When Am I Ready to Fund?

When Am I Ready to Fund?

Originally published on the CEP blog. The Center for Effective Philanthropy (CEP) is a nonprofit organization focused on the development of data to aid philanthropic funders in defining, assessing, and improving their effectiveness – and, as a result, their intended impact. 

You’ve reviewed documents, interviewed the organization’s staff, sought opinions from peers and other relevant experts, and conducted a site visit. Now, you’re faced with the question: Am I ready to fund?

At the Center for High Impact Philanthropy (CHIP), we have an unusual position to study readiness from both sides of the funder-grantee relationship.

We aren’t grantmakers or brokers for funding. However, as a source of evidence-based, actionable guidance for the funding community, we spend a lot of time analyzing how and when philanthropy can make a difference and sharing our findings with funders. As a result, we’ve seen how one funder’s “yes” can be another’s “maybe” — and yet another’s “absolutely not.” So, how can funders determine their own readiness? Here are three questions to consider:

Do I understand the organization’s social impact goals and how that organization is accomplishing them? Today, nonprofits and social enterprises need to be able to demonstrate impact, or at the very least, clearly articulate how they plan on achieving their intended goals. Sometimes an organization’s fuzzy thinking or poor communication is responsible for a funder’s lack of understanding. Other times, however, a funder lacks the necessary knowledge or perspective to make sense of what an organization is proposing. Many organizations are addressing longstanding, complex problems. Without knowledge of the specific context — e.g., what’s been tried before, characteristics of the beneficiary population, the potential grantee’s current capacity, etc. — it can be hard for funders to assess the likelihood that the organization will make progress against its social impact goals.

For example, when we shared the Pennsylvania Horticultural Society’s Philadelphia Landcare “cleaning and greening” model with one funder, that funder dismissed it as not compelling, questioning its relative value to residents of that community. But when we shared it with another funder who had more familiarity with the neighborhoods involved and the history of other philanthropic efforts, she immediately grasped the potential bang for buck of the opportunity.

How can philanthropy help?

Different grants can achieve different goals in support of an organization’s mission. Understanding how an organization would spend $10,000, $50,000, or $100,000, for example, not only helps you match your funding capacity to the organization’s needs, but can also yield valuable insights into how an organization functions programmatically.

For example, we recently visited a residential addiction treatment program for women. The organization’s leaders described how a one-time gift of a few thousand dollars could upgrade their kitchen, providing a more durable and hygienic environment for residents. A larger one-time gift of tens of thousands of dollars would allow them to improve the lighting and overall security of the entire facility, further ensuring the safety of those in the organization’s care. And reliable, ongoing philanthropic support of even small amounts would allow the organization to extend care to those residents who don’t improve within the government-funded maximum of 75 days. To be clear, leaders of this organization — like leaders of all organizations — seek and require unrestricted funds that allow them to respond to needs as they evolve. Still, such specific and concrete examples helped one funder better understand what was required to serve these women well — and gave him more confidence that the organization’s leaders would know how to use additional philanthropic funds.

If I’m not ready now, should I stay in touch?

For some funders, a particular opportunity will never be the right one. In a world of worthy causes and worthy programs, funders will often choose a focus that excludes certain organizations’ work. Other times, even when an organization’s work falls well within a funder’s area(s) of interest, that funder may still not be ready to write the check.

For example, when we released our food funder compass in 2009, several organizations approached us for inclusion in that guidance. One organization in particular had an intuitively appealing model, with backers that were thoughtful and passionate about the work. A funder familiar with similar efforts and that was comfortable with backing early stage innovations might have been ready to fund then and there. We knew, however, that this program would compare poorly against others we had already included for an audience of funders who demanded more evidence of results and cost-effectiveness. We explained all of this to the executive director. Ultimately, we did not include the organization in our guidance, but our team kept in touch. Recently we learned that the organization is preparing for its first outside evaluation. Not only are we are eager to learn the results, but we’re also hopeful that if those results are positive, a new and different cohort of funders will be ready to support the work.

At the end of the day, “Am I ready to fund?” depends on many factors including a funder’s tolerance for risk, time horizon, relevant knowledge, and relationships. Our hope is that these questions allow funders to assess their own readiness, helping funders and their grantees get to impact faster and with more confidence.