Back to basics: Navigating the fundraising landscape for NGOs in the 21st century
Updated: Jan 28, 2021
Get a handle on key terms and strategies for fundraising in 2020
The fundraising landscape is changing rapidly—and the way we think and talk about NGOs is changing too. When I meet with clients who haven’t done much fundraising, I realise how confusing and overwhelming the jargon can be. However, it’s not just the words that have people scratching their heads—it’s also about understanding how the fundraising ecosystem operates.
This confusion and, often, unease leads to deeper problems, too. It’s hard to design a strategy when we don’t understand the trends. It can also lead to disappointment when it turns out funds from institutional donors are simply out of reach for most small to medium NGOs (you know USAID money is there, but you just can’t reach it!) and moments of panic when the project-based funding doesn’t cover overhead and staff salaries. The following terms (and corresponding trends) are the essential building blocks for designing a future-proof fundraising strategy. I’ll do a deep dive into each topic in other articles, but for now, this is an overview of core fundraising terms, trends, and concepts.
Non-governmental organisations (NGOs): These are not-for-profit organisations and it is a catch-all that can refer to project-implementing organisations like Save the Children and donors like the Bill & Melinda Gates Foundation.
Social enterprises: Social impact organisations that have for-profit activities. These activities could be core to the organisation as in the case of Frontier Markets, one of my clients that distributes life-improving products through a network of women entrepreneurs in rural India. A social enterprise can also be a non-profit organisation that has some for-profit activities like Tilonia, the for-profit company that sells traditional handicrafts produced by local artisans as a sub-entity of Barefoot College (a non-profit organisation). The difference between a social enterprise and pure for-profit company is that they aim to achieve social impact through their activities.
Civil society organisations (CSOs): This term is gaining in popularity, but the definition hasn’t been standardised yet. Sometimes it’s used simply as a replacement for ‘NGO’, but I personally use it to refer to small grassroots NGOs. This is up for debate, however!
Unrestricted funding: The Holy Grail of funding for most NGOs. This type of funding comes with (relatively few) strings attached. It can be used however the recipient sees fit—that means it can cover rent, staff salaries, travel costs (“core funding”), and anything else that is usually considered “overhead” (which is often not or minimally funded by project-based grants).
Core funding: Funding that covers the organisation’s core operations including staff salaries, office expenses, digital presence (such as a website or social media), and marketing. These funds are essential to the overall operation of the organisation. Often, this is referred to as “overhead” which is accurate as well, but overhead can have a more negative connotation (depending on who you are talking to, of course!). A surprising number of donors do not fund organisational overhead, even though it is essential to run the organisation—referring to these costs as “core funding” can help underscore its essential nature.
Project-based funding: This type of funding is usually awarded in the form of grants from institutional donors or foundations. A project is pitched to the donor through the application process and should involve SMART activities (specific, measurable, achievable, relevant, time-bound). That means the funding only covers the project itself and typically won’t cover (or will only cover a small amount of) core funding expenses.
Direct funding: This comes in the forms of donations given directly to the NGO from small groups (such as schools or church groups) or individuals. Direct funding campaigns can be made in person (for example, marathons or at community events), through media campaigns (like Comic Relief) or, increasingly, online. Popular choices for crowd funding are sites like Go Fund Me, or NGOs might add a “donate” page to their website.
Procurement contracts: Typically overlooked by NGOs, procurement contracts are issued by donor governments and large NGOs. These contracts are built around a specific product or service which can be provided by any type of organisation (including non-profit, for-profit, and social enterprises). Procurement contracts are awarded on the basis of service delivery and thus it is unrestricted—provided the recipient fulfils the obligations set out in the contract, of course. Large donors use procurement contracts to provide trainings, workshops, or to supply services.
Consulting contracts: Often, large organisations will contract out discrete projects to a consultant or consulting firm, which may or may not also take the form of procurement contracts. For example, creating a manual or other educational material, or conducting research for a baseline study or impact assessment. These projects result the delivery of a specific product (usually knowledge-based) and may be awarded to either for-profit or non-profit consultants, consulting firms, or CSOs.
Institutional donors: This term incapsulates the big government donors including USAID, DFID, the EU, NORAD, etc. These donors disperse funds from governments through programmes and funding facilities at different scales and levels—from large global programmes to small in-country grants administered by embassies. The application process for the larger grants is often viewed as opaque and to smaller NGOs, which is one reason why consultants like myself are called on to navigate the process. Smaller grants may be awarded directly to organisations through embassies or country offices (as is the case with USAID) or through competitive calls for proposals (for example, Grand Challenges Canada).
Foundations: Companies who wish to do corporate social responsibility (CSR) might set up a foundation to manage their giving. IKEA, H&M, C&A and many other companies have foundations that support various NGOs. Some foundations link their support to their core business—for example, the C&A Foundation, one which I’ve worked with for Save the Children, focuses on the textile industry in the countries where they source their products. Others give funding based on unrelated interests or decisions made by the board. Some foundations issue open calls for proposals, but others that I’ve worked with, like the IKEA Foundation and H&M Foundation, generally don’t.
Trusts: High net-worth individuals may give money through trusts. Trusts don’t often issue open calls for applications. Rather, they build a portfolio of NGOs that they support over the long-term. As the money comes from private donors, they have flexibility to distribute funds however they wish, but it also means there may be a lack of transparency in the decision-making process.
Impact investment: This has become a popular way for high net-worth individuals and companies to support social impact. NGOs can pitch their impact like a business would pitch its product or service to demonstrate the impact per dollar, or to show how the NGO creates outsized impact from the money invested.
Did I cover all the fundraising terms and concepts you’ve been hearing lately? Which trends are creating the most buzz these days? Are there concepts or trends you’d like me to cover in-depth? Let me know in the comments below!