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Amid the philanthropic sector’s buoyant asset growth, with foundation assets peaking at an impressive $1.5 trillion in 2023, there lies a perceived contrast in the modest uptick of giving, which only increased by 5.5% to $97.5 billion. This divergence calls for nonprofits to keenly strategize and adapt in a rapidly changing financial landscape, notwithstanding a larger sector-wide discussion about foundation throughput. Organizations that have historically relied on individual philanthropy will benefit from diversifying their strategy by including institutional fundraising efforts.
Delving into Philanthropic Giving Dynamics
Despite significant asset growth, the modest increase in foundation giving can be partly attributed to the approach foundations take, often using multi-year averages to determine their giving levels. In the United States, most states have adopted the provision of UPMIFA that spending above 7% is presumptively imprudent. This means that many grant-making organizations adopt strategies like the Yale formula, which helps foundations manage their giving across fluctuating economic cycles, ensuring sustainability. In addition to the impact of inflation, assets fell by 9.5% in 2022. According to FoundationMark, foundations gave away an average of 7% of their rolling assets.
Nonprofits must recognize the nuances behind this trend and adapt their fundraising strategies accordingly, especially considering the potential lag in response to economic changes. A year of strong market performance can boost foundation assets. Still, the corresponding increase in giving might be tempered by preceding years of lesser performance, as foundations aim to maintain a stable giving rate over time. This reaffirms why a diverse fundraising strategy with a healthy mix of individual and institutional giving can ensure that organizations can weather economic challenges. When individual giving declines as a natural result of economic cycles, institutional giving can even out those peaks and valleys.
Leveraging Real-time Fundraising Intelligence
To stay ahead, organizations must harness real-time fundraising intelligence, using it as a core competency for securing foundation grants. This entails analyzing previous philanthropic indicators and foundation asset growth to predict giving trends. Leveraging real-time fundraising intelligence can be transformative for nonprofits. This technology, being the first of its kind, allows organizations to comprehensively identify potential institutional donors, significantly enhancing their ability to secure grants and gifts. By incorporating insights on the capacity of charitable and corporate organizations, along with the flexibility of data integration and detailed prospecting capabilities, nonprofits can more effectively forecast giving trends and tailor their institutional fundraising strategies to match the financial behaviors and preferences of foundations and companies. This approach not only streamlines the fundraising process but also maximizes the potential for successful engagements with institutional donors.
Actionable Strategies for Nonprofit Success
- Predictive Analytics: Leveraging tools to prioritize institutional donors that are most likely to align with your organization and how to engage those entities at scale.
- Fundraising Resilience: Diversifying funding sources buffer against giving fluctuations and ensure financial stability to smooth out different giving velocities between individual and institutional donors.
- Proactive Relationship Building: Forge enduring relationships with the right foundations, aligning with their philanthropic strategies and giving cycles.
- Mission Alignment: Prevent mission creep by identifying funders who are most aligned with your organization’s goals. Ensure your mission resonates with the strategic priorities of potential donors, especially those with growing assets.
Nonprofits adept at navigating these dynamics are better positioned to access the burgeoning wealth dedicated to philanthropy and diversify their revenue streams. By understanding the intricacies of foundation giving, nonprofit organizations can craft effective, sustainable fundraising strategies, ultimately securing the support necessary for impactful work.
Written by Cherian Koshy, Vice President Product Strategy, Kindsight
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