I recently met with a friend of mine at Geekdom who specializes in video storytelling for nonprofits. We were discussing some of his recent projects when he mentioned that two of the nonprofits he created videos for had the same exact fundraising strategy. This seemed odd to him, because the target causes and passions of the two nonprofits could not have been more opposite. In short, they both were going to ask for donations from the same three or four wealthy philanthropists in the local area.
I see this problem over and over again, and I have created a term for this fundraising strategy: Six Rich Guys Strategy (SRGS). I got the idea for this phrase from a recent article in the local newspaper about the six billionaires that live in my hometown of San Antonio. Click here to read.
Please keep in mind that not all of these individuals are philanthropists, and there are several other extremely high net worth individuals that live in San Antonio. Anyone that is involved with the local nonprofit sector even for a week will learn all of their names. I use the term SRGS because when you talk about fundraising in San Antonio, the same names always come up over and over again. Everyone has these same six guys on their list of people to "reach out to."
The future of philanthropy and nonprofits depends on organizations abandoning this antiquated line of thinking. Below is my attempt to outline why this is a bad strategy for your nonprofit and what you should do instead.
Why is the Six Rich Guy Strategy Bad?
1. Fundraising Fatigue - I have seen this happen with high net worth individuals, and I can tell you that sooner or later your six rich guys are going to get tired of everyone asking them for money. Nonprofits with no real fundraising strategy are like mosquitos. They can smell new blood, and before you know it, you are sleeping in a mosquito net because so many of them want to suck you dry. Nonprofits you didn't even know existed come out of the woodwork to pitch you on their cause. So what happens is the rich guys pick a niche or area, like education, and then focus all their efforts in that area. Everyone else that received money in the past, but is now outside of that scope, either gets "the break-up talk" or gets dramatically lower donations.
2. Nothing Gold Can Stay - The sad reality is that your six rich guys are not going to be around forever. There was a big nonprofit I was working with for over a year. They had a yearly budget that was in the millions, and in the good old days there was a very wealthy lady that was their benefactor. At the end of the year, when funds came up short, guess who would write the big check? You guessed it, rich lady. Then one day she died and all her money passed to her children. It turns out her children were not big fans of the cause, and so the funds stopped flowing and the organization has struggled ever since. This is what happens when you subscribe to SRGS. You may ride the wave now, but inevitably there will be pain to come. Why not prepare for it now and build your tribe?
3. You've Just Dated Yourself - This fundraising strategy reeks of the Blue Haired Ladies of the Opera or the Good Old Boys Club. It says, "I know rich and powerful people, and I can get an audience with them." Sadly, this strategy is very off putting for anyone to the young Generation Y or Millennial demographic. Young people, members of the creative class, and knowledge workers roll their eyes when people try to impress with these types of tactics. It says, "I am better than you because I am in the inner circle." It just leaves you feeling gross all over. As a result, young people are now voting with their money and instead giving through new mediums, such as CrowdGiving (see below), which feel more comfortable to their lifestyle.
What should you do instead?
1. Build Your Tribe - No one can explain what this means better than the master himself, Seth Godin. In his book, Tribes, he gives great examples of leaders like Scott Harrison, who built their tribes from nothing and still go on to change the world. For example, if your nonprofit is helping end homelessness, then you need to ask the question, “Who is my tribe?” Perhaps your tribe is made of relatives of homeless individuals. Perhaps your tribe is comprised of people who used to be homeless and now want to give back or help put an end to this epidemic. The problem is, if your major fundraising strategy is asking the six rich guys for money and none of them have been affected by homelessness, well you are barking up the wrong tree. Find your tribe, wherever they are and lead them. Once you build your tribe, you don't need to persuade them to give money, they will do it gladly because they are already personally interested in the cause.
2. Do Your Homework - If you are going to target the six rich guys then you need to understand what they care about. The classic mistake that most people make when they ask our foundation for funds is that they don't do their homework. They don't know that my boss is a member of the Geek/Entrepreneur tribe. I started making a mental note every time I get a meeting like this. I say to myself, "How long is it going to take for this person to ask me what our foundation is most passionate about?" The sad answer is most of the time they don't even bother to ask. In one pitch I actually tried to describe where our foundation wanted to focus it's resources, but the lady pitching wasn't having it. All she would do is talk louder and tell me more sob stories about her constituents. After about 35 minutes I just sat there politely smiling, nodding my head, and thinking about what I was going to have for dinner. I will let you guess how big her donation was; it rhymes with zero.
3. Think Jackson, not Cleveland - There are far more Americans that have Andrew Jacksons ($20) in their wallet than Grover Clevelands ($1,000). As a tribe leader it is better to have 50 engaged tribe members that each give you $20 than to have one rich guy that gives you $1000 but isn't a tribe member. The problem nonprofits have is that it's easier to ask the six rich guys than it is to organize and lead a tribe. If you want to see this model being done right I am going to use an example that is very controversial. The Church Model. Now, there are quite a few negative things I can say about the church model, but that is for another blog post. I think though, as fundraisers, they have mastered this concept. Most churches don't have any of the six rich guys going to their church, and as a result, they have to fundraise at the Andrew Jackson level. The traditional tithe (10%) is how they keep the lights on and pay the rent. A congregation of several hundred people all bought into the church's mission and all giving 10% will make sure it stays open.
4. CrowdGiving - An even better example of targeting small donations are the new Internet CrowdGiving sites that allow you to give between $10-$25 to fund programs like micro-loans, school projects, and foreign students attending college. You give $25, I give $25 and so do one hundred other people online and boom, a micro-loan is funded. The problem with this is strategy is that it requires nonprofits to think more like an Internet start-up rather than a "big professional organization." It's much more comfortable for a nonprofit to start a capital campaign to raise $6 million to buy a fancy building than to raise $200K to upgrade their online strategy to enter the new digital world. Having a static website with a "Donate Here" button doesn't count by the way. For more on CrowdGiving see our recent blog post.
I know that if San Antonio suffers from SRGS then so do all the other major cities in the world. As the philanthropic world becomes more disrupted by technology and social entrepreneurs, the nonprofits that cling to SRGS will struggle and eventually go away. If you are a nonprofit or charity my advice would be this, build your tribe around more smaller donations and just more flat out engaged people. Pretend the six rich guys don't even exist. Then if they happen to be part of your tribe they will eventually find you. This should be a bonus, not the entire strategy.
Have you or your nonprofit fallen victim to SGRS? Tell us your story here or at www.eSamaritan.net.
Lorenzo Gomez works for The 80/20 Foundation. He is also an SA2020 board member, the founder of the nonprofit technology blog eSamaritan (from which this article has been republished with permission), and former ten-year Rackspace employee. You can follow him on Twitter at @lgomez123.