The Foundation Center recently released a report that heralded the glad news that, in 2001, the grant making of the newer foundations formed in 1999 and 2000 was substantial enough to offset reductions in the grant making of larger and more established foundations. But what exactly will this mean for the day-to-day practice of fundraisers?
U.S. foundation giving continues to benefit from the boom in foundation creation that began in the 1980s and accelerated in the 1990s. In 2001, “The overall number of active foundations grew by nearly 5,228, or 9.2 percent—the second largest percentage increase in the number of foundations reported since the Foundation Center began tracking all U.S. foundations in 1975,” state Loren Renz and Steven Lawrence, authors of Foundation Growth and Giving Estimates: 2002 Preview. “Moreover, this annual growth rate of foundations represented close to triple the growth rate seen in the mid-1990s. The vast majority of these new foundations were formed in 1999 and 2000, and started grant making in 2001.”
“In 2001, newly active foundations contributed $603.3 million in giving, and held $7.8 billion in assets,” the authors continue. “They accounted for just over one-fifth (20.5 percent) of growth in foundation giving between 2000 and 2001. They reduced the overall decline of foundation assets from 5.4 percent to 3.8 percent.”
We spoke with Charles Scott, who was a founding staff member of the Association for Small Foundations. The term “small foundation,” he cautions, has nothing to do with the size of asset base, but rather refers to office size. This is the largest growing foundation association in the country. Scott, the ASF’s former CEO, passed along the following observations and advice for fundraisers struggling to stay abreast of changes in funding patterns.
The foundation’s donor will more often be part of decision-making: Because most foundations are family foundations, the founder or his/her family will often still be very involved in making decisions about what deserves attention and investment. All foundations are made up of individuals. Therefore individuals are giving to individuals, not organizations giving to organizations. Thus, giving will often have a more personal dimension. This means that, if you have not already acquired the skills to work with individual donors, you should get them posthaste. Building a mutually respectful relationship over time is absolutely critical.
Donors want to know they can trust the organization and will, to some extent, judge the organization by its leadership—therefore they will want to talk to the executive director or whoever is leading the project. This means that executive directors should spend 50 percent of their time communicating with their donors, thanking them for the gifts they’ve made, giving them updates, and preparing them for the next request. They should call a certain number of the organization’s donors every day just to give them updates, and they should include donors in community activities as active members of the organization.
Donors often have big philanthropic tents: Many donors who establish foundations are quite generous and have a big “philanthropic tent.” Fourteen percent have a donor-advised fund at a community foundation, seven percent have a fund at a financial firm like Fidelity, and 76 percent individually give over and above these other vehicles. This reality requires that you go back to the basics of building a base of individual donors. Research is very important. You can’t necessarily know a donor’s entire capacity to give by looking at just one vehicle.
Much of the giving driven by individuals is local: Most of ASF’s 3,000 members make grants locally—70 percent of their 134,000 grants are given within the state where the foundation resides. My impression is that this concern for locality can override restrictions declared in the published guidelines. But if you are newly approaching a small foundation, especially if you are asking them to waive guidelines, don’t send a 20-page proposal. Remember that they are functioning with small staffs. A one-page letter of inquiry—or, better yet, a meeting bridged by a mutual acquaintance—is a better way to begin the relationship.
ASF’s 3,000 members have combined assets of $48 billion, and granted $2.2 billion last year, but their grants were divided among a staggering 134,000 grantees. Here are some helpful framing statistics:
- The average number of grants made by a foundation with assets under $50 million is between 48 and 86.
- Different-sized foundations tend to make different-sized grants. Median grants include:
– For a $1 million foundation: $4,374
– For a $5 million foundation: $8,818
– For a $10 million foundation: $17,788
– For a $25 million foundation: $29,379
– For a $50 million foundation: $46,965
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But don’t make the mistake of thinking that such tendencies should guide the size of your request. Again, research and relationship are big drivers in how many grants are given, at what amounts, and over what period of time. While it is true that it often takes as much and sometimes more work for an executive director to approach a $5 million foundation than it does to approach a $50 million foundation, a foundation with a smaller asset base may stay with the organization longer than a larger one, and other forms of giving may evolve over time if the relationship is secure.
A slowed-to-stalled economy could portend far less giving. Even newer foundations have seen their asset bases erode significantly, sometimes leaving them with little or nothing to give away. Foundation statistics always lag a year or two behind, and if you are currently experiencing less foundation giving in your area, there probably is less foundation giving in your area. However, it is worth checking what new foundations have emerged. Many do not give in their first year, so they might not pop up immediately on your local screen. Information about all foundations is now easily available in the public domain. To find local foundations, go to Guidestar’s Web site, specifically the advanced search page (www.guidestar.org/ search/index.jsp), then, in the “nonprofit type” field, select “private non-operating foundation.” You can search by zip code, city, state or a radius of five, 10, 25 or 50 miles.
And, as always, you should always be scanning the annual reports—even programs and other materials where donors to local sister organizations and organizations working in similar fields of interest are listed.
The more things change, the more they stay the same.
Renz, Loren and Steven Lawrence. 2003. Foundation Growth and Giving Estimates, 2002 Preview. New York, NY: The Foundation Center.
Association for Small Foundations