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Breaking the Foundation Barrier
Part Two
Last week I provided you with a snapshot of recent philanthropic trends. Over the next several weeks we will be taking a more in-depth look at several of the different types of grantmaking organizations that inhabit the philanthropic landscape. First up: foundations.
The Existing Foundation Climate
Even with the economy as tenuous as it has been this past year or two, foundation giving increased by $3.9 billion in 2007.
In a recent press release, the Foundation Center (May 2, 2008) observed:
The country's more than 72,000 grantmaking foundations increased their giving to $42.9 billion in 2007, an estimated 10 percent gain over 2006, according to Foundation Growth and Giving Estimates: Current Outlook (2008 Edition). Contributing to this rise was close to 12 percent growth in foundation assets in 2006 -- the first double-digit gain in assets recorded since 1999.
The press release went on to explain:
Although the current economic downturn makes projections difficult, findings from the Foundation Center's 2008 “Foundation Giving Forecast Survey” suggest that prospects for growth in giving this year remain modestly positive. Just over half of the survey's respondents expect to increase their giving in 2008, with the biggest foundations being most likely to expect increased giving. An estimated 9 percent rise in foundation assets in 2007 to a record $670 billion also points to foundations continuing to show positive, albeit more modest, growth in giving in the current year.
The entire report can be downloaded from the Foundation Center’s website.
The year 2007 saw a slow-down in the growth of new foundations, however, and I think we are going to see that trend hold for a few years.
So, What Is a Foundation, Anyway?
There are three major types of foundations (with a few sub-categories) with which grantseekers should become familiar. Below, foundation giving for 2007 has been broken down into a simple list to show the contributions made by these three major foundation types:
- Independent foundations (which includes general purpose, special purpose, and family foundations) -- $30.9 billion
- Corporate foundations -- $4.4 billion
- Community foundations -- $4.1 billion
Independent foundations are considered private foundations and include such philanthropic organizations as the Ford Foundation, the MacArthur Foundation, and the Campaign for Human Development. Independent foundations encompass the following distinct categories:
- General purpose foundations provide grants in many different fields of interest.
- Special purpose foundations focus their giving on a specific area (or areas) and do not fund outside those areas.
- Family foundations are established by individuals for the sole purpose of making grants to nonprofit organizations. Many family foundations are very specific about to whom they will give and for what purpose.
Corporate foundations derive their grantmaking funds primarily from the contributions of a profit-making business. Corporate foundations often maintain close ties with their companies, though they are recognized and do business as separate, legal organizations -- sometimes with their own endowments -- and are subject to the same rules and regulations as other private foundations. There are thousands of corporate foundations, including the Citigroup Foundation, the Hasbro Children’s Fund, and the AT&T Foundation.
Community foundations serve a geographically defined area, such as a city, county, or state. Grantmakers such as the California Community Foundation, the Chicago Community Trust, and the Cleveland Foundation are examples. There are also numerous community foundations in other parts of the world, including the Vancouver Foundation and the Winnipeg Foundation in Canada.
Seeking Grant Awards from Foundations
Understanding the different types of foundations and the trends affiliated with these grantmakers is important for your organization’s overall “big picture” thinking. For example, just as you consider the importance of diversifying your organization’s overall revenue sources, you should also think about diversifying its income stream from different types of foundations.
To determine which types of foundations you should pursue in the next year or two, you will want to know which of your programs will require additional funding (both new and ongoing), as well as any shortfalls in the general operating and capital campaign fundraising you may be doing. You will also want to know the advantages and disadvantages of working with foundations. This will allow you to insert specific private grantmakers into an overall grants strategy.
Advantages of Working with a Foundation
- Foundations are a good source for start-up funds or seed money.
- There’s a trend to fund general operating expenses. (About 20% of the private foundation giving went to general operating in 2006.)
- Capital funding is fairly common. (Approximately 18% of private foundation funding went to capital in 2006.)
- Foundations are an excellent source for program support. (About 45% of private foundation funding went to program support in 2006.)
- It’s generally less work to develop foundation proposals (in comparison with government proposals).
- Application guidelines are generally easy to follow.
- Stature and prestige go hand-in-hand with receiving a foundation grant.
- Reporting requirements are minimal.
Disadvantages of Working with a Foundation
- Grant size is limited (when compared to government, specifically federal funding).
- Grant renewals are uncommon (with certain exceptions).
- Receiving grants may require establishing a relationship with the grantmaker.
Top Tips for Foundation Grant Writing
- The key step in successful foundation grantseeking is pre-proposal contact with the grantmaker. Pre-proposal contact, even just an email or telephone call, triples an applicant's chances for funding.
- The telephone interview should yield three key pieces of information for the applicant:
- Specific ways to make the project more attractive to the grantmaker
- The most effective format for the proposal
- The grant amount that is most likely to be funded
- While unsuccessful applicants often request reviewers' comments on their proposals, successful applicants almost never follow up. This is a mistake because the grantmaker’s critique might reveal aspects of your organization’s project that you should emphasize in future funding requests.
- Applicants can stay a step ahead of the proposal writing process by organizing their need documentation, qualification statements, and other proposal information into reusable application files.
- Neatness counts in proposal writing. An early and clean application reinforces the impression that progress reports and record keeping for the project will also be timely and professional.
- Applicants should be aggressive in using their board members' social and business connections with a foundation's trustees. (Applicants often fail to recognize and use these personal contacts.)
- The proposal should clearly connect the project with the foundation's priorities. Many applicants write their proposals first and then look for foundations to fund them. It is better to identify a funding source and then tailor your proposal.
There are numerous other tips in the Grants Mentor section of GrantStation. If you are a Member, you should check out this section of the website.
Next week we will discuss government grants and how they fit into your organization’s overall strategy as well as the advantages and disadvantages of pursuing government funding.
Tracks to Success is edited by Katy Mulcrone.
Questions, comments, suggestions, and useful tips for other Tracks readers
can be sent to her at katy@grantstation.com.
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