During the best of times, grantseeking is a time-consuming and resource-intensive activity.
Yet it’s vital to U.S. nonprofits, which together received about $43 billion in grants from U.S. foundations in 2007 to feed, clothe, educate, house, heal and inspire people.
But securing grants when foundation assets are tanking is even harder. And it’s not likely to get easier anytime soon.
Prepare ye, experts say.
It’s not pretty out there.
Over the past six months, endowments have dropped at least 22 percent to 23 percent, estimates Bill Jarvis, managing director and head of research for the Commonfund Institute, which analyzes endowments’ investment performance.
That jibes with the 23 percent to 28 percent drop Kathleen Enright has been hearing about.
As president and CEO of Grantmakers for Effective Organizations, she hears the moans and groans of funders.
“A word of warning,” she says. “Although we don’t feel like we’re insulated from the stock market crash and other economic troubles, we are to some extent because many foundations operate on a three to five-year rolling average. So the true hit to grantmaking will come in 2010.”
She’s referring to the fact that many large funders base their grantmaking budgets on an average of their assets over the previous three or five years, a strategy developed as a way to keep grant budgets steady even as earnings fluctuate.
But during a sharp economic downturn, that’s not enough, says Jarvis.
“For a three-year spending rule, it’s being felt now,” he says of the squeeze on grantmaking. “In 2008, declines are so big that the rule instructs you to cut grantmaking right now. And the negative returns for ’08 will be a drag on spending for 2009 and 2010.”
And even if the market turns up today, it would take extremely high markets to turn spending around, he says.
So, Enright says, “now is the time to build your own contingencies and prepare for what could be even tougher months and years ahead, rather than relying on a quick turnaround.”
Relationships plus results
The good news is that most funders are trying to honor their existing funding commitments, says Joanne Duhl, vice president for The Philanthropic Initiative, a group that helps funders design philanthropic programs.
“If there’s already a commitment to the programs you’re providing, then grantmakers are trying to continue those commitments,” she says.
A relationship is a foot in the door, she says, and that’s important as funders become more conservative, hesitant and less willing to take on new projects.
“Going back to those who funded you in the past is a much higher-potential approach than trying to solicit from a whole bunch of new funders,” she says. “The deeper the relationship, the better your chances.”
The foundations Enright works with generally want to make sure their current and former grantees are whole before they start funding new nonprofits, she says.
And when soliciting a foundation, be authentic.
“Never shy away from asking funders for what you need, rather than manufacturing what you think they want,” says Enright.
Doug Bauer, senior vice president at Rockefeller Philanthropy Advisors, agrees that relationships are critical, but that may not be enough right now, he says.
“You have to be very sober and very surgical,” he says.
Too many nonprofits still are blanketing the industry with grant proposals, hoping one will hit.
In an environment like this, that approach won’t work, he says..
“You need to focus,” he says. “Who are the groups that are truly interested in the work you’re doing? And can you demonstrate impact and results in a meaningful way?”
As foundations are forced to make tough funding decisions, they likely will want to put their money where it will have the greatest effect.
If a nonprofit can demonstrate that it is operating in a “businesslike fashion” and meeting its mission, a foundation is more likely to be impressed, says Bauer.
Nonprofits that are merely “okay” may not continue to receive support. He urges grantseekers to make their case to funders clearly and with data to back it up.
“It’s survival of the fittest,” he says. “And that’s not who is the strongest, but who adapts the best.”
Funding basic needs
The one area where foundations are considering funding increases is in basic needs like food, housing, shelter and heat.
Some funders are treating the fallout from the economic crisis much as they would the fallout from a natural disaster, as happened in the wake of the 9/11 attacks, Hurricane Katrina and the tsunami in East Asia.
The Silicon Valley Community Foundation and the Pittsburgh Foundation for example, not only are raising additional support to fund the increase in basic needs, they are dedicating a larger portion of their annual giving to help people weather the storm, says Enright.
“There will be some foundations who consider making grants that are an exception based on what they see as urgent needs in their communities,” she says. “And those grants are typically about human services.”
But the focus on alleviating the symptoms of the economic mess, while much needed, could come at the cost of funders’ other core grantmaking programs.
Dollars could be redirected from traditional grantees, for example, to those working in health-care, food and heating oil, say Bauer.
“Foundations are not immune to the fact that those groups are going to need some support,” he says of basic-needs charities. “So that may mean cutting back on some of their central grantees.”
Until the economy and endowments rebound, foundations will remain in that unenviable spot, forced in some cases to weigh immediate needs against the long-term good.
“It’s a huge challenge,” says Duhl. “You can’t ignore critical needs, but in philanthropy, people like to think they’re helping people beyond that as well, to create opportunities. It would be nice to think we could continue to do both.”
The grantseeking landscape is bleak. And so is the outlook. But perhaps the hard times will bring about innovation, says Bauer.
“It’s an extraordinary time,” he says. “But I’m hoping the silver lining is it will teach us lessons about how we can be more effective and efficient on both the grantmaking and nonprofit sides. Hopefully that will make us all better.”