Peter Haas – Sasha Dichter's Blog

I couldn’t be happier to have a guest post on outsourced fundraising from Anne Marie Burgoyne. Anne’s role at Draper Richards is to find and support early-stage, high-growth nonprofits, and Anne serves on the Boards of One Acre Fund, LivingGoods, Mapendo International, Spark, Agora Partnerships, Global Citizen Year and Mission Continues. If anyone is in a position to see these questions play out in multiple early-stage nonprofits, it’s Anne Marie.

When I read Sasha’s post last week about Peter Haas’ TED Fellows blog post (on the possible future of the fund raising industry), I jotted down ideas I had about how such an outsourcing idea might (not) work and why – purely as an intellectual exercise. And then, oddly, an email arrived from Sasha asking if I might have thoughts on this topic to share. How fun and here goes!

For context, I work for the Draper Richards Foundation – a funder of early-stage non-profits with high-growth models. We see 40-500 applications annually, use a very thorough diligence process to get to know the individuals and models applying for our grants, and fund 1-2% of the applicants with $300K, a board seat and participation in our community of practice. We seek to invest in organizations with strong leadership, scalable models and sustainable impact and provide general operating support, introductions, and as much time and attention as we can to help our portfolio of entrepreneurs succeed. We come from a venture capital tradition and firmly believe that fundraising is a key skill set of a gifted entrepreneur.

I concur with Peter Haas on a number of levels. It IS really hard to raise money and it is hard to be good at fund development. I have great admiration for people who raise money well (and those who continue to hone the craft) and I remember it being the hardest part of my job when I was an executive director.

Unlocking resources is the highest and best use of time, especially for an organization in its early years. Fund development calls rarely are mono-focused on raising money. A well-prepared, well-executed fund development meeting can yield partnership and board development leads, as well as identification of possible volunteer and full-time talent – a social network stands at the ready when a person who is committed long-term to their organization calls on a foundation or generous individual. I am reminded of one of the findings from Heather Grant and Leslie Crutchfield’s terrific book Forces for Good – “Convert individual supporters into evangelists for the cause.”

This sort of conversation only happens through good listening, continued dialog and mutual trust – with a leader who is intellectually and emotionally stuck long- term to their organization.

In addition, fund development keeps nonprofit leaders close to a big part of their market – a must in the bifurcated world of non-profits in which the “purchaser” of services is different from the recipient. In my further past, I managed a sales team, and feel strongly that the market feedback role of revenue generation is integral to an organization’s success. Many donors focus on a topic or geography of interest to them. The questions they ask and the observations they share are often rich with intelligence that can help with execution and organizational decision making.

Don’t ever think that your gun for hire is looking for more than the money when they pay a call. People respond to their incentives – and if their motivator is gift size alone then that is what they are looking for and that is what they will close.

In addition, there is a big difference between need (“I’ll take any money”) and want (“This is a funder who understands our work and sees our vision.”). If a fundraiser is motivated by their “cut,” versus the trajectory of an organization’s work, mission creep is sure to follow.

The aspect of the equation that is missing here, I think, is that in early-stage work, all you have to offer is the reputation and past success of the leader and her brave and capable staff. There is no consistent proof of concept, no execution in multiple settings, few impacts to share that are clearly replicable. There is, however, a vision for change and a path to make the world different – and that story can best be told by the person whose mind incubated the idea, the person who is orchestrating its execution.

Once an organization reaches critical mass in terms of size and history – often when they have been in existence 3-5 years and have a budget of above $1-2M – hiring a committed and professional Development Director can be a boon. These senior members of the team often have an area of expertise – high net worth individuals or large institutional funders – and come in with their eyes open to learning the mission in intimate detail and their ears open to hearing what current and potential funders have to share about the work of the organization and their experience as donors. They can multiply the impact of the founder’s considerably, but are never a panacea – the role of fundraiser, and role of the executive director in fundraising, never ends, it simply mutates over time as the needs of the organization evolve.

I am a big fan of outsourcing non-critical path tasks that are routine, time consuming and distracting – but fund development is not one of them. Human capital is the heart the non-profit engine. And relationships with funders as people and as connectors, rather than wallets, builds deep capacity for future giving – of money, of ideas, of additional relationships.

Founders and leaders, especially in the early years when an organization is building its model, reputation and brand, are in the best position to successfully raise funds and to build deep and broad relationships that will be a foundation for future success.

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Peter Haas, the Executive Director of the Appropriate Infrastructure Development Group (AIDG), has a strongly-worded post up on the TED Fellows blog called Show Me The Money – Disasters, Restrictions and The Future of the Fund Raising Industry. If you’ve ever thought that this “fundraising question” is something off to the side for nonprofits, read Peter’s post.

Peter argues that there’s an untapped business opportunity for professional fundraisers. The logic goes as follows:

It’s really hard to raise money as a small nonprofit
Large, capacity-building grants are harder to come by than they were in the 80s and early 90s
It’s too expensive for small nonprofits to hire salaried fundraising staff who can raise millions of dollars
Many nonprofit CEOs aren’t good at this
And, Peter implies, maybe it’s not a particularly good use of nonprofit CEOs’ time to fundraise (in Peter’s words, “I’ll tear through the BS in a system and get to the core error. But I’m not a salesman for high end luxury goods.”)

Peter proposes that professional fundraisers could fill the gap by signing up as fundraisers for hire, taking a cut of the funds they raise. This way, goes the logic, nonprofits don’t have to pay hefty salaries upfront, and fundraisers who have proven that they can raise real money can work their magic. In Peter’s words: “Somebody accustomed to raising 50-100 million for a big org could probably do a lifestyle changing business, cutting their work week dramatically while earning the same salary, by only raising 10-20 million divided between a handful of smaller up and coming orgs.”

It’s an interesting idea. In truth there are a handful of these people out there, and I think they and the sector would get a nice shot in the arm if more people stepped up to take this kind of risk and put their skills to use for small, growing nonprofits.

But before we go too far, let’s dig a little deeper into Peter’s post, since he says out loud something that is often left unspoken, namely:

If the mission of the NGO is the service to the community, and fund raising is truly something administrative (as most donors like to classify it in cost analysis), then it should be something an NGO can easily subcontract.

This is where we, our donors, and the sector as a whole go awry – when we think that there’s the “real work” of the nonprofit and this peripheral activity of raising funds.

In 2008 I wrote a Manifesto for Nonprofit CEOs. Here’s an excerpt:

I’ve met too many nonprofit CEOs who say “I hate fundraising. I don’t fundraise.” If you’re being hired as a nonprofit CEO and the Board tells you that you won’t be fundraising, they’re either misguided or lying.

Tell them they’re wrong. Tell them that your job as a CEO is to be an evangelist for your idea and to convince others about the change you want to see in the world. Tell them that if this idea is worth supporting then they should jump in with both feet and support it with their time and money and by telling their friends it is worth supporting.

Spending your time talking to powerful, influential people about the change you hope to see in the world is a pretty far cry from having fundraising as a “necessary evil.”

Apparently I still have a few people left to convince.

Which got me thinking, again: why do we keep on running into this wall in the nonprofit sector? Coke just sells colored sugar water, yet the people who make it a multi-billion dollar company are the storytellers who created and sustained the brand over the past 120 years.

What’s so different in our sector? Is it because the people we serve (“beneficiaries”) and the people we who are our source of revenues (“donors”) aren’t one and the same person? And do we honestly think that this bifurcation of stakeholders is healthy or sustainable? Is there even another sector where we would entertain this kind of dichotomy?

Let me put it another way: if a CEO of anything but a nonprofit said, “I’m starting a new business. I see a gap in the market and I’m jumping in with both feet and am prepared to sweat blood to make this thing work. But I don’t want to deal with the whole revenues side of the business. I’m not THAT guy.” Could a tech entrepreneur say that they’re not willing to talk to customers and VCs? Did Kelly Flatley and Brendan Synnott, the founders of Bear Naked, say they’re weren’t willing to talk to the folks at Whole Foods? Of course they didn’t. How is this any different?

I’m not saying it’s not hard to raise millions of dollars in grant funding – it is hard. It’s really, really hard. And this isn’t the same skill as being on the front lines making your programs work. And, sure, a gutsy fundraiser-for-hire could help. But funders aren’t cash registers, funding conversations aren’t switches seamlessly from one organization to another, and any nonprofit CEO who thinks he is going to secure million-dollar gifts without seriously rolling up his sleeves and being the person those funders bet on is wishing for a market opportunity that just ain’t there.

So my question for Peter is: are you proposing a short-term solution to a cashflow issue (“I need someone today to help me raise that first million”) or a business model issue (“what I do as the ED is and should be separate from this whole fundraising thing.”)?

If it’s the first one, let’s go for it. If it’s the second, then I think we’re kidding ourselves.

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