, no one, gets it right the first time. And, that’s a good thing. Knowing a venture is off track early, allows for course correction that leads to a much better outcome.
Trust. That is the main thesis throughout this piece. Trust must go in both directions between funders and grantees. Trust thrives in structure, when people are clear about their needs, expectations, and outcomes. And organizations, those who provide foundational support to people in our communities, thrive when they feel safe, supported AND trusted.
We believe that the tactics mentioned here are just one set of tools to help build a new funding model based on mutual trust and power sharing. We believe the examples above provide evidence that processes and models are shifting and that there is good traction for the continued development of a more collaborative and abundant nonprofit funding ecosystem.
We’re curious–How would you create more trust with your funders? Please share your thoughts by reaching out to us at firstname.lastname@example.org. We’re eager to learn from you all, and collectively move towards a more just and prosperous society.
This blog is part of a series published by HSF exploring the state of philanthropy and the social good sector. Make sure to check out the previous piece, The Future of Grantmaking: Funding Models Aren’t Progressing as Quickly as Our Values.
About Heather Bell, Co-Founder – Heather brings decades of experience helping people improve existing processes and build new things. After working in both the corporate world and public higher education, she has returned to her roots working with small businesses and startup organizations. Heather thrives when she is working with amazing teams, constantly learning, and building bridges with humans.
About Co-Founder, Kelly Minton – Kelly brings experience from the nonprofit and for-profit sectors. She has worked as a marketing associate in the corporate world, launched two startups and has worked in nonprofit advancement. She is well versed in traditional fundraising and board governance.