January 02, 2017

When searching for funding sources, nonprofit organizations often target the best known, largest donors that fund work in their area. For community-based projects, this list might include a large community foundation or a well-known, national foundation that has an interest in the organization's focus or geographic area.  When it works out, having a grant from a large donor can be a great boon for the organization. Having a single grant of $100K can be easier to manage than four $25K grants. That said, the large-donor strategy has some pitfalls and is not always the best route.

CHALLENGES OF PURSUING FUNDING FROM LARGE FOUNDATIONS

Some of the downsides of pursuing grants from larger foundations include:

• The larger and better-known the funding source, the more competition your organization will face in securing a grant.

• Larger foundations usually give grants of higher dollar amounts than smaller foundations, but not always, although larger foundations almost always require more in the way of reporting requirements.

• The more formal the foundation's structure, the more likely it is that the foundation has subject-matter experts in the form of program officers who will expect to be involved in your project's development and implementation.

• In the U.S., many of the largest and best-known foundations tend to give grants to the same organizations year-after-year. Newly formed or smaller, community-based nonprofits face steep competition and little chance of receiving one of the few grants the large foundations give outside of their portfolio of regular grantees.

One of the reasons why organizations look to the well-known funders for funding is that they are easier to research. For example, everyone has heard of the Bill & Melinda Gates Foundation and the Ford Foundation.  Information about these two foundations can be discovered through many different avenues including the foundations' websites, donor databases, media coverage, and even scholarly books.

Small foundations, on the other hand, are much more difficult to research. Not only is contact information hard to come by, but often the smallest foundations do not maintain a website, or if they do, it might contain limited information that is infrequently updated. Additionally, many small foundations are family foundations run by family members and do not have paid staff to answer questions or manage the application process.

While there are challenges with researching and applying to smaller foundations, there are several compelling reasons not to dismiss them.

ADVANTAGES OF WORKING WITH SMALL FOUNDATIONS

• Smaller foundations receive fewer grant applications than the larger foundations, so the competition for funding will be less intense. You'll still need to submit an application that fits within the donor's interests, but if you meet their interests and eligibility requirements, you'll have a higher chance of receiving funding than you would from a large foundation.

• Small family foundations may lack the formal structure that large "corporate" foundations have. However, it doesn't mean their grants are tiny in terms of dollar amounts. Family foundations can be small in the sense that they have few-or-no staff, but they can have a sizable endowment and award grants in the hundreds of thousands of dollars.

• Smaller foundations frequently have specialized interests and fund a narrow area of work. While this can be a negative if your work doesn't fit their interests, if your projects do fit their interests, and you are successful in winning an initial grant, the funder could become a steady source of funding for your organization for years to come.

• Smaller foundations, at least in part because they have limited staff to manage their giving program, often award grants with few strings attached. In fact, some small foundations do not require project reports and instead only ask to receive a copy of an annual report for their records.

• Small foundations are often more open to giving money for general operating expenses than larger foundations. If your organization is in need of unrestricted funding, small foundations can be a good resource to add to your funding mix.

FINDING SMALL FOUNDATIONS

One of the biggest challenges in applying to small foundations is that it can be hard to find them.

If you haven't already invested in a subscription to a donor database, you should consider doing so if you intend to pursue the smaller donors. Donor databases are the most efficient way to research donors of any size, but for small donors, the databases are essential. Many of the small foundations do not maintain a Web presence, which means Google will not help you get the information you need about the donor's interests or application processes.

If you don't have the funding to subscribe to a donor database, there are a few alternative ways to access information. One option is to see if your local library has a subscription to a donor database. This is not uncommon in the larger public libraries (at least in the U.S.).

A second, slower option is to use the Foundation Center's free search tool to generate a list of foundations based on geographic location, giving trends, or endowment size. The free tool works best if you have the name of foundation and want to learn more about it.  With the free tool, you will not be able to look up funders by areas of interest.

A third way to uncover these harder-to-reach donors is through cultivating individual donors. For example, a family may have a family foundation through which it gives grants, but individual family members may give to charitable causes as well. If you can reach one of the family members and establish a relationship, you may ultimately be able to tap into the larger resources of the family's foundation.