A core part of the prospect research process involves evaluating potential sources of funding such as private foundations, community foundations, and government agencies to determine which sources of funding are the right “fit” for your organization and worth pursuing.
Deciding What (and What Not) to Pursue
Relationship with the Funder: Unless your organization is well established and/or has built relationships with potential funders, the odds of successfully winning any grant are going to be relatively low. To increase your chances of being awarded grant money, it's important to cultivate relationships within the donor community.
Funding History: When you review a foundation’s grant history and see it has funded organizations similar to yours in the past, this could be a sign that the foundation is worth applying to. However, organizations that have received grants in the past have an existing relationship with the funder, which gives them an advantage. When a funder receives grant applications of similar quality from organizations with similar missions to conduct similar scopes of work, there is a good chance the funder will continue to fund the known organization over an unknown one. When you review a funder's giving history and see an organization similar to yours in the grantee list, research the current grantee before you decide to submit an application. Try to find out if the grantee does good work, has performed well on its current/past grants, etc. If the answer is Yes, the organization is doing a good job, it increases the chance that the funder will continue to fund the organization. If the the current grantee has a mixed reputation or is known to manage its grants poorly, the funder may be interested in supporting a new organization.
Reporting Requirements: Even if you find the “perfect” funder for the work you do, if the funder gives out small grants and has a burdensome reporting process requiring detailed project reports on a semi-annual or quarterly basis, the funder may not be a perfect fit after all. You’ll need to evaluate the opportunity closely to make sure it won’t cost you more money to manage the grant than you will likely receive in grant funds. This “opportunity cost” is more of an issue with small grants (maybe $35,000 and under) but it can also be an issue for grants of $100,000 or more, depending on what the reporting requirements are and how many staff hours it will take to meet them.
With these cautionary statements out of the way, let’s look at eight things to consider when you are evaluating a foundation for fit.
Eight Things You Should Know about a Foundation before Submitting a Grant Application
Foundation’s Areas of Interest: Most foundations have narrowly defined areas of interest. At the broadest level, these interests may fall into categories such as health, the environment, or the arts. Within these categories, foundations will create focused grant programs. For example, under the category of "health," a funder may only offer grants to fund research to reduce infant mortality. When you review a foundation for fit, it is important to drill down to make sure that your organization or project not only fits within the foundation’s broad areas of interest but also within a specific program area.
Foundation’s Annual Giving: To determine how many grants a foundation gives out in a given year and how much each grant is likely to be, it helps to look at the foundation's past giving. A foundation’s annual giving can vary year-to-year, both total giving and across individual programs. Examining a foundation’s giving history will provide a sense of which programs are most active and best funded and what your odds of getting funded might be. If a foundation has grown in recent years, or has recently increased funding for a particular program area, it could signal that the number and size of awards will be increasing (at least in certain programs areas). It may also indicate that the foundation could be more open to funding newer organizations it might not have considered in the past.
Average Grant Amounts and Number of Awards: As part of evaluating a grant opportunity, it's essential to look at the average grant size. Knowing this information can help you determine the foundation’s priority areas and decide whether it is worth applying for a grant. For example, if the foundation's average grant size is $3,000, it may not be worth it to apply unless the application is very easy and there are no reporting requirements. Conversely, a foundation may offer grants average grants of $300,000 to $500,000 in each of its program areas. This would seem to tip the cost/benefit equation in favor of applying. However, if the foundation only awards one grant a year in each of its program areas, the amount of competition for each award will be steep. Unless you are confident that your organization can successfully compete against a large pool of established nonprofits, it may not be worth applying.
Eligibility Requirements: Even if your project fits with a foundation’s program interests, you’ll need to confirm that your organization meets the basic qualifications to apply. Some foundations only accept applications from organizations with headquarters based in a specific country or geographic region, or they may only consider applications from existing grantees. As part of the initial review of a foundation, one of the first things you’ll want to do is note whether your organization falls within the basic eligibility requirements.
Application Process and Deadlines: Reviewing the foundation's application process can help you decide the “is it worth it” question. If it won’t take long to pull together the application, your project fits within one of the foundation’s priority areas, and the grant amounts are decent, it is probably worth applying, even if you have a question about whether your organization or project will be competitive. Deadlines are also obviously important to note. You’ll need this information to determine if you have time to apply during the current grant cycle or if you should wait for the next one.
Current Grantees: Looking at a foundation’s list of current (and past) grantees can give you an idea of what kinds of organizations and activities a foundation likes to fund. As mentioned above, seeing an organization that is a lot like your own on the current grantee list is both a good and a bad sign. On the other hand, it could mean that the foundation is interested in your area of focus and might favorably entertain an application. On the not-so-positive side, it could mean that the foundation has this area of interest covered by one of its existing grantees and is unlikely to fund another organization to do similar work. Regardless of whether it is a good sign or bad, if you end up applying to a foundation that has funded work similar to yours, you'll want to factor in the foundation staff's level of experience when you write your application (i.e., write for a more sophisticated audience).
Foundation Staff: Uncovering any connections to foundation staff—maybe someone on your organization's staff went to graduate school with a program officer who works at the foundation—is always helpful. As part of your profile of the foundation, create a list of the foundation’s staff and board members and circulate the list around your organization to see if anyone recognizes a familiar name.
Other (History/Latest News, etc.): While the foundation’s website and any foundation database you use for prospecting purposes will have the bulk of the information you need to evaluate an opportunity, it is worth spending time reviewing other sources such as Google search results and the Chronicle of Philanthropy to see what else you can uncover about the foundation, its current priorities, and any staffing changes. Through this research, you may learn that the foundation is expected to spend down its endowment in the next few years, or that it is rumored to be on the verge of ending a particular program area (or opening a new one).
It may sound like there are more reasons not to apply to a foundation than to apply. In some ways this is true. For any organization, regardless of mission, there will only be so many foundations that will be a good fit and strong prospects. However, when you find a foundation that is a good fit, in many cases it becomes a long-term relationship where the funder, now a stakeholder in your work, provides ongoing support to your organization for many years. Can it take a while to find The One? Yes, it can. But the benefit of a focused search and careful evaluation process is that you’ll end up submitting fewer applications overall, but each of those applications will be of higher quality and you’ll have a higher chance of success.