Fundraising in the Philanthropic Capital Markets

This is my contribution to the Giving Carnival being hosted by Gayle Roberts. This edition of the Carnival asks us to predict the future of fundraising.

Building on my post from yesterday, I want to explore a future where fundraisers are less focused on direct to donor appeals and more focused on what Lucy Bernholz calls the Philanthropic Capital Markets. What does this mean? I’ll explain in a list format:

• A growing number of donors will approach their giving proactively with a strategic map that they rely on to guide their giving decisions. Major donors in particular will work with a philanthropic advisor or at least follow a strategic guideline espoused by philanthropic advice books and blogs.

• Just as investment strategies help professional and amateur investors minimize emotional, knee-jerk decisions to buy or sell a stock, donors with philanthropic game plans will be much more deliberate about their giving. This will be a net positive to effective nonprofits and disastrous to ineffective nonprofits who are dependent on emotional appeals.

• Effective nonprofits will find donors are seeking them out using widely available nonprofit research tools (that will be far more robust and less quantitative than the simplistic expense ratio analysis currently available). The role of fundraiser will be far more of a marketing job than a sales job, as communicating the nonprofits strengths will be more important than building personal relationships with donors.

• Just as stockbrokers (selling product for a commission) left brokerage firms in the 80’s and 90’s to become independent investment advisors (selling advice for an annual fee), fundraisers who have taken on the “philanthropy advisor” role that people like Charles Collier advocate will leave nonprofits to establish independent philanthropy advice firms.

• A segment of fundraisers will need strong financial skills to tap into the complex world of philanthropy focused micro-finance, venture capital, nonprofit lenders and other emerging options that seek to finance nonprofit activity.

• Traditional financial service firms will increase the resources they devote to serving philanthropic clients, beefing up on both skilled advisors as well as launching philanthropic financial products. Some fundraisers will join these firms as both marketers and client advisors.

• But these changes will primarily affect mid to large nonprofits and startups with big ambitions. Just as small businesses rely on investments from friends and family and have limited access to sophisticated financial products, the vast number of small nonprofits will continue to rely of traditional fundraising appeals.