Far too many great ideas for solving pressing social problems are not being applied at the scale they deserve, because thousands of nonprofit organizations are teetering on the brink of collapse. Of the 300,000 nonprofits in the United States, two-thirds have an annual budget of $500,000 or below, which does not allow them to expand their operations or scale their solutions. Fundraising is by far the biggest challenge for the sector, even for the most successful organizations. In a survey I conducted of the leaders of over 200 top-performing social entrepreneurships, 81% of them identified access to capital as their most serious concern. If an organization can’t reach sustainability, which I define as reliably raising around $2 million in annual revenue, the chances are high that it will eventually stagnate or fold.
Using Design Thinking to Help Nonprofits Fundraise
Fundraising is by far the biggest challenge for the social sector, with access to capital being a major concern for both nonprofits and social enterprises. The traditional advice is that organizations should diversify their funding sources, aiming for a roughly even mix of foundational and individual donors, government grants, and earned revenue. But that’s not the approach of the most successful organizations. Previous research has found that the nonprofits that have grown in size to $50 million a year or more rely heavily on one particular source. This is known as finding “the natural match.” For example, the Sierra Club relies primarily on membership fees, while Susan G. Komen has concentrated its fundraising intensively on its race events. Interviews show that these organizations experimented to find their natural match, actively soliciting feedback from donors and other stakeholders.