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Every time I criticize foundations, someone steps in with “well, 80% of philanthropic dollars come from individual donors.” Usually it is a well-meaning statement, designed to give hope to those of us who are frustrated with foundations and their various archaic and ridiculous practices. And taken as a whole, it may be true. This report, for example, shows that in 2019, 69% of giving comes from individuals, 10% from bequests, 17% from foundations, and 5% from corporations.
If 17% of our revenues come from foundations and 5% from corporations, why should we spend so much time and energy bashing our heads against the walls, screaming in anguish at the foundations and corporations that require quarterly reports, make us use their own budget templates, or, worst of all, force us to remove Oxford Commas to stay within character limits? If they account for only a fraction of total philanthropic dollars, maybe we’re wasting time trying to get foundations and corporations to change and should focus more time rallying individual donors?
Let’s examine this. Just like with other things in our sector that we’ve taken at face value, there is a whole bunch of stuff to consider. Top among these things, as usual, are the equity implications that are often ignored in many of the broad philosophies and practices prevalent in our field. I wrote about this earlier, in Why Individual Donation Strategies Often Do Not Work for Communities of Color, but I still hear this comment all the time, so let’s revisit it, because it is misleading and damaging to our work.
First of all, the statement lumps organizations of different sizes and types together, and the larger orgs tend to skew data significantly. The largest nonprofits are mostly religious institutions, universities, and hospitals. They and other multi-million-dollar orgs are often in a completely different sphere of fundraising, and perhaps a huge chunk of their funding does come from individuals.
However, most nonprofits in our sector are less than 500K in budget size. Third Space Studio’s research of orgs under 2M in budget size, for example, reveal that among 155 orgs surveyed in 2016, only 36% of their revenues on average come from individuals (In 2015, it was 34%. You can download the report here). This nonprofit economic impact report by CalNonprofits, meanwhile, shows that government dollars count for nearly HALF the revenues of nonprofits in California; and when large institutions are removed from the calculations, individual donations account for only 16% of revenues!
Here’s even more recent data that show that only 13% come from individuals. Clearly individual donations do not come anywhere near the 70% or 80% that’s touted by fundraising experts for decades.
Second, let’s remember that even among smaller nonprofits that make up the majority of orgs in our sector, those led by marginalized communities are even more reliant on foundation support. This is an area we need to study further (please put any research you can find in the comments), but having worked with dozens of organizations led by communities of color, and leading two of them myself, I can tell you that individual giving is especially challenging. Many orgs led by marginalized communities rely heavily on foundation dollars. The small amounts of individual giving they receive often come from events.
And there is a chicken-and-egg phenomenon where you need significant start-up resources to develop a robust individual giving program, along with several years to build a base of donors. Expecting marginalized-communities-led orgs to fundraise like white-led nonprofits that generate donations from mostly white donors is culturally insensitive and inequitable, and saying that most funding comes from individual donors also allows foundations to punish organizations that do not meet this inaccurate benchmark.
Third, this misleading and mistaken belief lessens the urgency among funders and absolves many of their impetus to change. I have been on multiple panels now where this statement is used by foundation staff to deflect valid criticisms aimed at foundations. Usually it is done with a bit of modesty, a humble suggestion that foundations really aren’t all that powerful or important. But whether we like it or not, funders play a significant role in the sector. Funders often set the tone that individual donors and the rest of the field follow.
Foundations do not deserve this much power to shape the field—that right should go to the people and communities most affected by systemic injustice—and yet they possess it. Minimizing the power and influence that foundations wield helps to maintain those dynamics while increasing complacency and reducing foundations’ urgency to reexamine their practices in the sector.
When so many organizations led by communities of color, LGBTQIA, disabled people, and rural communities depend on foundations as one of their primary sources of funding, foundations need to understand the critical role they play and stop tossing the funding hot potato to individual donors.
Finally, individual donation strategies have their own challenges. We need to stop thinking of individual donations as the silver bullet to philanthropy, and fundraising gurus need to stop pushing it as the panacea for all the challenges brought up by frustrated people, especially marginalized people, when it comes to foundation support. It is rather patronizing, as if we ourselves have never thought about raising money from individuals. We do, all the time. If it were as easy as some of you are saying, then the assumption is that many of us are foolish or ignorant to chase after grants instead of focusing our time and energy developing relationships with donors.
Trust me, considering how inequitable and burdensome most grants that are accessible to marginalized communities are, and the fact that 90% of foundation dollars go to white-led organizations, we would not willingly prioritize grants. But the sad reality is that for many marginalized-communities-led nonprofits, the crappy grants that we get that age us and make us want to quit the sector forever are often still easier to obtain and more efficient than cultivating individual donors.
Besides, even if it were as easy as many gurus suggest, individual giving has its own set of problems. Among them, white saviorism, poverty tourism, tax avoidance, wealth that came from historic injustices, donors shaping which issues we tackle based on their whims and with little knowledge, and problematic donor behaviors that often go unchallenged like sexual harassment and racism.
With all that in mind, we need to stop deploying blanket statements like “80% [or 90% or whatever] of nonprofit revenues come from individuals.” It is not true when disaggregated, it is a strategy that primarily works for white-led orgs, it punishes organizations led by marginalized communities who rely heavily on foundations, it’s condescending, and it lets foundations off the hook regarding changing their inequitable practices.
This is not to say that nonprofit shouldn’t develop individual donor strategies. Communities of color are extremely generous and donors of color have been ignored by our sector for a long time. We should ensure that donors have opportunities to be involved in our work, and we need to do it in a way that is aligned with equity.
While we work on that though, we must continue pushing foundations to increase payout rates and the percentage of their funds going to organizations led by and serving communities of color and other marginalized communities.
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