Foundation grants are an important revenue stream for almost any successful, sustainable nonprofit. But what is less evident is what role foundation fundraising should play in a nonprofit’s overall revenue mix. Understanding what foundation grants can and can’t do for your organization is critical to planning for success today, and for any future growth or improvement you may want to pursue.
We often hear from nonprofit leaders who want to aggressively pursue foundation grants so that they can achieve major strategic goals for their organization. But not every project, plan, or goal that your nonprofit has is the right fit for foundation fundraising.
Most foundations are strongly prescriptive in what they wish to fund, meaning that successful proposals require a strong alignment between an organization’s needs and a funder’s specific interests or priorities. Foundations are not necessarily interested in what you deem to be your best idea or your organization’s greatest need, and they may not be moved by urgent or emotional appeals that resonate with individual donors.
Developing a strong foundation fundraising strategy requires internal conversations with staff and leadership about what truly needs funding and how those needs can be framed for potential foundation donors, specifically those that are actively giving in your area and are already strongly aligned with your mission.
Here are several common funding categories we recommend organizations pursue specifically for foundation support:
- Capital Projects
This is a big one – literally! Capital requests (capital being defined as construction or large equipment costs, typically at the level such that they must be depreciated over time) are often the largest grants that many organizations will ever be responsible for. Most foundations are explicit about whether or not they will consider capital requests, but this isn’t a green light to simply ask them to fund your next big construction project.
Capital grants from foundations typically (there are always exceptions) involve amounts that are (1) well below the actual costs of a capital project and/or (2) intended to enhance or close out a project that already has significant investment. This matches the inherently conservative (financially speaking) outlook of most foundations: they often don’t want to be the ones to take the initial risk in breaking ground on a project, but they do still like to be involved in a way that suits their investment strategy.
Oftentimes, when foundations do want to fund capital projects, they want the satisfaction of helping to “close out” the campaign rather than risk funding your project on the front end.
This means that foundations typically expect an organization to demonstrate momentum, community and major donor involvement, and shared financial commitment. In our experience, while grants should play a role in any capital campaign, organizations should not expect to fund the majority of a large-scale capital campaign through foundation grants. While organizations often have multiple capital needs, foundation funding should be viewed as one component of a broader capital strategy, rather than the primary or sole solution.
- General Operating Support
General operating grants are among the most valuable types of foundation funding because they allow organizations the flexibility to direct funds where they are needed most – full stop. However, these grants can be challenging to secure, particularly for organizations with larger operating budgets or those whose programs span a wide range of need areas. For organizations with larger budgets or wide-ranging program impact areas, we often recommend pursuing program- or project-based grants whenever possible (assuming that the funder offers that opportunity), as they provide a more tangible and defined investment opportunity for funders.
- Program Support
Many organizations operate multiple programs with distinct budgets, data, and outcomes, making program-based grants an accessible and effective option that – when requests are designed well – can offer flexibility approaching that of general operating support. To pursue these grants successfully, it is critical to have:
- A clear and complete program budget,
- Good data and outputs tracking,
- Program-specific outcome measures.
To make this type of request most (financially) meaningful to your organization, we always recommend incorporating general operating expenses into your program budgets. This means learning to create “all-in” budgets that demonstrate the true cost of operating a program – for example, a percentage of rent, partial staffing costs, administrative support, insurance, and more.
When your program budgets show the true cost of running your programs, you kill two birds with one stone: you meet the desires of a prospective foundation donor to fund a program while also ensuring that you support your overall organizational expenses.
- Project-Based Funding
Project-based grants typically support one-time or time-limited initiatives with a defined scope, timeline, and budget. These may include capacity-building efforts, pilot projects that need initial investment, or brand-new initiatives designed to strengthen existing programs and services. The main difference between program requests and project requests is that project requests will eventually come to an end or transform into something else; they will not require consistent funding to sustain their success. For these opportunities, it is essential to clearly articulate the project’s start and end points, anticipated outcomes, and how the project aligns with the organization’s broader strategy.
To summarize: foundation funding opportunities are finite, and it is essential to be strategic about which needs are prioritized first. Pursuing a smaller project-based grant at the expense of a larger general operating opportunity can limit potential to receive a larger grant, or one that could be built upon for multi-year awards. Conversely, insisting on general operating requests to foundations that would be more interested in a focused, targeted program or project can result in a waste of time and a lost opportunity.
A thoughtful, prioritized funding strategy ensures that foundation support is aligned with both immediate needs and long-term organizational health.