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Grantmaking 101

Grantmaking 101. A few words about the nonprofit sector. What is a 501(c)3?. 501c3 is the tax code that defines what we call “nonprofit” organizations Must operate only for exempt purposes No earnings to shareholders /individuals

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Grantmaking 101

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  1. Grantmaking 101

  2. A few words about the nonprofit sector

  3. What is a 501(c)3? • 501c3 is the tax code that defines what we call “nonprofit” organizations • Must operate only for exempt purposes • No earnings to shareholders/individuals • May not attempt to influence legislation as a substantial part of activities • No participation in campaign activity related to political candidates

  4. Nonprofit Structure BOARD OF DIRECTORS Executive Director Staff Members (and volunteers) Staff Members (and volunteers) Staff Members (and volunteers) Staff Members (and volunteers)

  5. “Nonprofit” is a broad category • Religious Institutions • Schools, Universities and Summer Camps • Hospitals and Medical Centers • Human Service Providers (housing, food, clothing, tutoring, after-school-enrichment) • Environmentally-Focused Organizations

  6. What does the nonprofit “sector” look like? • In California, there are almost 140,000 nonprofits total • Of those, only about 25,000filed the tax return forms required if your budget is >$25,000 most are very small! Source: www.canonprofits.org

  7. Where does nonprofit revenue come from? 36% government funding 54% sales, fees, earned income 10% philanthropic donations from individuals & foundations Source: www.canonprofits.org

  8. Where do philanthropic dollars come from? 30% foundations 70% individual donations

  9. For Profit Government Non Profit

  10. Key things to remember NONPROFITS • … are mission-driven organizations focused in lots of different areas • … can earn money just like for profits, as long as it’s in line with their mission, and they don’t pay taxes on the money they take in • ….can accept donations and certify to donors that their contribution is tax-deductible • … can pay people reasonable salaries and bonuses, just like for-profits, but there are no “owners” and thus no extra payouts to anyone

  11. A few words about fundraising & revenue models

  12. Nonprofit Revenue Models • Every nonprofit should have a revenue plan • Are “diversified sources of donations” important? • We’re seeing a possible trend toward revenue models that rely less than 100% on philanthropy

  13. Fundraising in one slide! • It’s a reality of the nonprofit sector • Important as an engaged funder and advisor to understand an organization’s fundraising plan • What makes most people uncomfortable is “solicitation without cultivation” or cold-calling – with cultivation, fundraising is much less stressful 

  14. A few words about the lifecycle of a nonprofit

  15. Lifecycle Stage Matters Because… • Organizational capacities, needs, and foci vary and change at different stages in the lifecycle – what may be an appropriate strategy in one stage can be a problem in the next! • The lifecycle stage of a nonprofit has implications for strengths, weaknesses, opportunities and challenges that an organization will have and face • Nonprofits may need to address “gating items” of organizational capacity to move through the lifecycle from one stage to the next

  16. The Nonprofit Organizational Lifecycle Model

  17. And now more about SV2’s grantmaking process

  18. What does a grant round look like? • Kickoff meeting – broad field updates, inspiration • Lots of learning at all stages • Selecting a focus • Finding great potential Grantee nonprofits – usually a closed process, we do the research • Due diligence – internet research, phone calls, site visits, proposals, presentations by finalists, reference calls with board members, funders, etc. • Selection of a Grantee

  19. SV2 Grantmaking Criteria SV2 funds organizations that: • Are 501c3 nonprofits • Are based in the Bay Area (extent to which programs are in the Bay Area varies by group) • Are at a lifecycle point where our dollars and time are significant (proxy is budget size of $250K-$2million) • Have high potential Executive Director & Board leadership • Have a well articulated/thought out model, approach, impact and a focus on outcomes • Are at an inflection point where they are ready for and interested in scaling (definition of scale can vary) • Want SV2 Partner involvement beyond the dollars (thought partners, advisors, connections, etc.) • SV2 Partners are interested in working with as Lead Partners and advisors to that nonprofit

  20. Details on our Grantmaking Groups • Education • Environment • Health • International HOW IT WORKS • Groups rotate through a strategy/learning year • We give 3-year, $100-150K grants (so $30-50K/year) – means 9 active grantee in the portfolio • Grants focus on capacity building

  21. What is capacity building? Strengthening the infrastructure/core of an organization in areas such as: • Mission/vision/strategy • Board leadership • Staff leadership • Program design and evaluation • Financial management • Fund development • Marketing and communications • IT • HR • Legal

  22. What happens after the grant? • Lead Partners & staff do OCAT & orientation • Grant Agreement (goals/outcomes) finalized • Open Advising Meetings held quarterly • Lead Partners: • Ensure accountability to grant goals • Act as ongoing connectors to SV2 Partners, resources within and outside SV2, etc. • Annual Investment Review by Board Committee

  23. How SV2 differs from a foundation GRANTMAKING • Group process and vote to decide • Combine analysis and passion to make decision • Relatively long due diligence process • Multi-year, non-renewable capacity-building funding • Grant funding raised annually; no endowment AFTER THE GRANT • Want hands-on engagement/personal relationship • Eager to be engaged in the challenges, not just see successes

  24. How SV2 differs from an individual GRANTMAKING • Group process and vote to decide; might involve compromise • Learning/access to information and diverse perspectives from fellow Partners to inform decision • Increased access to organizations and information • All Partners are invested in the full grantee portfolio AFTER THE GRANT • More avenues to engage with leadership

  25. Avenues for Engagement at SV2 • Grantmaking • Educational events – First Fridays, Chew on This Dinners, tours, etc. • Open Advising Meetings with Grantees • SV2 Teens and Kids programs • Annual (Fall), Holiday and Spring meetings • Leadership roles – Grant Round Leader, Lead Partner, Board Member, etc.

  26. Due Diligence

  27. Looking on a nonprofit’s website • What do they do/how do they do it? • Impact they’re making • Leadership • Board • Location(s) • Annual Report/990 (more rare) • Let’s check out a website or two!

  28. Guidestar.org for initial financials • Revenue & Expenses • Scroll through for anything else you notice • A word on % to programs vs. overhead • Let’s check out a real 990

  29. Reading a grant proposal • Now let’s look at a real SV2 grant proposal and discuss as a group

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