Fundraising as a source for generating income is a key and complex activity of foundations. It’s the lifeblood of charitable organizations and can serve as a way to raise awareness of a cause and drum up interest among donors. The principle is the same in not-for-profit activities as in the profit sector: The objectives are to generate income, maintain and create jobs and create value for the society. The ‘only’ difference is that in non-profit organisations, the net benefit (donations and other income) has to be distributed to and invested in beneficiaries and cannot be given back to the donors or owners as it is non-philanthropic sectors through aspects like dividends for shareholders.
In relation to foundation funding, there are three main types of charity organisations in general, and foundations specifically – Giving Foundations have a large foundation capital either in the form of a legacy given as an endowment fund to the foundation or as a mixture of such a foundation capital and additional yearly income from foundation activities such as business. Giving foundations use the annual net benefit of the capital and additional revenue for project support of the own organisation or donated to other organisations. Their income heavily depends on the financial market and on business achievements. Since the 2008 financial crises, many foundations continue to suffer from decreasing net income and have had to cut their donations and own infrastructure. These foundations are either relatively unknown to the public since they do not need to publicly fundraise nor market, or—like many foundations in the last ten years—become known through their public invitation to submit funding support requests.
Receiving Foundations on the other hand usually have limited foundation capital, usually the minimum amount that is required by law of the state where the foundation has its legal registration(e.g. in Switzerland CHF 50,000). A key part of their activities is fundraising: collecting funds from various sources for annual expenses, projects and administration, and to build reserves for sustainable development. Their income heavily depends on their fundraising skills, motivations and the economic situation in the donor areas and sectors. Typically, they are well known in the public because they have to publicly fundraise.
There are many options when it comes to raising money for a non-profit and the fundraising channels and methods are very broad, however, these are some of the main types. As you review these types of fundraising — and the different ideas behind how to raise money within both categories — don’t be afraid to combine some of the methods, or use the multi-channel fundraising approach.
Personalities: Having a well-known personality as president, Board member or director of an organization or a movie or sport star as special ‘ambassador’, increases visibility and credibility of an organization as basis for donations.
The income sources by category of donors and donations differ substantially between the donors and goals. For example general donations are given to institutions which then allocates a programme or project according to the needs and budget lines whilst project-related (earmarked) donations are given for a specific programme, project, campaign or even for an individual (scholarship, individual child). Earmarked donations are a strong trend since donors want to have a better control, a relation to the project/country/person. Institutional donors need to justify the donation as coherent to their strategy and priorities. On the other hand, receiving institutions need enough general donations in order to balance over-funding or under-funding of projects in order to reach the overall goals of the philanthropic activity. General donations also depend on the trust of donors and their long term relationship with an institution – the relationship, trust in the leadership, transparent, and credible information policy are key for general contributions.
To conclude, Receiving and Giving Foundations have multiple sources of resources through maintaining their own resources, receiving donations from third parties and giving donations to third parties. Many foundations combine these activities. It means that they do not implement all projects themselves but are direct implementers of some and donors and facilitators of other projects. Creating a non-profit fundraising plan or strategy for your next campaign will help you focus your efforts and guide your day-to-day fundraising efforts when things get tough. It’ll also ensure your fundraising team is aligned on certain tactics or events that may be part of your strategy. Also, thank your donors for their gift, and take care to be a good steward of that gift. Thanking people isn’t just the right thing to do; properly done, a thank-you also sets the stage for the next gift. Indeed, the best fundraisers always assume that the first gift is never the last gift. Stewardship, meanwhile, is by far the most ignored and overlooked aspect of fundraising because if you thank your donors and steward their donation with care, you’ll find that asking them for money gets easier, not harder.