Break Free From the Nonprofit Starvation Cycle
The other day I met with a nonprofit leader (let's call her June) who has a great idea for an earned income venture that fits directly with her mission, but she doesn't have the startup capital to launch. When she explained this to me, she threw up her hands as if to say, "I'm powerless to move forward."
But from my vantage point she has all the pieces necessary to raise the startup capital and launch, she just isn't putting them together. It's a common refrain — nonprofit leaders complain about being in a catch-22 of not having enough money to raise enough money. But the answer is often right in front of you. To break free from the starvation cycle, assemble the assets you already have in order to raise capacity capital.
The nonprofit starvation cycle is one nonprofit leaders know only too well. Nonprofit organizations rarely have the technology, staff and systems to function effectively. So they scrape by trying to wring one more drop out of a completely dry rock. But instead of waiting for funders to fix the situation, it is up to nonprofit leaders themselves to break free. And you break free by raising capacity capital.
Capacity capital is a one-time investment of significant money that can help build or strengthen a nonprofit organization so it can create more social change. Capacity capital funds things like technology, systems, a program evaluation, revenue-generating staff and startup costs for an earned income business. It is money that strengthens the organization so it can do more.
But often nonprofit leaders, like June above, don't recognize that everything they need to raise capacity capital and break free from the starvation cycle is in right in front of them. Here are the necessary pieces.
You know what you need in order to do more, so put together a change plan and figure out what elements you need (technology, systems, staffing) and what they will cost. Do your homework so you can speak intelligently about what it will take to get you from point A to point B. June has a great business plan for her venture and knows exactly how much she needs in startup costs.
Donors who love you
When raising capacity capital, you want to go after donors who already love what you are doing and want to see more. You must convince them that a one-time investment of capacity capital will enable you to do even more of what they already love. June has a great network of longtime donors, which she could convince to become capacity capital donors.
A connection between capital and more impact
Make a convincing argument to those donors that capacity capital will create more of what they already love. For example, having a great development director in place can bring hundreds of thousands of new dollars each year, which means many more people will be touched by your organization. Or explain how an evaluation of your program will allow you to focus your resources on highest impact activities. June could describe how a profitable earned income venture could increase financial sustainability while delivering more impact.
June has all of these pieces. She has a great plan for an earned income business that could significantly contribute to a more sustainable financial engine and thus allow her nonprofit to reach more people, a clear articulation of how much capital she needs and for what, and a committed group of donors who love the organization. For her, and for most nonprofits, it is simply a question of connecting the dots.