How to Find Your Major Donors of the Future with Jay Frost
Jay Frost brings together people, ideas, and resources to fuel positive change in the world. He has worked with hundreds of organizations to identify and pursue billions in fundraising opportunities around the world. He has been recognized as one of America’s Top 10 Fundraising Experts by Philanthropy Media, one of the Top Eight Fundraising Influencers by Elevation Media, one of the Top Thirteen Excellent Fundraising Consultants by Double the Donation, and one of the Top 100 Charity Influencers by Onalytica.
A successful fundraising program is within the reach of any charitable organization. But it often takes a shift of perspective and One of the greatest challenges for every nonprofit is attracting individuals with the capacity to give a major gift. In “Power Prospecting,”Jay explores how to find the top wealth holders within your constituency, throughout your community, across the country and around the world. Whether you are embarking on a capital campaign or just trying to expand your private philanthropic support, this workshop will prepare you to identify people who can make your mission possible.
More about Jay Frost at https://www.frostonfundraising.com/meet-jay
Read the Interview
Hugh Ballou: Welcome to The Nonprofit Exchange. Russell and I are here again for another version. We’ve just had Jay Frost join us. He’s come in from another meeting. Jay has been a TedX speaker, and he is an expert on many things about funding. Jay, we just talk about your topic and we have a few questions for you. Before we get started with any of that stuff, it’d be good for you to talk about who you are, a little about your background, and why you’re doing the kind of work that you’re doing. Jay Frost, welcome to The Nonprofit Exchange.
Jay Frost: It’s great to be here, thank you very much. Where do I begin? I’ve been in the world of philanthropy and fundraising since I started working. As I think I’ve told you earlier, recently, I began as a grant maker. I stumbled luckily into that world, where I had the real rare privilege of being able to help direct funds to artists, but quickly discovered that it would be helpful to be on the other side of the equation, to better understand what it’s like to have to ask for support and to work with organizations who are always seeking that kind of help, as they work to address the needs of their community, and going far beyond the arts although I love the arts very much. There is a lot of need across the country. We have over 1.2 million organizations, and all are desperate for resources. It was a very easy way to bring some real value and start working with folks who needed to find out how to better marry their interest to the interests of people who have resources. I spent the better part of the nearly last 35 years doing precisely that: Finding out who had money and passion and trying to see if there was a land bridge or an idea bridge between those people and those organizations. Sometimes getting an epiphany for those organizations who may be reluctant to share power with potential supporters. So it’s been a great journey, and I am still in the middle of it.
Today, I work with a number of consultancies on large capital projects, and sometimes small ones. Sometimes working with emerging organizations here and abroad. Also, trying to bring training and coaching to organizations, including through webinars I was doing minutes ago, to organizations who are spread around the world who have a need to figure out where our next dollar is coming from, how we’re going to pay our bills, and more importantly, what is going to transform the mission we’re hoping to create.
Hugh: That’s the bottom line for Russell and me. People talk about money. It’s what happens with the money. We have this funny thing about money with nonprofits. The word is stupid. It’s a lie. We have to make money. It ought to be called something different. We usually conceive of profit as money that goes into someone’s pocket, not the money that’s invested in the work that we do. It’s retained earnings or something else, but it’s a whole paradigm shift.
Jay Frost and I met on LinkedIn. Russell Dennis is co-host of this. Russell and you have things in common. He worked for an Indian reservation as the funding person for 11 years, and he has also been on the other side with the IRS, so he knows about compliance. He has a good lens to look through.
Jay, let me kick it off. Jay, everyone says if we just had funding, everything would be good. I find that there is a prerequisite to attract the funding. Even if you get it, what good would it do you if you don’t have the team and the plan to execute and the leadership to carry the ball forward, and a way to create capacity so you create sustainability? If someone comes to you and wants to raise money, what are the deficits people come to you with, so people could be prepared to talk to you about it? What are the deficits, and then the reverse of that, what should they have in place?
Jay: There are so many, and they usually are unique to the organization. But there are some that many unfortunately share. A couple of these, I have to admit, they surprised me the last few years how many organizations I discover don’t have three things. They’re not necessarily related items, but they’re all fundamental.
One is state registration. When you mentioned your work with the IRS, since I work mainly capital campaigns, my assumption has always been that you are registered to fundraise, aren’t you? Many aren’t. Sometimes it’s because they don’t know, and that’s okay. Sometimes, I’ve had one of these conversations where I really think you should just do it across the country. If you have a Donate Now button on your website, I’m not an attorney, but I would feel more comfortable if you were set to raise money anywhere if someone wanted to give money to me.” They’ll respond in different ways. “We’re only applying to foundations.” “Are they giving you money? Maybe you should be registered to raise money.” That’s a simple one, and it’s actually not that expensive. If you’re a serious organization, you want that in place. You don’t have to have a physical office, but if you’re not registered to raise money, you probably shouldn’t be doing it.
The next thing is the board. I know that seems obvious, too. Every organization has one. But not necessarily on a board that’s giving and asking. If we don’t have 100% participation in the board, I don’t know how they can go out and ask anyone else for support. That’s fundamental and obvious, but I keep running into organizations that don’t do it. It’s surprising.
Another thing I’ve been running into a lot recently is either the absence of or a lack of broadcasting about the policies and procedures of the organization. This also sounds boring, but it’s important. It’s the infrastructure of the house. If an organization doesn’t have gift acceptance policies to guard against accepting money from the wrong kind of places or money that is not aligned with their mission, then if they can’t go and tell the public, “Yes, we took money from this source and feel good about it,” they probably shouldn’t be asking for it from those places. That’s the worst case scenarios, but each of those are easily addressed. Since two of them are really core infrastructure, and one is setting the stage any time they go out and ask anyone for support or share their vision for the future, I don’t see how any organization can do without those three things.
Russell: As you made this transition from securing the funds to looking at people who are eligible and doling funds out, what was the one thing you found out in making that transition that you didn’t know before?
Jay: In terms of finding people-
Russell: In terms of shifting from finding funds to giving funds out, was there a big Aha?
Jay: For me, it was the reverse. I was giving out the government’s money. But that was giving away money for the arts. The big Aha moment, the big shift for me, first, in terms of making that shift personally, I think I may have told Hugh this, is I had conversations with people who were gift recipients. I realized how important this support was for those people, not just financially, but emotionally. To get that endorsement, that encouragement. But this was a long time ago. It was the ‘80s. We couldn’t have done what we’re doing right now. There was an Internet, but it was being used by the Defense Department, not folks like us. We didn’t have email addresses. We weren’t using them to any great degree. I had conversations with people. I was 24, and these people were in their 80s. I realized they were extremely deferential to me as a young man since they couldn’t see me. I was of course respectful of them, but I had that epiphany where I realized the road they’ve journeyed is so profound that I have to understand what it’s like to be in those shoes. That was the personal moment for me.
In terms of what that meant in practice, working with organizations and making sure I understand that, it actually came much later. I worked a lot with data in my career as a fundraising consultant and services provider. For a long time, it was with insider securities data. This is another arcane area of fundraising. I got data from the Securities and Exchange Commission, and then we worked with organizations, whether it was in Harvard or MIT or a local social services agency or an arts organization. They all needed to figure out who are the 1% of people who can make a difference. This isn’t just going around and knocking on doors, hoping for the best, or putting a pot in front of the grocery store. All of that is important. These are people who are already in our file. They graduated from our school, received treatment from our hospital, show up every year at the benefit, bought season subscription tickets. They care. But we don’t know they have those resources. They don’t know we don’t know it.
I recognized through that process of learning information that there are a lot of things organizations can do not only to find out where the money is, but to start understanding where these people are coming from. If you’re a person who, let’s say, you’re working hard at your little company, and suddenly it’s bought up by another company, your life is changing, probably in ways you don’t fully understand or appreciate at that moment. Same with a company that goes public, and you’re an executive. Suddenly, all this stock that really had no value is very valuable. Maybe it’s only valuable at certain time windows every year, as your options vest. This is a lot of data, but the real point is I think we should be sensitive to where people are and how their lives are changing, and be able to reach out to them in an appropriate, respectful way, but not to avoid talking to them. There is a tendency to separate ourselves from one another, especially organizations and donors, because we’re afraid. We’re afraid to talk to them about giving and financial circumstances and the big issues about how they want to be remembered by their children. In fact, those are the most important things.
Hugh: Speak to that. That is a very common thing that people are afraid. We have this money shadow thing. Why do you think that is?
Jay: I wish I knew. I mean I know why asking for money is uncomfortable for people because I’ve had to train a lot of people to do it. I don’t know about the money part. I wonder if maybe we could help people get over that a bit by helping them to simply think about themselves and start thinking about the other person. Ask good questions rather than trying to sell stuff. Find out who they are, where they’re coming from, what matters to them.
Hugh: There are a lot of things going here. Let me say that I would add one to your three. The fourth one, I think especially to grant makers, is they want to see a strategy so you have well-defined outcomes. They want to fund the impact of your work. I find the vast majority of organizations either don’t have a strategy, or the strategy is simply a piece of paper they have not fully integrated into the board, and the board is not active with this. An active board is one of the first things that grant makers look at.
We talked about finding your next donor. There are sponsorships. There is philanthropy, which is corporate or private donations. There is also corporate sponsorships, which is another pocket of marketing money. We teach there are minimum eight streams of funding. I understand that the vast majority of the funding for most nonprofits comes from individual donors. A lot of the start-ups think they are going to get grants that change their lives. They start up, write a grant, and everything will be hunky dory. I don’t know where that fallacy comes from. Let’s hone in on this donor thing because that’s the backbone of our budget, isn’t it?
Jay: Yes. I know we can’t use national statistics and generalize about a specific organization, but nationally speaking, 86%+ of the money comes from individuals. In addition, if an organization is waging a capital campaign, they find as much as 95-97% of the money is coming from 1% or fewer of the individuals. It might be as much as 3%. It depends on the campaign size. It’s all individual money. Institutional money is important for a variety of reasons. It provides the vetting process, so organizations think smart about what is the impact I hope to achieve through this program. I agree with you. That’s fundamental. Most of the money comes from individuals. Even within institutions, it’s individuals making decisions. If we’re not talking to people, we’re not getting anywhere. We certainly can’t grow. It’s unsustainable.
Hugh: There are those grants that we need to have their emblem on our program. The arts granting organizations. Even though it’s small dollars, it’s a validation for an arts organization. I’m talking about the Lynchburg Symphony.
I’ve learned a lot about the topic of development. I notice you haven’t used that word; you’ve said funding and donors. There are some misconceptions about development as a profession. I encourage people to think about a funding strategy. First, you have a strategy for your nonprofit. Then you have a marketing strategy and a funding strategy to support your strategic plan. Talk about the topic of development. Then talk about how do we approach these people who really could write us a check, but we don’t know how?
Jay: There is a lot baked into that. First, it’s about the language we use. Why do I say fundraising? It’s what it is. I don’t think we should be ashamed of it. Development’s fine. Advancement’s fine. If people don’t know what we’re talking about when we talk to somebody outside the field, then we have a problem. I don’t think we should hide what we do. We should be proud of what we do. By the way, I don’t have a problem with sales. Sales is great, too. What we’re doing is different from sales in that we are not trying to get people to buy stuff here when we do fundraising. We are not trying to convince people to do anything when we do fundraising. We are not trying to persuade people. I don’t believe that anyway. I don’t think we can persuade anyone to do anything. But what we are doing is opening a door to allow people to invest meaningfully in the things that are meaningful to them. If that’s what we’re doing, and I think we should be very proud of it. At some level, that’s important to get out there.
The broader question. I guess if I’m understanding you right, how do we get people to then move from being casually interested in something if they have the resources to committing to it? A lot of that comes from listening to people. If we spent more energy doing that, spending two thirds or more of our time just listening to people, and then showing them we’ve heard them, as simple as that sounds, first of all, then we lose, we don’t get the money we want, everyone walks away happier. Most importantly, it’s much more likely that people will invest in something they’ve told us they want to do, rather than in something we want them to do. This is throughout the field of fundraising. Too many times, organizations are saying, and they do this in politics every day, “This is my deadline. This is my quarterly deadline. This is our goal. This is what we have to do.” Who cares? What matters to the community and these people because these people are the ones who are going to decide to give this money to us to enact this great mission, to make these great things happen, or they will give it to their kids. Why should they care about our goals and our deadlines? It should be about them.
Hugh: Russell is smiling. One thing I have learned from Russell, even recruiting board members, find out what they want. Russell is grinning from ear to ear here. That is a sermon he preaches often. What do you think, Russ?
Russell: It’s about language and finding out what moves people. It’s all about them. We forget that it’s not about us when we’re out there trying to get that check. That’s common. I was thinking about where you look for these folks. It’s going to differ from every organization. What are some of the best places for an organization to look for donors?
Jay: The best place is right in their own database. It’s like a pebble in a pond. The water is still, and there is the splash. That is hopefully the board and the people closest to them. They have to start. That’s why I say there has to be participation at a high level. It doesn’t have to be high dollars, but it better be meaningful to those board members. And it goes out from there. The people who have been touched directly by our services, our work. Those others in the community who have a similar or unified interest with that, etc., etc. But then there is the other piece of that. Show love to all because that’s what we’re in the business of doing: social good. We do have to focus our time and attention on those people who have resources to give.
To put this in terms of metrics, I would like to see an organization’s development officer having at least 10-15 meetings per month. That means those meetings will have to be with people who really have the financial wherewithal to help. We don’t want to talk other people. We do. But if we can only see 10-15 people a month, those people had better be people who care about the same things and have the resources to do it. How would you find that? There are some very specific tools to do that. But there are easily at least six characteristics of that financial capacity and affinity.
One would be they’ve given significantly to us. That’s the most obvious. Another one is they have given significantly to others. You can find that through databases like the one at NOZA, that is part of Blackbaud. Donor Search has 275 million records. Giving to others.
Another is their service on a board or foundation. Even if it’s not on our board, if they are serving on another board, hopefully they are in the same service as our board, meaning they’re invested, they care, and they are putting in resources and time. We can probably find the 2-3% of people in our database who are serving on a nonprofit or foundation board are probably giving us a disproportionate amount of money. Probably 25% of our revenue. You just don’t know who they are. Those people, where can you find them? ProPublica has a great free database. Another one is The Foundation Center, which for $45 a month is the best bargain of any tool out there.
The last three would be real estate. If someone owns two or more properties, or if they own a single property worth in excess of $2 million, the top 1% of the population. Let me see.
Political giving. There is almost a 1-1 correlation. If someone is a political donor, either party, they give over $1,000 to an FEC campaign. Those kinds of people are giving us as much as 70% of our revenue right now. We just don’t know who they are. You can find others who are political donors at your level.
Then there are the people you visit with. Go talk to them. Find out what they care about. It won’t be reflected in their political donations because they usually only have a couple of choices. We can offer them a lot more choice in our world.
Finally, people who own businesses that are in excess of$10 million in revenue, and then people who are insiders in the stock market. There are probably 800,000 of those people living and dead since 1985. That is a very small universe of people with a lot of liquidity, and sometimes they’re quite public. But there are people who still put their pants on one leg at a time. If they lost money in the stock market yesterday, what does that mean? If we have an opportunity to have our 10-15 meetings a month, then I hope we’ll see somebody in one of those categories because those people together will make up the top 3% of our population of our database. We’ll be extremely focused, and we will always be talking to people who we know something about what they care about. And we know they have the financial ability to help on the things they decide to invest in.
Russell: That wherewithal is definitely important. What are some things a nonprofit can do to make themselves eligible to receive non-cash assets? As you know, the tax law has really impacted the way we donate. First, do you see organizations that are well-organized to accept non-cash assets? Then what are some steps an organization can take if they are not?
Jay: That’s a good question because it’s so individual. Most of the organizations I work with are in a position to accept at least dock gifts, or in a position to accept a gift from a donor advised fund. It might end up being in the form of cash anyway. But it’s sitting in this pool over here. Just because they can accept it doesn’t mean they’re necessarily positioning themselves to do so effectively, to market it. This is very true about anything resembling a state planning or planned gifts. They could include some information on their website. That could be a nice thing to do. It’s not perfect, but it’s a good start. They could have seminars on that sort of thing to at least make people aware they could be a recipient. So many of the bequests are a surprise. If we talk to people directly, they are way more likely to get a larger bequest.
Another thing would be to, even putting information right within our newsletters. It could be as simple as something about a planned giving program, but it might also be something like this: Does your company match donations? There is a whole database on matching gift data. Organizations can utilize that information to find those people. They could also be marketing about it, talking about it on a regular basis. Instead of people having to guess as donors, they could know what organizations have a friendly environment to receive those gifts.
I absolutely agree with you, Russell. The money coming from those sources is where most of the money is going to come from. It’s a small group of people who have those assets and are looking to do something meaningful with it. Our tax laws may be changing all the time, but not where people hold that money. It gets more complicated if it’s a boat, car, or train, but when it comes to financial instruments, every organization should have a plan for receiving those things.
Hugh: Jay, you referred to a donor advised fund. Would you define that for us?
Jay: A donor advised fund would be where an organization, let’s say a Fidelity charitable gift fund has the ability for people to set up funds for as little as $10,000. They can put money in, receive the tax benefit at the time they set up the fund, and advise Fidelity, or ask Fidelity to make a donation when they wish to do it. That could be annually, or it might not. That’s why they’re controversial, not legally, but among those who want to encourage more philanthropy. It may inadvertently delay people’s giving. In any case, people put some money in, like they would a bank. Fidelity holds it. If I am the holder of a Fidelity charitable gift fund account, I could say, well, I’d like to give some money to my alma mater this year. “Would you give $500 of my $10,000 to the University of Michigan?” They could say essentially, “We’ve taken that under advisement.” But of course they would do it because why wouldn’t they? It will always go to where you want it to go, if you’re recommending as a donor a legitimate 501(c)3 organization.
This is the important part, which I think you’re getting at. Now Fidelity is the #1 charity in America, if I’m not mistaken. All the donor advised funds have grown so dramatically. I can’t’ remember the figure right now. We’re thinking of billions of dollars sitting there, waiting to be given. What’s difficult for us as nonprofits is there is no database of that. I can’t go and look up who has a donor advised fund the same way I can look up a foundation in The Foundation Center, like all the other things we discussed. It makes it tougher for us, but also we’re pointing out if we can talk about it, then the people who have these donor advised funds are more likely to think to make a distribution to their social service agency in their neighborhood and help them out.
Hugh: Talk for a minute the difference between a donor advised fund and a family office.
Jay: Oh wow. I haven’t worked with a family office personally. But my understanding is they are pretty dramatically different. Correct me, with your insights. That’s where a family office is going to control more than whatever they might have in terms of the foundation. As a subset to the decisions they make as to protect the assets and the integrity of their family, they might have a component about philanthropy, where they endeavor to bring the family together on those issues. They might have an instrument, which is a family foundation, in order to make those distributions. A family foundation would have a board made up of living family members typically and presumably. Multiple generations. There could be staffing of it, full-time, part-time, lawyer’s office. There is some kind of person staffing the activity. It’s more expensive to set up and run.
The donor advised fund, anybody can set one up if you have 10 grand. Sometimes less.
Hugh: Russell, you noticed the piano besides him. We talked about working with arts organizations. Is piano your instrument, Jay?
Jay: I have a number of instruments. The reason it’s a little messy in here is we just had our annual cookie and music exchange party. Half the house moved into my office. This is a little electric keyboard. Our baby Baldwin is out there. We have four guitars, three cellos, a banjo. I don’t even know what’s out there anymore.
Russell: Hugh plays, he has this little stick, and he waves that thing around. Then you think you have a whole orchestra there, just waving the stick. I don’t know how he does it.
Jay: I just play one on TV.
Russell: He does a great job with that. In preparing yourself for an organization, what are some things an organization should have internally and structurally that will increase their capability to accept different types of gifts, non-cash gifts?
Jay: In addition to all the things we talked about before, especially Hugh’s point, I would say one thing they’d want is a strategic plan. The point of the organization. And flowing from the strategic plan, a fundraising plan. How are we going to raise the money to do the things they say they want to do? The dollars should not be leading the mission; the mission should be leading the dollars. Then the staff that is going to implement the fundraising plan. I don’t think it’s fair to an organization, the board, the community to operate without somebody who is responsible for the fundraising activity. It’s an important piece. If the organization has the money, they should immediately make that hire. They shouldn’t job it out to a consultant. A consultant is great, but they have specific purposes and uses in lots of different settings. I wouldn’t be paying triple to have someone do a job that would be wonderful to have owned by the organization. I would say that would be my order.
The reason why that would be important is if we know why we’re doing what we’re doing, when we’re going to do it, and what it’s going to cost, then we know the different pieces we need to employ in order to raise that money. Then we have a person to implement those things we said we want to do with some flexibility because things change, and things don’t go as we planned. Generally, we have the person, the plan, and the mission. Then doing something like, .“We better put up a page on our website that talks about different gifts/” becomes a lot easier. Then that’s just a feature. The benefit is all the other stuff.
Russell: It’s important to have that key person if you can have them. A lot of organizations go after people like that. Compass Point did a really interesting study in 2013 that talked about that fundraising infrastructure. Once you have this person, they have to have the support of all the key team members and board members in order to be effective, as opposed to “Go forth, and bring us money.”
Jay: It’s true.
Hugh: Relationship. We have mental capital. This is what we’re going to do for the world. We want financial capital. There is relationship capital that is the conduit. How important is it to have relationships inside of private foundations when you are trying to write a grant?
Jay: If I can look at that more broadly and zero in, I think relationships are fundamental to what we’re doing. That’s why the staff and the board are so important. They’re wrapped around that mission and the vision and strategy. Because they will be building relationships that then are focused around what we’re trying to do and how we’re trying to do it. The why and then the how. What should they be doing? Should they be raising money? Yes. But how? You raise money by building a relationship with people so they can trust you, so you will be a good steward of the resources they want to invest in that mission. Where you’re aligned.
I think that that relationship capital is essential. How do you get there with a foundation? That’s a harder thing. A lot of foundations will say, “We don’t accept unsolicited requests for support.” My reaction to that is, well, then we want to be solicited, so let’s get to know them. Is it possible to get to know people within foundations if you don’t currently? Yes, I think it is. I think you may have to work a little bit at it. There are ways to do that. We could talk about that all day. One might simply be look at your database, and find out who you know who is already connected to a foundation, which you can do through a screening tool like Donor Search, Wealth Engine, iWave, Blackbaud. Any of those tools would allow you to find those wealth holders, but also those who would be more likely to if not definitively connected to a foundation.
In other words, we are talking to someone we already know who is already invested in us about the place where they are protecting the assets of their family or their vision. Sometimes it’s a family foundation. Now we’re talking to them personally. Yeah, I think it’s all about relationships, even when it doesn’t seem to be.
Let’s imagine someone listening into it talking today. “I heard about a foundation in town. I’m not sure how to get through to them.” My reaction is, “Why do you want to get through to them?” Are you just looking for their money? Because if all you’re looking for is money, then it’s going to be pretty hard to raise money. You’re looking for an opportunity to work with someone, to do a better job of what you do. Part of that requires resources. If you think you have similar interests, that your missions are aligned, then yeah, you absolutely want to get to know those people. I want to find out what else they fund, when they funded it, who serves on their board, what their interests are. I want to show up at their events, get sponsored. I want to know as much as I can and find an opportunity to ask them what drives you, what’s important to you, how is it you want to make change in the world. If you have something aligned, then I can say, “Well, we’re doing this project. It sounds like these other things you’re interested in. Would you be interested in sharing more about that?” I would want them to ask me for a proposal.
That sounds like a really long process, but there is an old thing that he used to talk about in Japanese business, compared to American business. My wife is from Japan. In Japan, you work a really, really long time, and seems to take forever. Then everything goes really fast, and you complete. But here in the United States—we do things really well, but we don’t always do them carefully—you do things really fast, and then it takes us forever because we didn’t think it through. I think in fundraising, we can learn a little bit from that other approach. Let’s be patient. Patient money is good money. Let’s be patient with our time, too. Let’s really get to know people before we see them, after we meet them. Let’s make a marriage that’s going to last. The worst thing that can happen is you get a little money today, and you never get it tomorrow. You can’t sustain it. Institutional philanthropy is a great example of let’s get to know these folks, make them our partner.
Russell: That’s really good with a donor advised fund because they actually take that money, invest it, and there’s capital gains on it. Those gains are deductible, whether the money is distributed. They’re only required to distribute 5%. They’re looking for good projects. They have money and want to put it somewhere.
Jay: That’s the idea. Some people have complained, no, it’s sitting there forever. That’s right. But my reaction is maybe it’s siting there forever because we haven’t given them a good, compelling reason to invest it in these projects. Why do some organizations stay small when others grow big? Maybe it’s because they don’t think big enough. I am not going to blame every small organization. I am not intending to mean that at all. Sometimes there are other impediments. Sometimes we don’t need to grow or want to grow. All of those things are fine. But if we need to serve a need that’s not being addressed, then maybe we need to think a little bigger. We talk to someone with those kinds of resources, especially if they are tucked away in a fund like that. We are talking their language about something that’s important to them. We can do something meaningful.
I think about this with the growth of homelessness for example. These agencies are not serving that need, and now it’s exploding across the country because of the lack of affordable housing. How do we address that? I definitely don’t have the answer. One thing I do know is if an organization is below a million dollars, it won’t be able to address that very easily. They need to scale so they should be adaptable to the needs of their community, so they can feel comfortable asking donors to address the needs as it changes. They will be more successful in addressing homelessness. If they think small, they will only have limited resources to do it, and they won’t be very appealing to people who have tucked their money away in these big donor advised funds.
Russell: That’s pretty key. If you look at the landscape for getting connected with a lot of these people, I’m sure the technology has probably made that a little bit easier than it was at one point in time. How has that impacted the way that people look for people that deploy that money? Talk a little bit about the kinds of changes that have taken place in identifying donors and places for research. Let’s say they don’t have these folks in their database. How do they go about finding them and making those connections?
Jay: That’s fair. There are some who just don’t. For the most part, most organizations I’ve seen, there are a few. Anybody who has a geographically representative database probably has a few of these people. It’s always the1% rule. 1% of your donors or friends have resources. Getting to know them is going to be important. Most organizations probably know half those people, but the other half, they don’t know very well, and they don’t realize it. Whether they only have 1,000 people in their database or 100,000 or one million, they probably only know half the people who have these kinds of resources or interests.
How has it changed? A lot. When I got started in this, it wasn’t just the lack of Internet. It’s also on the growth of these databases, and the accumulation of data is enormous, especially in the last few years. Now you can go to a number of companies to screen your database or use an online resource to find both more about your existing donors and friends, but also new people. For example, there is a database within one service where you can look up donors who have given to specific kinds of organizations by their NPEE code, a typology of these organizations, and a geographic area, like a three-digit zip, and a gift amount. You could pull up a list of all the people who, say, in Charleston or in San Francisco, pick a city, who had given to dance with gifts of over $1,000. It wouldn’t cover all the people, but it could cover a good number. You could pull that list and send them a note or invite them to your next event or find out who they were connected to the people on your board. Bring that list to your board, and do an old-fashioned peer review, where you sit down over lunch and lock the door so they can’t get out for a few hours. Give them some coffee, and ask them who you know. Hopefully, at the end of the day, you end up with 10 people.
If I had no resources at all, and I were just starting from scratch, all I had was the board, and I knew the board was committed, and they were already giving. The first thing I would want to do is find out who else they knew. Most of us know a few people we haven’t thought about lately. It’d be great to welcome them to the party that is so meaningful to us. Why not just ask them that question first? Let’s start out with 10 x 10 x 10. Find the 10 they know. Figure out the strategy for those 10. Go talk to those 10. Work our way through that.
If we do have a good case statement, we didn’t talk about that earlier, but it’s part and parcel of our strategic plan and fundraising plan, explaining why we’re in business, why it’s important, and what we’re going to do, that can be the piece that then enables us to have those kinds of meaningful conversations with existing donors who have resources that we find through these tools, the new people we identify through databases or members of our board. We sit down, show them that document, and say, “What do you think?”
Russell: That’s perfect.
Hugh: We’re talking to Jay Frost today on fundraising. His website is FrostonFundraising.com. You can find out all about Jay. He’s been a TedX speaker. He does seminars. He has been on both sides of this equation. I’ve determined he knows what he’s talking about.
Early-stage nonprofits. It’s a different kind of presentation, isn’t it, when you just got your basic board members. You’ve worked that first plan. Now you’re trying to put some money down so you can get going. Are there different thoughts for people who are just coming out of the chute with their organization?
Jay: That’s a tough one. I guess there are, but that’s a challenge because the program or the funding, how much of it is just worried about losing control over a mission that they love so much. The one thing I do run into a little bit—I’d be interested to hear if you two do as well—is when I talk to an organization, and the founder or the chief executive is not willing to take advice or bring new people onto the board or ask people on the board who are not making the level of commitment required to take on another kind of role or responsibility and make room for those who are more committed. All those things require a person to let go. It’s very hard to do, especially if it’s a small organization.
With a nascent organization, with a working board with several family members involved, it can be problematic. Not because they don’t care or aren’t committed, but because it could inhibit their ability to bring in the kinds of ideas and resources that would allow their idea to flourish. It’s sort of like a person having a farm and then never letting water onto it because you are waiting for the rain to come. It just doesn’t work. But I feel for them because I know that what they’re doing in their heart of hearts is trying to bring into reality this vision they have for a better world. But I think the best way to do that usually is to find other like-minded people, and to let them share a bit of the power. And the more they do, the more they’re likely to find that their ideas are successful, and that the organizations and their missions not only flourish, but maybe outlive all of us.
Russell: What I’m hearing is that, we talk a lot about this, building strategy, it’s all about alignment. It’s making sure that we’re talking to the right people to begin with. We have to find that mission alignment. The likelihood that that will go off the rails is a lot different if everybody is aligned. That involved a whole lot of work, which our SynerVision process will take people through. It’s some effort upfront. If you spend that time upfront, it greases the skids to move forward. It’s definitely a challenge for a new organization. You have to have the types of things that we build in place. There is a fundraising strategy, a donor strategy, a grant strategy, an approach to everything that is filtered down from the mission. But it’s building that success frame and getting people to execute it. A lot of it is about who you know. Realistically, as you have a lot of experience, what would an organization that is fairly new be looking at in terms of the amount of time invested to attract some of these major donors?
Jay: Significant. You might be lucky. It does happen. People just give you a gift. I think I would budget 12-36 months. The problem with that answer though is it’s too facile. There are some people who are already there. They have been giving all along, but no one asked them. I have been involved with one organization for most of my life. Talked recently to an ex-member of their board who had been involved for even longer. Another 15 years more than I had. He told me in confidence he had never been directly asked for a gift. This hurt him. It felt like they had never taken that additional step to invite him to invest in the very thing he had devoted so much of his life to. So much of his identity was embodied in it. It’s tough.
Russell: It’s about looking where you are. Who do you have? Who do you know?
Hugh: That breaks my heart. There is an assumption about what we are doing, people will just write you a check. That does happen. But I find that people fall down on the call to action. Also, I find that people sometimes talk themselves out of the donation because they want to know what time it is, but they don’t want to build a clock. There is crafting the statement that starts with why it’s important. Start with why, Simon Sinek.
Part of the early-stage funding, I work with entrepreneurs as well. There is a tension between concept. People think it’s a great concept. There is love money. They love you, and they love the idea. One of our colleagues Ed Bogle is a strategist who talks about love money. Some people want to see the proof. In business, like a product or service, in a business, there is proof of concept. People want to see it’s going to work before they buy it. Can you do this? Sometimes funders have put a lot of money into things, and it’s gone belly up. Even though it’s a gift, it’s an investment.
Jay: You know what’s funny? I’ve seen this trend in the last few years. I am sure you have as well. That thought process is now bleeding into what we used to see as philanthropy. Not just in smaller organizations being founded to address needs that are already being addressed by other organizations, but where they didn’t have confidence, that organization had that kind of plan to execute. It’s also being addressed by new companies, not 501(c)3s that are addressing some of these issues. They are social benefit companies and organizations like this. Now the public has no measure of control, oversight, or anything else into those companies, which sounds great. But they can do whatever they want. They can pay themselves whatever they want.
I’m torn about this because the nonprofit sector, and I agree with you, you talked about the nonprofit sector. It means we’re not something when we are something. They say third sector in Europe. It’s a little better, but not a lot. We are different. If what we have is a public good, not in this wishy-washy social good language, but literally a public good, not just because of the tax status, but the way we are treated, if that’s true, then both we can hold ourselves to a higher standard. Donors can hold us to a higher standard. Instead of creating competitive organizations, they could partner with us. If we were willing to partner with them, we could do much better. There are needs that are not being addressed by the government, and it’s left to us, or they won’t be addressed at all. Is the better route for someone who just made some money yesterday to start a new company or 501(c)3, or is it for us to open our doors a little bit to these next-generation donors and let them be our partners and do a better job? I think it’s the latter. We already have the infrastructure and tax code to do it, and we already have people with a lot of dough. I think we need to bring these things together if we really want to make some change.
Hugh: Absolutely. I find a lot of people dumb down when they hear the word “nonprofit.” I believe the IRS calls it “tax-exempt,” and that’s how we put it. You just hit on another non. What we’re not is a non-governmental organization.
Jay, we’re headed to the closing here. What is a tip or thought or challenge you’d like to leave with listeners? It’s FrostonFundraising.com. This man knows his stuff. You talk about Benefit Corporations. That’s a B-Corp. Those corporations typically do not qualify for grants because you have to be a 501(c)3. We did get a good description a year or so ago. This isn’t a for-profit enterprise; it’s a for-purpose enterprise.
*Sponsor message from SynerVision’s online community*
Jay, this has been very helpful today. What thought do you want to leave in people’s minds?
Jay: Maybe just to as they look in 2020, think about how can I expand the group of people that I want to welcome into my little club, the place we’re doing our work? They aim higher in terms of what they’re trying to accomplish, and then seek out the few people who can help them to accomplish it, and to do so without forgetting all the others who will probably rise to the occasion later. It means do some research, and it means you have your case down in your pocket, and you know exactly why you’re in business. Focus on them, not on yourself. The conversations will resonate when you have mission alignment. You don’t need to worry about that part. You don’t need to worry about selling. You just need to worry about listening carefully and welcoming people into the fold.
Russell: Great stuff. Jay Frost, thank you so much for joining us. This has been really insightful in terms of getting in touch with major donors. What you need to do to set yourself up for success.
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