Episode 021 – Nonprofit Startup Funding


By Jeremy Reis

In this fourth episode of a special podcast series teaching the fundamentals of fundraising, you’ll learn how to pursue nonprofit startup funding. Whether you’re at a brand new nonprofit, are revamping a fundraising program, or need creative ideas for fundraising for a new campaign or project, this episode will give you actionable fundraising ideas. My teenage daughter is interested in nonprofit fundraising, so I’ve created a special series in Nonprofit Answers to help her learn fundraising. I know the information in these episodes can help everyone in nonprofit development.

Full Transcript:

A bit ago, my 15 year old daughter Emily came to me, and she was interested in what I do as a nonprofit fundraiser. She expressed interest that this might be a career that she wants to go into. And so, I’ve put together this podcast series for her. I’ve been really exploring the basics of fundraising, from the psychology of a donor all the way to how we convert someone into becoming a donor. We’re walking through a series of explaining fundraising topics to my 15 year old daughter. I’m hoping that as we go along, that you get a lot from this series, that you hear tips and hints and tricks and things I’ve learned over the year from people who are far smarter than me about fundraising, about the nonprofit world, and about how you can improve your skills and become the best nonprofit fundraiser you can.

Today, we’re going to talk about how to get that initial funding. So let’s imagine that you are an organization that is just starting out, a startup nonprofit, or at a nonprofit who’s been around a while, but you’ve been relying on a couple of major donors or board members to really fund the operations. And so, we want to go through the initial steps of how to get funding, what that looks like.

If you’re at an existing nonprofit and you’re a fundraiser, I think you’ll get a lot from this episode, because we walk through a lot of the basics of who you would go to and ask for funding. You may generate some ideas on certain campaigns on how you can expand your supporter base and find new donors to really go into some new areas for your nonprofit. So no matter what your size, I think you’re going to get a lot from this episode. We really walk through the steps of asking and creative ideas on how you can find local funding for your new nonprofit, existing nonprofit, or nonprofit that just needs to expand their donor base.

So our goal is how to get that initial funding as an organization. There’s a couple of phases that we’re going to go through, a couple of ways to get funding, of people to get funding from. The first one we’re going to talk about is to get your seed capital. So seed capital is the initial amount of funding that you need to start up the organization. Every nonprofit organization’s going to have startup costs from legal registrations, both within your state, but also the federal government. You need to register with many of the states in order to even do fundraising in those states. And so as a lot of our fundraising goes online, then you’re going to need to be registered in almost every state in the union if you’re in the U.S. in order to accept donations, and in order to comply to the law. Along with that comes reporting requirements and annual filing fees that you’re going to have to pay.

So there are a number of startup costs. You can’t just start a nonprofit without any cash, as you’ll run quickly into fines from many aggressive state governments that want to make sure that you are following the law. So we need a seed capital phase. And for a lot people, the seed capital phase is going to come from friends, family, and fans. What you want to do in this phase is to go out to people that you know and ask them if they will support you, or if they know somebody that would support your cause. And if they do, then set up an appointment with them and use them as a referral source to go meet with other prospective donors to help on this initial seed capital phase.

You want to find people that are passionate about supporting you. So those are kind of the friends and family phase, where you’re trying to find people who are really interested in supporting you. Maybe not even necessarily the cause, but people that believe in you and want to support you. And they’ll help lead you to people that support the cause. I’m going to say this in a gentle way. You want to find people that have a hard time saying no to you, because these are the people that are going to provide that initial funding that you need to start up your organization.

The form that this fundraising takes is typically a personal conversation. So lunch, a dinner, a coffee. I would be as completely honest with people as you can upfront. You don’t want to sneak into a coffee or a lunch and pop the question for funding. So tell people upfront, “Starting a nonprofit. My nonprofit deals with sex trafficking in the Philadelphia area. I really believe in this cause. I really believe that it’s an underserved area of work in the city, and I’d really love to talk to you about your help. Or if you know people that can help me, can we meet for coffee, can we meet for lunch to walk through that? No pressure. I’m not going to pressure you to give. But if you have time, I really love your advice on how I can help raise some funds to start up this nonprofit.” It could be as very simple as that. You don’t want to pressure people and make people feel bad that they didn’t support you. But you do want to meet with people that believe in you and believe in the cause. So this isn’t for everyone. You’re not going to get a yes … You know, in these initial phases, it’s really a numbers game. You’re going to go through a lot of people to find people that will support you.

One thing to keep in mind here, I’ve had this objection as I’ve talked to smaller nonprofits, and there have been some nonprofits I’ve really pushed back on even the idea of fundraising. That a couple of major donors fund it, and they don’t want to get into mass donors or general donors and fundraising. And the idea is that they don’t want the headache that comes with that, and why would people support that cause anyways? I want to tell you that if you don’t ask, then you’re robbing someone of an opportunity. If you’re a Christian, you know, many of us are led to support specific causes and specific people. If you’re not a Christian, many people just have a passion for the problem area that you’re solving.

And so fundraising is not a dirty thing in the least. It’s a great thing ’cause it supports the operations of your organization, and because you have beneficiaries that need that support. And so, when you’re unwilling to ask someone, when you’re afraid to ask, then you’re really robbing that person of an opportunity to fulfill their mission and their cause. ‘Cause they’re not going to be able to do what you do, they’re not going to start a nonprofit. They’re not going to go and do the hard work that you’re doing to support these people, but they do want to help. So when they have a heart for a cause and you have that cause and you don’t connect the two, then you are really robbing them of an opportunity for them to fulfill their mission, fulfill their desire to help.

When you do set up this meeting, two of you have coffee, dinner, even just meet with a prospective donor, you really want to focus on the donor. You want to tell the story of the why and why this cause. Why is this cause important? Why is sex trafficking in Philadelphia area important? Why is it underserved? Why are there kids in the U.S. going into sex trafficking? You want to tell the story of a beneficiary. Tell of someone that’s been impacted by this and how this donation is going to help that specific person.

You really need to answer these questions. What’s the pain point that you’re trying to solve for this donor? Every donor has a pain point that they’re trying to solve. The pain point may be as simple as, they have a passion for a specific cause, and they don’t know an organization that they can trust to give that money to. And if they know you and trust you, then they know that if they give you those dollars, that it’s going to go to a good cause.

The second question that you need to answer is, why you? Why are you the one to solve this problem? Why are you starting this nonprofit? Why are you the right guy to take that donation and to help someone with it? Third, you need to answer the question, what is your unique selling proposition? Unique selling proposition is a marketing phrase that’s used in the business world, and it’s what makes you unique. What makes your nonprofit special, that you want to ask them for a donation to support your cause? What is the one thing that sets you apart from other nonprofits in that area?

So if you are starting a sex-trafficking organization in Philadelphia, you serve a specific people group that no one else is serving. Are you in a specific area of the city that no one else is serving? Do you have a unique methodology for helping counsel people who have gone through this? Is there something else that sets you apart, that sets you as a unique organization that this donor should support?

Now the second channel, or way, of raising funds is from what I call founding board members. So these are people that may or may not donate, but who have influence in a specific area that you’re trying to raise money from. So these people are often connectors. They’re often people that walk in certain circles, that make connections and introductions for you, or can introduce you to prospective donors. So if you think about people that might be in this group, we might have a local business owner who’s got a lot of influence in the community. A local politician or former politician, again, who has influence in the community. A pastor of a large church that knows many pastors, that has a number of people who look up to him for guidance and can provide foundational support and spiritual support for your new nonprofit. And maybe founders of other nonprofit organizations that have done work in this area, that support your cause, that know that your organization is going to do a good job.

These founding board members, their role is to introduce you into circles that you may not already be in, and make connections with potential donors and with potentials advocates and volunteers otherwise that you couldn’t make a connection to. So it’s very important to find this group of people and get them engaged. And they really need to have a passion for you or for your cause in order to serve in this role as a founding board member.

Third, you want to have a series of dinners and coffee. And dinners and coffee is, you work with influencers in groups that have connections to potential donors, and you ask them to invite their friends and family to a dinner. You tell them to be upfront about it, that at this dinner you’re going to hear about this nonprofit and the cause that they are fighting for. And you go in and present about the nonprofit, and you can tell people that this is a no pressure zone, that the only outcome that you’re asking for from the people there is that if they’re interested, and you’ll go around and talk to the people in the room, if they’re interested, that they’d be willing to set up a coffee date for you in the coming days and weeks after the event. And you want to make those coffees as quickly as possible so you can capture that fire and that interest of people when they come to this dinner.

And so, the format of the dinner is, you want the host to really build you up as a expert, as a valued friend, a valued colleague, that your organization is important. You will then explain the story of your organization, of how you came to be, the story of a beneficiary that’s been supported by your organization, and the great outcome that came from that. The story of why that potential donor is sitting in that room right now and what kind of impact that they could have. And then you’re going to have a time where you’re going to go and mingle among that audience and meet with people around the room and try to set up coffees with them in order to explain deeper what your organization does and how you can connect with that donor to fulfill their personal cause and their personal desire to help and connect them to the great work that you do and the beneficiaries that you do.

The fourth way that you can raise funds for your nonprofit organization is from other like-minded organizations. These may be other nonprofits, social enterprises, businesses, churches, synagogues, other organizations in your area that support the cause that you are fighting for. And so, there may be churches or synagogues in the area that have a focus on the specific cause that you’re working towards. The church itself may not have people that work in this area, and so they want to support other nonprofit organizations that do work in this area. There may be social enterprises like coffee shops or retailers or small businesses that want to give back. And your organization will be an avenue for them to give back. You may also find many of the organizations in your area, if you’re a 501(c)(3), have employee match programs, where when a employee gives of either money or time, that the organization matches those donations.

I worked at an organization, at a for-profit corporation, and they had a employee giving program that for every hour that an employee donated to a nonprofit organization, the organization would cut a check of $25 per hour for those volunteer hours. So if I went in a given month and gave 20 hours, then the organization that I worked for would cut them a check for $500. In addition, they also matched up to a certain amount of cash donations to applicable organizations. So you’ll find these like-minded organizations that will be interested in helping support your nonprofit.

In many areas, there’s also local community foundations. And local community foundations pool money from donors and support causes within the local community. If your nonprofit works within the local community working with beneficiaries, then you may find that these local community foundations are willing to give you money to support your cause. There’s a couple of caveats with local community foundations. Oftentimes there’s a significant amount of paperwork and waiting time for funding. There’s also typically a lot of reporting back of results, and documentation of results on the backend. So it isn’t as simple as going in and asking for money and getting a check same day. You are going to go through a number of hurdles in order to get that money. They’re going to monitor you and then evaluate based on the results that you report. So you will need a mechanism of reporting back to that local community foundation to meet the grant requirements that they give you.

The sixth way of raising funding is through peer-to-peer and crowdfunding donations. Peer-to-peer funding is when a donor or prospective donor exposes your organization to their peers for a campaign, a cause, or other kind of fundraising. So this is where somebody would be willing and commit to putting your cause or your campaign in front of their social influence, in front of their social audience. So that’s peer-to-peer.

Crowdfunding’s a little bit different in that crowdfunding is when a number of people come together to fund a specific campaign or project. And so crowdfunding may or may not necessarily be peer-to-peer. It may not involve a bunch of people sharing to their social network, but that is typically how crowdfunding is shared. But crowdfunding is a large number of people, whether or not they know each other, coming together to fund a specific campaign or project.

Peer-to-peer, it’s a powerful way of fundraising. I know of organizations who for years have relied on major donor funding. And when they moved into general donor and they went straight into peer-to-peer, and a majority of their income is now coming from peer-to-peer and crowdfunding campaigns. And so, you want to take advantage of this as early as possible in your nonprofit. You never know when you’re going to hit on something that really strikes a passion in your supporters, where they want to share that with their social networks.

Thank you for joining me today on this episode of Nonprofit Answers. Today we learned all of the different funding options for nonprofits who are in startup mode or who are looking for different areas to raise their funds.


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