When evaluating a for-profit business, investors immediately ask about market potential: are there billions of dollars available across a global market? Or is revenue limited to weekend foot traffic at a local store?
When building a nonprofit fundraising strategy, market potential is just as crucial. Is there money for what you’re doing? And, who is funding the impact?
After helping hundreds of organizations answer these questions, we’ve identified three distinct approaches to developing and engaging with funding markets. Each approach fundamentally shapes your strategy, goals, and storytelling.
- Pied Pipers: These organizations need to create a demand for a new or niche cause.
- Examples: Startups in social innovation, niche nonprofits addressing social issues, early-stage advocacy groups.
- Strategy and considerations: These organizations often need to leverage visionary storytelling/leadership, provide thought leadership, and/or play a numbers game – actively selling too many prospects to secure first critical commitments.
- Pros and cons: It can take longer to get traction with funders, but when these organizations do land funders, the funding generally comes with more flexibility and “big bet” or transformational potential. Further, after getting some traction, a highly successful Pied Piper will attract funders to the cause and – at first – be the de facto market leader (also called ‘first mover’ or ‘category of one’).
- Market Servicers: These organizations operate in well-established social sectors (e.g., education, health, environment) where there is a recognized philanthropic market. They may be startups or well-established organizations, but they compete for funding in a market with many other similar organizations.
Strategy and considerations: While the funding market is more abundant, it is also more competitive, so these organizations need to focus their case more on differentiation and effectiveness. - Community Maximizers: These organizations primarily raise funds from their immediate community, such as alumni, parents, donors, or local residents. They often have a strong built-in network that they can tap into repeatedly.
Pros and cons:- Unless you’re an Ivy League institution, your community may feel (or be) limited in size. However, individual funders can tend to be more fervent and committed.
- A lifetime relationship with a funder is an asset and strategy that has higher potential returns for Community Maximizers than other categories. Based on our experience, we estimate that 95% of estate gifts are made to Community Maximizer organizations.
Further considerations:
- Hybrid Models: The categories above are clarifying, but they don’t have to be absolute. Some organizations may fit into multiple categories, depending on their stage of development or the diversity of their funding sources. For example, a university (Community Maximizer) might also be involved in cutting-edge research (Pied Piper) and receive grants for specific projects (Market Servicer).
- Life Cycle Stage: The fundraising strategy should also consider the life cycle stage of the organization. Startups may need to focus on Pied Piper strategies initially, while more established organizations can leverage their community and market positioning.
Actions:
- Decide which category (or categories) your organization fits into. Share with your team WHY you believe this and discuss the implications for strategy.
- Explore the categories, but also explore various causes within categories. For example, if you have a mobile health solution for refugees, perhaps you need to attract funders to the space (Pied Piper strategy), but if you also build your case for support so that you are providing access to care for the underserved (writ large), then you may also be able to tap into a larger funding market (Market Servicer strategy).
- Explore potential funding market sizes using our Philanthropic Market GPT.
We made this for demonstration purposes. It’s very basic but can be a handy tool to compare philanthropic landscapes based on how you position your impact.
