"You’ll never reach your true potential living life in comfort and routine. You've got to take some risks."

-Kylie Francis, social media macro influencer-

Tutorial 4: Considerations for Mitigating Risks and Maximizing Impact

We all have cause to be grateful to the countless philanthropists who were willing to take risks with their giving. Before an innovation can positively impact higher proportions of people, one or more funders need to provide seed funding. It is well-known that philanthropy is necessary for taking initial risks to pilot programs that, if successful, governments can scale. Likewise, unless people are willing to take at least small, calculated risks to enable nonprofits to grow, very little progress will occur.

The operative words are “small, calculated risks.” One grant maker. partnered with another to hire an assistant to a high-powered leader in Kenya – a man coordinating development at the national and sub-national levels. The results were extraordinary. However, if the leader left his post prematurely, outcomes could have been compromised considerably. However, the giving could be classified as a small, calculated risk because the grant size was not substantial compared to the size of the portfolios of the foundations. It should be noted that one major success can outweigh the cost of many failures.

If you are very risk adverse, you may want to start with small amounts of money relative to your personal or institutional portfolio. You can retain a philanthropic advisor who is on board with helping nonprofits grow – some are. You can also look for the sweet spot: Nonprofits with solid fundamentals but could benefit significantly with as little as one additional part-time staff member.

As mentioned elsewhere in these mini courses, consider pooling funds with others. If two or more people share the costs, then the individual outlay for each person is less. If you do not have a potential partner, consider getting involved with a giving circle or Issue Fund.

Collaborative funding has several advantages in addtion to mitigating risks. If the total amount provided is significantly more than would otherwise be the case, the outcome will likely be as well. For example, hiring a development person for two years is a significantly more promising proposition than hiring for one. This is because it often takes more than a year to achieve success plus more qualified talent will sometimes only accept a position if offered a two-year guarantee.

Generally speaking, small organizations that are less well-known or not supported sufficiently run a greater risk of closing down or radically downsizing. This consideration adds complications as many funders want to be more equitable in their giving. At the same time, it is unfortunate that those at the bottom are more likely to struggle with raising needed funding. Some funders will choose to support a small grassroots organization with solid leadership, qualified staff, and efficient processes, and take it under their wings. They may do so by providing capacity support, consultative support, or by volunteering time.

Additional Approaches for Mitigating Risks

Get feedback about the organization from outside sources, particularly from foundations and others. If you can, find donors who have stopped supporting the nonprofit, find out why.
Analyze the potential degree of impact that relatively small amounts of funding can achieve. You will find some great examples from stories on this site.
Make sure that you or your philanthropic consultant reviews financial statements. You can examine the 990s on all nonprofits in at least the United States at no charge.
Have a clear timeline in mind for how long you plan to support the organization.
Think carefully about the quality of the leadership of the organization you are considering funding. When funding the hiring of a development person (fundraiser), their level of charisma will play an important role in achieving success. Lastly, if a nonprofit does not already have an extensive contact list in a program such as Salesforce, it can take months, a year, or longer to put one together, depending on the number of existing prospects.

Proceed to Tutorial 5

  • Introduction

    Welcome to this series of mini courses. We hope to give individual donors a quick lay-of-the-land

  • Ten Approaches for Funding a Nonprofit

    1. Program Funding: This type of funding is given to cover the costs of running programs, which

  • Donor's Perspectives on nonprofit capacity building

    Many leaders in philanthropy support organizations (PSOs) believe that nonprofits could achieve a considerably greater impact

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