Ten Nonprofit Funding Models

In the end, we settled on three parameters to define our funding models—the source of funds, the types of decision makers, and the motivations of the decision makers. (See “Identifying the Models” below.) This allowed us to identify 10 distinct funding models at level that is broadly relevant yet defi nes real choices.

It is interesting to note that there were several funding models we thought we might fi nd, but didn’t. One possible model was nonprofits supported by earned-income ventures distinct and separate from their core mission-related activities. Another possible model was nonprofits that operated on a strictly fee-for-service model in either a business-tobusiness or direct-to-consumer fashion, without important supplementary fundraising (from members or prior beneficiaries) or underlying government support. Although there are some nonprofits supporting themselves with such funding approaches, they were not present among the large nonprofits that we studied. It is our belief that these types of approaches do not lend themselves to large-scale, sustained nonprofit advantage over for-profit entities.

What follows are descriptions of the 10 funding models, along with profiles of representative nonprofits for each model. The models are ordered by the dominant type of funder. The first three models (Heartfelt Connector, Beneficiary Builder, and Member Motivator) are funded largely by many individual donations. The next model (Big Bettor) is funded largely by a single person or by a few individuals or foundations. The next three models (Public Provider, Policy Innovator, and Beneficiary Broker) are funded largely by the government. The next model (Resource Recycler) is supported largely by corporate funding. And the last two models (Market Maker and Local Nationalizer) have a mix of funders.

1. HEARTFELT CONNECTORSome nonprofits, such as the Make-a-Wish Foundation, grow large by focusing on causes that resonate with the existing concerns of large numbers of people at all income levels, and by creating a structured way for these people to connect where none had previously existed. Nonprofits that take this approach use a funding model we call the Heartfelt Connector. Some of the more popular causes are in the environmental, international, and medical research areas. They are different from nonprofits that tap individuals with particular religious beliefs, political leanings, or sporting interests, who come together to form organizations in the course of expressing their interests. Heartfelt Connectors often try to build explicit connections between volunteers through special fundraising events. The Susan G. Komen Foundation is an example of a nonprofit that uses the Heartfelt Connector model. Established in 1982, the Komen Foundation works through a network of 125 affiliates to eradicate breast cancer as a life-threatening disease by funding research grants, by supporting education, screening, and treatment projects in communities around the world, and by educating women about the importance of early detection. The foundation’s mission has a deep resonance with many women, even though its work may never benefi t them directly. Between 1997 and 2007 the Komen Foundation’s annual fundraising grew from $47 million to $334 million. The average individual donation is small, about $33, but the foundation’s fundraising efforts have been driven by its ability to reach out to an ever-widening base of support. Its major fundraising vehicle is the Susan G. Komen Race for the Cure. The foundation and its affiliates hold about 120 running races each year that draw more than 1 million participants. These events not only allow individuals to give money; they also engage volunteers to put together teams, solicit funds, and participate in the race day experience. Nonprofit leaders considering the Heartfelt Connector funding model should ask themselves the following questions:
* Have a large cross section of people already shown that they will fund causes in this domain?
* Can we communicate what is compelling about our nonprofit in a simple and concise way?
* Does a natural avenue exist to attract and involve large numbers of volunteers?
* Do we have, or can we develop, the in-house capabilities to attempt broad outreach in even one geographic area?