What is Your Nonprofit Funding Model?
Where does Your Nonprofit Fit In?
The main focus of my career is writing grants for nonprofits and small businesses. Part of that work is identifying different nonprofit organizations' funding strategies and funding models. Knowing how a nonprofit works help my work in finding the right grant funders for their work.
The following is a summary of Stanford University's research into different funding models for nonprofits.
Ten Nonprofit Funding Models
Heartfelt Connector — this is The Make a Wish Foundation and the Susan G. Komen Foundation, model. They differ from nonprofits that rely on individuals with particular religious, political, or sporting interests to form positions in order to express those interests. Through special fundraising events Heartfelt Connectors attempt to develop explicit connections between volunteers.
Beneficiary Builder — Hospitals and universities are two of the best examples of Beneficiary Builders. The vast majority of these NGOs’ income comes from fees collected from recipients in exchange for the services they provide. However, the fees do not cover the complete cost of providing the service.
Member Motivator — Some Nonprofits rely on individual donations and use what we term the Member Motivator fundraising model. These individuals (who are nonprofit members) pay money because the issue is relevant to their everyday lives and something from which they all benefit.
- The National Wild Turkey Federation (NWTF), which protects and expands wild turkey habitats and promotes wild turkey hunting, is an example of a Member Motivator. It attracts turkey hunters, who collectively benefit from NWTF’s work and therefore become loyal members and fundraisers.
Big Bettor — These nonprofits rely on one or very few donors. Usually focused on medical research or environmental issues.
- Conservation International (CI), whose mission is to conserve the Earth’s biodiversity and to demonstrate that humans can live harmoniously with nature, is an example of a nonprofit that uses the Big Bettor funding model.
Public Provider — Many nonprofits collaborate with government agencies to deliver critical social services, such as housing, human services, and education, for which the government has set aside funds.
- As Public Providers grow, they often seek other funding sources to augment their funding base. TMC (formerly the Texas Migrant Council), which supports children and families in migrant and immigrant communities, is an example of an organization that uses the Public Provider funding model.
Policy Innovator — These non-profits have devised innovative approaches to addressing social challenges that are incompatible with current government funding systems.
- An example of a Policy Innovator is HELP USA. This nonprofit provides transitional housing for the homeless and develops affordable permanent housing for low-income families.
Beneficiary Broker — compete with one another to provide government-funded or backed services to beneficiaries. Among the areas where Beneficiary Brokers compete are housing, employment services, health care, and student loans. What distinguishes these nonprofits from other government-funded programs is that the beneficiaries are free to choose the nonprofit from which they will get the service.
Resource Recycler — Some Nonprofits have grown large by collecting in-kind gifts from businesses and individuals, then distributing these donated products to those who could not afford to buy them on the open market.
- These are mostly food banks of one kind.
Market Maker — Some Nonprofits provide a service that is motivated by both philanthropic donors and market factors. Even if money is available to pay for the service, a for-profit organization would be improper or illegal to do so.
- The American Kidney Fund (AKF) is an example of a nonprofit that uses the Market Maker funding model. AKF was founded in 1971 to help low-income people with kidney failure pay for dialysis.
Local Nationalizer — These organizations focus on issues that are important to local communities across the country, such as poor schools or youngsters in need of adult role models, where government alone cannot fix the problem. Government agencies and fees account for only a small portion of the funds.
- Teach for America (TFA) is an example of a nonprofit that uses a Local Nationalizer funding model.
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