If you are a small non-profit or a social enterprise you are probably out there trying to fundraise. One of the things you do, I assume, is try to reach out to large Non-Profits in your area/ market and/ or to well-known funders/ donors. You are hoping to show them how great your model/ innovation/ approach/ product is and expect that they will get out of the way to try to support you, get you funded or somehow integrate your innovation into their operations.
This will not happen, unfortunately.
What might happen, is after having had a few of these conversations without making any progress, you get disillusioned and conclude that “the big guys don’t want you to succeed” because your superior model threatens their status quo. This may actually be true, but that is beside the point and definitely not the reason why you don’t get funded.
You don’t get funded mostly because institutional money circulates in highly prescriptive ways, and these ways simply do not include taking bets on insurgents. It is wrong, yes, but it is what it is.
If you want institutional money you need to play by institutional rules. Ironically, no-one is more frustrated by these rules than the good people inside these institutions who want to create real impact at scale. These people are out there and they are your allies – you just need to make their work easy for them.
Money for the boys
Here is the painful truth about the way money circulates in the institutionalized impact industry: large institutional donors (“known entities”) hand it over to large, institutional recipients (“known entities”), following arcane, tedious but predictable cycles or awards involving mostly the same handful of organizations. Don’t take my word for it. 70% of USAID’s money goes to 4 organizations. It is the same with DFID and I am taking bets that this economics applies to pretty much any institutional donor, including large private foundations.
There are many reasons for this, but mostly it is because institutional donors need predictability more than efficiency and they can’t handle the volatility that comes with investing in unknown entities.
It’s shitty, but it is what it is. You can fight it, but the smart thing to do is work with this reality and use it to your advantage.
Three ways to Fundraise
Basically, as an insurgent you have the following choices:
- Fundraise with private Donors– this is probably the best thing you can do at this point, until you prove your model at some sort of scale and until you build a track record of results, compliance and scale. The great news is that there is more private funding available now than any time before, and that much of this funding is struggling to find worthy causes to fund. There is a massive generational shift in private donations, which favors insurgents. If you want this funding you need to appeal to a new generation of donors. You need to stand out and I do have more insights about that which I will share in a future post.
- If you DO want institutional funding the path of least resistance is to find an institutional partner (large NGO, “known entity”) that will include you in their consortium during their next award cycle. This is easier than you think, as ALL incumbent recipients are in a race to prove to their donors that they are more innovative and effective than their competitors. If you position yourself as an innovation partner that can work in a larger consortium to provide a much needed boost in innovation, you are on the ticket. However, before you go down this route, make sure it is actually what you want – see below on the high cost on institutional money.
- Keep your eyes out for innovation funding opportunities – most large institutions have them. However, do not expect a lot of money here, but rather look at these as the opening in a longer chess game, where the end-game is you get vetted and become one of the “known entities” that will qualify to even be considered for real funding later on. These opportunities vary in terms of hoops through which you need to jump and often they are not worth the hassle, but if you go down this route a good place to start is the Gates Grand Challenges Exploration.
- Finally, the more insurgent strategy – and something you should consider in any case – would be to draw someone’s attention inside the funding agency that you are targeting, with the idea that that person will go out of their way to find a solution internally to get you funded, because this benefits them in some way. The only way to do this is with smart inbound strategies where you invest time and resources to understand the decisionmaker’s journey and make sure you create clear value for them on their journey. The type of value we are talking about here includes: opportunity to stand out to their superiors/ associate themselves with innovation. Or a situation in which there is top-down pressure to innovate or associate themselves with a certain technology or model (on trend). This is a long-shot strategy and your mileage may vary.
Hard Facts about institutional Fundraising
- You will not win a bid if you have not been consulted/ involved in the writing of the call for proposals. If you haven’t been involved or consulted before the request is out, don’t even bother to apply. Sure there are exceptions to this, but the track record of anonymous insurgents winning institutional contracts simply by submitting kick-ass proposals on a website is pretty damn poor. You want to win an award? Find a way to contribute to its design.
- All institutions are people taking decisions, often in committee. Understand committee dynamics and you have an advantage. Institutional restrictions and prescriptions are real and EVERYONE has to work with them. However the best insiders know how to push the rules to make things happen. You need allies inside. The good news is that incumbents suck at inbound and you have an edge here. Institutional decision-makers (and committee sitters) are out there, like everyone else – on social media, googling things. Make sure when they do they come across you, consistently.
- Institutional money is expensive money. The most important fact to remember: make sure you understand and are comfortable with the real costs of raising and receiving institutional money. You will lose strategic control over your work. You will have to gear your teams to manage upwards. You will lose some/ a lot of your leanness and agility. You will have to write reports and show up at meetings. Your success will partly depend on factors and partners that you cannot control. You will have to justify every cent spent and may get push-back on some of your spending decisions. There will be delays in your payments that will threaten your cashflow. You will receive no credit for success but you will get the blame in case of failure.
Now get out there and fundraise.