Building a Fan Base

A guide to raising money and recognition
Fundraising may be the least fun part of running a campus-based microfinance group, or any nonprofit, for that matter. But it deserves attention: first, we need money to operate. Second, winning gifts from a large donor base confirms that we are doing something worthwhile. Giving money feels good. Getting money feels good. Asking for it can be tough, but it’s well worth the trouble. You may even find you like it.

A Lesson from the Intersect Fund

Before launching the Intersect Fund, my co-founder and I made one fateful fundraising bid. Then-college juniors, we had scored a meeting with the Corporate Contributions Director of a Fortune 100 company headquartered in our town.

Our hopes were high. After all, our student-run microfinance idea was a good one and this company had a lot of money. What could go wrong? We expected to walk away with a $25,000 commitment.

Instead, we received a jarring crash course in fundraising.

The contributions director liked our idea in theory, but had a tough time believing we kids could carry it out. He wanted to know which community leaders we had spoken with (no one, admittedly), how many clients we’d recruited (none yet) and how we planned to raise all the money we needed. (Apparently, “a big check from you” was the wrong answer.)

Hindsight revealed to us our main mistake: we sought funds for an idea. Not for an established organization, for real clients, or for a strong community coalition. Our youth didn’t help, but it was our lack of community credibility really sunk us.

We spent the next several months meeting community stakeholders, recruiting clients and building a strong organization. Since receiving our first grant in late 2008, we have raised or earned nearly $400,000, some of it from the corporation that rejected our first pitch.

Five Components of a Fundraising Machine

Here’s what you’ll need as you begin seeking fundraising dollars:

  • Evangelism: You should to be so excited about your clients and your work that you tell everyone about them. Friends, relatives, strangers on the bus, everyone. No need to hog the conversation, but once you mention the project, people will want to know more. Be forthcoming with details and have some success stories in mind. Make sure your staff and volunteers do the same.

  • A Good Board of Directors: The ideal board contains key community stakeholders. That is, deans from your college, executives from local corporations, and people with community-level experience in your area. Your directors’ jobs are to give you good advice, donate money, and spread the word about your group to their wealthy or influential friends and colleagues.

  • A Clear Message: Make sure you can describe your group in a simple sentence. We say we’re a “nonprofit that helps people start businesses.” That’s usually enough to get people asking questions. Follow with details about what you do and a basic story of how your programs make a difference in people’s lives.

  • Satisfied Clients: This may seem counterintuitive: how do you serve clients if you haven’t yet raised any money? Well, it turns out church basements and student volunteers are free. Start teaching a business training class and building relationships with the aspiring entrepreneurs who show up. They will become your success stories and your motivation for raising money.

  • A Sensible Theory of Change: Okay, you disburse microloans and offer business training courses. But why? How does that help? What’s your vision for your community or the world? A theory of change explains how your products and services help your clients, and how, in a larger sense, helps to make the world a better place.

For example: Business training and microloans strengthen small businesses, help low-income individuals generate more income, enlivens the inner city economic environment, gives people a stake in their communities, creates role models, creates jobs, and ultimately results in more tax revenue, better cities and a better future in which upward social mobility is a real option for low-income individuals. It’s a mouthful, but that’s the impact we believe our programs will eventually have. What are you working for?

7 Start-up Funding sources

  • You — Be prepared to contribute some money into your group when you’re starting out. You shouldn’t always be the organization’s main benefactor, and it shouldn’t drag you into debt, but expect to spend a little on printing fliers, renting a P.O. Box, and rewarding your volunteers with the occasional pizza party.

  • Friends and Family — If you and your staff have developed a compelling story and share it whenever you can, it’s likely your excitement has spread. Odds are your parents or relatives would be glad to support you on some level. Every little bit helps. The thought of seeking money from friends may make you cringe. But keep in mind: you’re seeking funds for your clients and your group, not for yourself. And, contrary to what you might think, gift requests flatter their recipients. Even if your friend doesn’t donate, he’ll feel glad you thought of him.

  • Your clients — Your clients may not donate to your cause yet, but they should pay their fair share. Many student-run microbusiness groups follow the same flawed logic: “What right do we college students have to charge clients for our services? Besides, won’t fees repel people who struggle with day-to-day expenses?” This attitude helps no one. Clients — no matter how poor — value only those services for which they pay. Collecting fees for your programs will force you to maintain their quality, and fees will provide a valuable income source. Further, foundations like to see that you’re earning at least some of your income.

  • Local Accounting and Law Firms — Professional firms grow deep local roots. Their principals care about helping the community they call home, and are thrilled to hear of programs that foster self-sufficiency. Meeting with local accountants and lawyers is well worth the effort. Even if monetary gifts are not forthcoming, donations of time and advice are invaluable. Think of how nice it will be to have a professional helping with your 501c3 registration and nonprofit incorporation. And think of how much a discount on a good financial audit will save you — both now and down the line.

  • Business Plan Competitions — Every school seems to host one of these, and several foundations have followed suit. You’d think every college student with the next Big Idea for software or social change (i.e., every college student) would race to enter. But it turns out the daunting task of actually writing the business plan deters many would-be contestant. If you can get yours written — and you should, since you’re teaching clients to do the same — you will already have a better chance than you think. The Intersect Fund has won $75,000 from business plan competitions. In our first, which we entered as undergrads, we prevailed in the final round against five MBA-backed for-profit companies.

  • Your School — You should already be hitting your school up for the obvious freebies: printing, postage, meeting space and — of course — student labor. But keep in mind: professors and deans have university money to offer. Get to know them. They may offer funds in exchange for research opportunities, or for your help teaching a Social Entrepreneurship Course, or for consulting with their students on how to start similar groups. Also, universities replace big-ticket items like computers, projectors and scanners every few years. Find out whom to speak with about acquiring some of these valuable hand- me-down electronics.

  • Local Bank Foundations — Like the accounting and law firms we mentioned, local banks tend have strong roots in their respective communities. In-fact, small banks’ local stewardship is (they think) their chief competitive advantage over the likes of Bank of America and Wells Fargo. These small banks’ top executives will likely meet with you to talk about your group. Like every bank, the small ones have foundations that disburse small grants to community groups. If you make a good enough impression on the bank’s leaders, you may even win a grant without having yet obtained nonprofit status.

Quick Grant-Winning Tips

Foundations can help support your organization for years. Keep in mind though, even the small, regional ones read hundreds of proposal each year. Here are some tips to distinguish your proposal from the rest in the heap:

  • Keep it Short — If the directions include a five-page limit, keep it to five pages. The overworked grant officer reading your proposal awards no extra points for verbosity.

  • Write in Layman’s Terms — Demonstrate your program’s merit by writing about success stories, positive outcomes and a solid theory of change. Explain your reader about how microfinance can help your community. It’s tempting to include minutiae about your loan mechanics, but try to avoid mundane details. Try to educate your reader without boring her.

  • Know your funder — Foundations have specific funding priorities. For example, some focus solely on education, others on community development, and others on healthcare. Most fund efforts in several issue areas, a list of which they display online. Make sure your proposal fits. If you’re unsure, call or e-mail the relevant grant officer. In-fact, you should do this anyway: speaking with the person who will read your proposal can give you a strong sense of what he’s looking for.

  • Remember the attachments — Foundations tend to seek several supplementary documents, often including your program’s budget, your organization’s budget, a list of your board of directors, a financial review or audit, and (almost always) your IRS-issued letter indicating your 501c3 nonprofit status.

Tackle these right away: budgets take time to create, and financial review or audit can be costly and time-consuming to obtain. If you lack 501c3 status, you’ll likely need a “fiscal sponsor,” i.e. another nonprofit who will essentially let you use their tax-exempt status to apply for the grant. If you win the grant, the foundation will send the money to your fiscal sponsor, which will send it to you. Keep in mind, fiscal sponsors has differing fee structures and may ask for a small percentage of the grant.

Five ways to keep the money coming

  • Thank and Bank — Write a thank-you note as soon as the check arrives, and mail it out before depositing the money, ideally within 72 hours. Your benefactor just gave you a generous gift. Show her you appreciate it by thanking her promptly. Some nonprofits send e-mail thank-you notes. We prefer snail mail because it takes more effort. It pays to personalize your thank-you notes. Include information about all the great non-monetary gifts the donor has already given, i.e. advice, moral support, etc. Joe Shure from The Intersect Fund says, "This makes an impact: I'll sometimes be thanked for my thank-you note."

  • Send “Touch” letters — These are periodic letters to update your donors about the progress you have made since you received their gift. Include client outcome numbers if you can, and always talk about specific clients. Donors — and everyone else, for that matter — relate to personal stories.

  • Send Grant Reports — Foundations will ask for reports, often one year after they have disbursed your grant, that include information on how many clients you have served, what you have accomplished, etc. Be sure to send these in time to apply for a new grant, and it doesn’t hurt to send a report even if none is required. Foundations are more likely to give in the future if they have a clear idea of what you’re doing with their money.

  • Ask for more — Keep sending your individual donors “ask” letters. Not every month, but in intervals that you feel are appropriate. More letters will yield more donations. Talk about the progress you have made and your vision for the future. With foundations, it’s slightly different: some welcome proposals from the same organizations year after year while others resist repeat funding. Your pre-proposal research into a given foundation will have revealed its preference.

Spreading the Word

Start Small — A story in your school’s student newspaper is a great start. Then, move on to University sponsored media outlets like newsletters and stories on the website. School PR departments like to see students involved with their community, so they will likely welcome your coverage request.

Make Friends with Reporters — See which reporters cover small business issues in your local media outlets and get in touch with them. Compliment them on their stories. Make yourself available to talk about the small business landscape or the struggles of low-income entrepreneurs. If reporters see you as a valuable source, they will be more likely to write about you in the future.

Case in point: For months, we have bugged a local business editor to include our programs in his events calendar. He obliges each time, and he recently asked us to write a biweekly column in his newspaper.

Build a great Website — Make sure a first-time visitor can learn what you do, donate to your cause, and read about your clients. A good first impression pays off.

Fundraising Resources

  1. The Foundation Center
    • The Foundation Directory Online is a powerful database with over 100,000 grantmakers and recent grants that is easily searchable.
    • The Center's libraries are located in New York, Atlanta, Cleveland, San Francisco, and Washington, DC. Several public and university libraries provide access to the online directory for free and other foundation center resources.
  2. Grantspace
    • Hosted by The Foundation Center, Grantspace offers another searchable database with answers to thousands of FAQs, example grant proposals, letters of inquiry, etc.
    • Grantspace lists the Foundation Center's classroom training courses. Some are for free and others for a fee.