Startup cash - networking for support

Search online for "nonprofit startup funding", and you'll get lots of results from well-known players in the field as well as articles from prestigious universities and publications.

The common thread is that you aren't going to access funding from one of the large foundations. In the beginning this is definitely a  DIY project.

Nearly all of these searches are going to emphasize you almost literally have to be a door-to-door salesperson.

Of course today that also means social networking, but regardless of how you do it you have to start with one-on-one contact. Checks don't write themselves.

One of the currently popular ways to raise capital is through some type of crowdfunding. It's relatively inexpensive to do, and some of the results are staggeringly successful.

What all of these campaigns have in common is viewer participation and that comes from awareness.

 

That means you have to do something to  generate interest.

 

That could mean latching onto a current news story. Remember the business owner in Ferguson MO whose business was trashed so badly she thought she might have to close for good? She got so many contributions from a GoFundMe campaign that she is going to be able to help other businesses that suffered after their businesses were trashed. That campaign leveraged the national media attention on the underlying issue.

Or maybe you have a few dozen followers on your Facebook page that already have an interest in what you do. You can ask them to tweet out a call for supporters interested in learning more about your cause.

Local papers are usually looking for community or local area news.  Find out who is bylining those stories and let them know you have some news for them. It helps if you already have a fundraising campaign in place.  Be sure you let the interviewer know how people can help.

If your nonprofit targets an area or problem that has already been in the news recently, be sure you let the reporter know.  After all, it could turn into a series of articles for them.

And of course there is your board of directors. Each one of them probably has a social media or community presence as well.

Attracting startup nonprofit cash is about building relationships. Relationships require connecting to someone. Check out these two messages.

Both use a picture of a little dog. One says "Local group wants to build no-kill animal shelter"  The other one says "Without your help, Fido will die on Friday".  Which one do you think people are going to click on?

If you need help designing a campaign or appeal for startup funding, drop me a line at rightwords@ida.net. It's what I do.

 ©2015 – Rebecca Lee Baisch  

The politics of funding – Is your program relevant to grantors?

The reality of nonprofit funding is that sometimes your mission isn't trendy enough to attract support.

Take the current interest of increasing participation in post-secondary education, and contrast it with the goal of helping low-income people get jobs.

One the one side you have millions being poured into missions supporting STEM education, such as instruction in how to access financial aid for college.

On the other hand you have more local nonprofits struggling to get enough funding to do things like improving access to the workplace for people who just need a steady paycheck.

One group with the latter mission focuses on providing decent clothes for interviewees and training to improve interviewing skills and focuses primarily on workers aged 40 and up, displaced from the job market during the recession. Typically they purchased clothing from local retailers and made it available to interviewees. The program budget was in the low five-figure range annually.

This group is starting to find that even jobs which shouldn't require any sort of post-secondary degree are suddenly being restricted or at least are preferential to college grads only.

An example of this is seen in an advertisement for seasonal employees for a major home improvement supplies retailer. The specific opening was for a seasonal week-end position assisting customers in the lumber department.

The ad reads as follows:

"Preferred Qualifications:  Associate's Degree in Business, Retail Management, Specialty related to department (e.g., design, appliances) or related field OR Certification in trade related occupation required."

Most potential applicant's never get past that sentence, although much further on in the ad it does say a minimum of one years experience is also acceptable.

The low-income-focused nonprofit had several people available who had actually done the job for other employers, or who have experience in other types of sales, but they don't have any of the paperwork required. No degrees, no certifications, just decades in the building material or building trades. Several of their people applied, but none were even interviewed.

That matters, because it lowers the impact, i.e. the provable results of their program, making their program appear less effective.

The aforementioned NPO working with the older jobseekers stated that most of their previous funding sources had switched over to what the frustrated ED called "more media-attractive" support. Their funding has dropped by over 50% since 2010, due to grantor mission realignment.

I suggested that perhaps they needed to incorporate programs that were more, shall we say, "funding-friendly" such as programs to get their people into some type of educational setting or training to make a complete career change.

His answer was that maybe funders need to start looking at the world his people lived in today.

He said "These are people with an excellent work ethic and fully marketable and useful skills, who have from another 15 to 25 years left in the labor force. They have families to support NOW. They have household expenses NOW. They haven't done a thing wrong except to become politically and socially irrelevant. Maybe by the time they can retire or die, we will all be replaced by robots, but that time isn't NOW"

Unfortunately that conundrum is the reality of funding. Sometimes, no matter how worthy or timely the cause, it doesn't resonate with grantors.

That reality will eventually impact your results, so getting a handle on a solution will definitely affect your future.

The answer is to either pursue a shift in your own focus or seek out new funding streams and new supporters, and continue to educate the public on the value and relevance of your mission.

In the end, we designed a campaign to appeal directly to individual donors, utilizing both direct clothing donations and a crowdfunding appeal that ultimately raised enough money to meet goal. Longer term, the NPO is seeking to develop relationships with new grantors.

If I can help you with funding solutions, drop me a line at rightwords@ida.net. 

Making your crowdfunding appeal work.

Crowdfunding is a nonprofit (and small business!) financing option that has generated a lot of interest, both here on this blog and throughout the internet. For nonprofits in particular, it can bridge the three-year development gap before you can hope to attract significant grant funding.

"Joel" responded to my last post on the subject in an email saying he had tried crowdfunding and hadn't even met his modest goal of $500. He mentioned that he posted it, checked back just before it was due to close and only had eighty-five dollars in contributions.

That points out the reality of any type of fundraising, especially crowdfunding.

As Joel found out, making crowdfunding actually work isn't as easy as it sounds. One well-known site reports that less than 10% of the campaigns it hosts actually meet goal. Others report success rates of up to 55%. None report 100% success. Success isn't a sure thing.

Crowdfunding isn't a passive exercise.

To put it as simply as possible, your crowdfunding appeals are investor presentations. Small businesses tend to get the idea of presenting value for money, nonprofits not so much. This is especially difficult because the real value for donors is not quantifiable in dollars and cents.

Think about how you invite people to a party. Would you just tack a post-it note to your front door and expect to have a fabulous turnout?

A fully functional fundraising strategy is pretty much a necessity for success. That includes the usual elements of PR and marketing you would use if you were planning an in-person event. If you are just starting out and looking for seed money, you will need to do a whale of a sales job to convince donors of your legitimacy, so strong board bios, program descriptions, goals and supporter profiles are recommended.

Some sites allow, or even insist on promotional videos, but if they don't you might consider presenting a short (1-2 minutes max) video on your website or on YouTube or other social media and link to it in your appeal. They don't need to be professionally produced, but they do need to be relative to your appeal. You also need to have a link in the appeal to your website or at least your Facebook page.

Organize your campaign for success.

While businesses can offer a share of tangible profits and a return on investment, nonprofits (and here I mean 501(c)(3) organizations, not L3C's) are not able to do so, since all the money raised (less processing fees) has to go to fulfilling or supporting their missions. Since donors still have to be engaged, or to put it bluntly, enticed to contribute, another strategy is needed.

That is often done through the use of rewards. Those might be as simple as a nice thank-you email,  involve  merchandise like a blanket or cap, or  something more personal, like a photo-op with the board or a prominent supporter. That can mean forming alliances with business supporters who will donate merchandise or services such as printing. Use larger prizes for larger donations. Just be sure the rewards don't violate any IRS rules. You need to secure this support before starting your campaign.

Another pitfall for any crowdfunding hopeful is lack of understanding about how the process works. On one level it's still a sales pitch, but you still  need to create an emotional connection so that people will stick around long enough to actually donate. Having a strong statement of need is critical, so create that in advance. Have a concrete goal for the funds. General appeals with unspecified uses for the money don't do as well.

The truly nice thing about crowdfunding is that unlike a lot of grant applications, you can inject some emotion into the picture. Don't be shy about appealing to people's emotions. If you say "people are hungry" try to have some pictures or first-person stories that illustrate the problem available.

You need to have a strong network.

People you don't know don't just roll out of bed in the morning and say "I think I'll troll the web and find someone to give money to," and they certainly aren't going to put your name in the search terms.

Your network, i.e. your existing supporters and contacts have to help you get the word out as well as being your first donors. If you've ever been to an auction, you know that everybody sits on their hands until the first bid. You need people to start the ball rolling by getting a few donations posted. Also like an auction, most of your support will probably come in the last few days, provided that you really push for the support. Don't give up on the campaign too early.

If you have three people following you on Facebook, that's probably not going to get the job done. Somebody has to email, like, or tweet the message every day to people who will then do the same thing. You may have to use traditional advertising methods like flyers or ads to drive traffic to the campaign. Ask, ask again, and keep asking. This is grassroots networking at its finest.

You need to have good basics.

Some sites require that you  present a formal presentation to the website before they will even list you. That means you will need things like a business plan, program descriptions and a budget. Others require that you are able to respond to inquiries with those documents. Most, if not all the sites require that if you advertise you are a nonprofit, you have the paperwork to prove it.

A web presence is pretty much mandatory. You should have a website where people can get some in-depth knowledge of your mission and competency. A social media presence such as Facebook, or any of the other platforms can substitute, but if you are looking for really big dollars (and that's mid-five figures or more in this world) people are going to check you out. Be sure to add a link to your campaign and the start and end dates in any online copy or email blasts. Don't make prospective donors hunt for the crowdfunding site – they won't do it.

Read all the fine print.

Reputable crowdfunding sites will have a fully detailed terms and conditions section. Find out how much of the money you actually get, how and when it is transmitted, whether you have to meet minimum goals to get the money and what guarantees the site offers to assure that if your goals are not met, the money is returned to the donors. Find out if there are any limits on how often you can post a campaign. Look for reviews or complaints online.

Be realistic.

Your goal needs to be realistic for the phase you are in now. If you are new, asking for a million dollars isn't reasonable, and it guarantees that you won't meet your goal. If you are established, and have a good track record to show that you use donor money well, then you can be more ambitious. Crowdfunding can and has reported campaigns raising well over $100,000.

Crowdfunding might be the answer to surviving that period between initial start-up and the point at which you can compete for grants, but it isn't a simple, easy process. Before you click "sign me up",  do your homework.

Wondering if your crowdfunding campaign measures up?  Drop me a line at rightwords@ida.net if you would like an inexpensive review. 

Promoting your nonprofit

Unlike a famous movie line, just because you build it doesn't mean they will come. "They" being the donors you need to attract to actually make your nonprofit dream a reality.

Just like any other small business, you need to convince people you may not even know to spend money to support you, or rather, your mission. So, how do you do that? Especially when as a new charity, you can't qualify for most grants?

You must have a webpage, but you still need people to visit it. How do you drive traffic to your site and hopefully to your "Donate Now" button?

Well, you could advertise, but advertising costs money, sometimes a lot of money. Even a business card size ad in your local paper or a 30-second spot on your local TV station can cost you a few thousand dollars a year. However, many media outlets have public service requirements to fill, so traditional advertising is still possible.

Of course there is always social media. Lots of nonprofits have Facebook pages, but they don't typically generate many dollars, and they don't attract many new faces. Facebookers are generally talking to people who already know them. On the other hand, those people also know people that they can bring to your cause.

Twitter can be a way to attract new blood, provided you understand that the response will be to "hashtag-their interests." If they don't know you, then a key phrase that targets their interest will be far more effective than "hashtag-your charity's name."

Then there is the oft-dreaded personal interaction. Speaking at meetings, attending stuffy events, or even volunteering creates personal connections. While it isn't quite the same as door-to-door sales, sometimes it feels that way.

The point of all advertising to reach people. People are the conduit to the funding that supports  your nonprofit.

To that end, try all of these strategies. Some will work better than others, and then you can refine your campaign. But you can't succeed without reaching out, no matter how awesome your mission statement sounds.

One emerging form of fundraising is crowdfunding. As it becomes more well-known, a lot of nonprofits are posting on sites like Kickstarter, Indiegogo or StartSomeGood.com and a lot of them are not meeting their goals.

The one thing that all of these sites require is that you have a network or nucleus of supporters. People aren't logging on to their computers every morning and typing "find an awesome nonprofit I can donate to". You have to have people that will not only start the ball rolling by donating, but reach out to their friends and direct them to your campaign.

Start developing your PR strategy now, build your network, and the funding end of things will become a lot simpler. Need more information?  Email me at rightwords@ida.net and we'll talk!

More on Nonprofit Crowdfunding – Is it leaving the little guy out?

In  my September 13, 2013 post, Crowdfunding for Nonprofits - Hype or Hope, I presented an overview of this form of funding development. This follow-up offers a more in-depth look at how the process is evolving to provide better structure, protection and validation for both donors and nonprofits and some of the pitfalls of that process, particularly for smaller organizations.

The visible problem  

In the above post, after viewing some of the websites catering to this funding model I stated:

 " There didn't seem to be a lot of vetting of the projects and nonprofits for the donor's peace of mind. In some cases, there was no way for the donors to receive an accounting for whether the money actually resulted in tangible gains or completed projects."

Apparently I wasn't the only one who spotted this weak spot. Now there are various approaches to deal with it.

Anything that deals with collecting and spending OPM (other people's money) is generally viewed with some reservations by would-be supporters. There is a good reason why the California legislature is moving forward to pass a law to crack down on what they see as fraudulent fundraising practices in the charity sector.

That's one way to approach the problems of donor exploitation. Another way is for the industry itself to define parameters by which such campaigns can be vetted. It's the old government vs. private enterprise argument. Should government impose a one-size-fits-all regulation, or can the industry police itself?

Public perception vs. reality

Nonprofits on the whole don't want to cheat anyone. Not the donors, not the beneficiaries of their goods or services, and certainly not the nonprofit community as a group. The problem is that one well-publicized bad apple experience taints the whole sector, and no one understands that better than the nonprofits themselves.

The public, perhaps naively but certainly vociferously, demands that nonprofits, like Caesar's wife, be above reproach. They might shrug off insider trading on Clorox as an isolated event, but just let a charity slip up once, and the whole sector gets a black eye.

Then there is the public perception of what constitutes charitable giving. The Nonprofit Times in an article published June 1, 2014 notes that  donors seem to be having trouble differentiating between funding and fundraising.

Measuring honesty

Legitimacy is the keyword, but to have legitimacy, you have to have a standard.

Enter the Accountability Review Wizard as designed and distributed by  the Charities Review Council. This tool seeks to bring uniformity and legitimacy to a rating and certification process.

In a April 16, 2014 posting on the hosting website, the Charities Review Council states that this is the only cloud-based risk and assessment tool currently available. In addition, they promise to provide resources to assist charities to advance to meet the optimum standards.

This fee-based service requires that the charity have the usual documents to verify organizational and financial  legitimacy, and seems fairly reasonably priced, at .02% of the organization's annual operating expenses, rather than total revenue, and ranges at present from $100 to $3,000. That should make it affordable even for smaller charities.

Arguably, someone should also address the vetting of the platforms on which campaigns are posted. Enter the Crowdfunding Bill of Rights developed and sponsored by David Neff and Miriam Kagan and profiled on the Kimbia.com website. For a more in-depth look at this proposed toolkit,  check out the entire article in The Nonprofit Times referenced above. While this is primarily slanted at the donor, it does peripherally note that the fees charged by some of the platforms are quite high.

All this is a step in the right direction. The internet has a well-deserved reputation as a hotbed of scammer activity. Anything that is perceived as or results in reducing the risk for donors or investors is surely better than nothing.

 Or is it?

Are we measuring the right things?

The one problem I see with all of this is the attempt to define what constitutes an acceptable level of administrative costs vs. program investment.

The California legislature ran into this problem when crafting their law. Originally they had a set-in-stone ratio of program spending vs. administrative and fundraising costs. After some educational meetings with nonprofits, they discarded that number.

The problem arises when looking at the vastly different mission requirement costs for nonprofits, and the public perception of what is "good".

No matter who or what agency tries to arrive at that figure, it is going to result in assigning an arbitrary number as the optimum standard. That number will then be the benchmark for the general public to judge which organizations are "good".

This isn't a new problem. Every nonprofit rating website has some sort of arbitrary standard they use to assess nonprofits. That can be anything from a cost ratio tied to the revenue figure of the organization to the dollar figure of the key personnel salaries.

The problem there is that it doesn't necessarily present a total picture of your organization.

A nonprofit delivering a healthcare service may have salary and labor costs in excess of 50% of their operating budget due to the legal requirements to employ highly-trained licensed professionals. A all-volunteer group that collects food, clothing or books for the underprivileged may not have any salary costs, but  does pay out a substantial portion of the budget for fundraising to purchase the items distributed. Very new organizations may have high initial development vs. program  costs.

The above-noted Accountability Review Wizard, as a part of their method to assign a rating, does attempt to address this by having a range of acceptable program spending levels from 65 to 90 percent,  but even in that framework, they suggest that a 90-10 ratio of program to administrative spending ratio is the most desirable.

That just seems to further the notion that all nonprofits have to be broke to be effective.

And therein lies the problem with crowdfunding, particularly if it is an all-online event.

The strategy, which is growing exponentially year-over-year in dollars invested in charitable giving, needs to be more about educating the public.

That doesn't mean that developing these benchmarking strategies is ineffectual or wrong. They just don't go far enough.

Is there a logical next step?

To address that shortcoming, if you think it is a shortcoming, the nonprofits themselves need to be actively involved in providing educational tools that go beyond dividing numbers attained from the 990 or the financial statements to arrive at ratios.

For instance, should the mid-six figure salary of a CEO whose organization requires the holder that position to have multiple master's or doctoral degrees be equated to the $10,000 salary of a  CEO who oversees a newly-formed  local conservation group? The former may only utilize 1% of the organizations funding, while the latter might currently account for 40% of the revenue. Do the ratios tell the whole story?

What's acceptable should be somehow tied to the type of nonprofit and it's relative chronological development as it relates to effectiveness.

In that way, a donor, whether through crowdfunding or more traditional avenues, could assess whether the effectiveness of the organization is improving with the modifiers of age, growth and revenue. Is bigger better?  Should donors fund  developing management expertise in favor of programs during the first five years of the nonprofit's existence?

What about you?

This is an area that the nonprofits would seem to have to move from passive acceptance of other's standards to active participants in shaping those standards. Larger organizations know that, and some of them are doing it, thereby shaping the dialogue.

Smaller and newer nonprofits have a stake in this too. Crowdfunding is evolving into something much larger than a simple social media posting event. The organizations that stand to benefit the most are the little guys, the ones that can't immediately access large grants.

Your messaging needs to address the issues being debated and codified on a national scale by these larger platforms. Even if you choose not to be evaluated, you ignore current trends in shaping public perception at your peril.

You are the folks that constantly contact me to bemoan the fact that you can't compete in the traditional grant marketplace. This is your chance to make the dialogue about effective outcomes, not financial ratios. Make the most of it.

If you need help crafting a message, contact me at granthelp@ida.net, or visit my website at http://www.cloudlancerwriting.com. 

Crowdfunding for Nonprofits - Hype or Hope?

Crowdfunding. It's a money-raising buzzword. It's trendy and in some cases, trending. It's the 21^st century way for small businesses, artists, entrepreneurs and yes, small nonprofits to access cash for projects. Grants and government funding are incredibly competitive, and there is an element of the "good-ol'-boy network" mentality involved. Really new or very small nonprofits are often excluded just because they don't fit in that network.

Just a half-dozen years ago, no one thought of crowdfunding as a viable business model. Most business people were familiar with investor groups, but the idea of doing a whole fundraising campaign on the web was well, sort of a fantasy.

Then, in 2008 and 2009 respectively, Indiegogo and Kickstarter appeared on the scene. Primarily aimed at the performing and visual arts and the for-profit business market, these platforms offered a way for small businesses and start-ups, and even individuals to access funding for projects. Nonprofits have a category too.

In the last two years I have seen a decided uptick in the number of crowdfunding sites catering to nonprofits. So, is this a viable way for small nonprofits to access cash for programs?

I'd have to say "it depends". Like any new business model, crowdfunding has its share of hiccups. Initially, I saw a lot of sites go up that purported to be absolutely free to use. "We don't take a dime of donations for ourselves" was, and is a common tagline. Many of those sites no longer exist.

It costs money to build and host a website, process donations, keep track of whose projects fund and whose need to have money returned to the "crowd-vestors" ( I don't know if that's a real word…but it works for me!). Absolutely free just isn't going to pay the bills.

There didn't seem to be a lot of vetting of the projects and nonprofits for the donor's peace of mind.

In some cases, there was no way for the donors to receive an accounting for whether the money actually resulted in tangible gains or completed projects. Some sites gave the donors back their money if the project didn't fund, while others allowed the project owner to keep whatever funds were raised.

Lately I notice that many crowdfunding sites are themselves for-profit businesses. They charge a listing fee or other service fee, either from the donor, the project or program owner, or both. They withhold the credit-card processing fees so that the cost is not coming out of the site manager/creators funds. They seem to have a more stringent verification process for the nonprofit and to require more verifiable data before listing a program/project. In short, they have a business model and there seems to be some thought behind making the sites sustainable. Many like Uruut (www.uruut.com) are brand-new, but seem to have a grasp on the funding sources for the nonprofit sector.

Crowdfunding is certainly an avenue for small start-ups, both for -and non-profit, to explore. Like any other business venture, do your due diligence. All venues that have money as a component are ripe for exploitation and outright fraud. Service providers to the crowdfunding industry should be vetted. One resource I found was an ongoing five-part series on the website www.crowdcrux.com. titled "Doing due diligence on crowdfunding service providers". While it doesn't specifically apply to nonprofits,  the tips will undoubtedly apply across the board.

Exploring crowdfunding certainly provides the little guys with some hope of succeeding. Just remember, there is no such thing as "free". In this case your effort in selecting a good platform sponsor and a credible campaign will be the price you pay to increase your chances of success.

©091413 R.L. Baisch