Is $1 Million All You Need to Succeed?

Image: Becris at Freedigitalphotos.net

Image: Becris at Freedigitalphotos.net

Imagine this: You’re working with a start-up nonprofit organization and scrambling for every dollar you can raise. Along comes a big philanthropist, passionate about your mission, who offers to donate $1 million to your cause. 

Wow! Is this generous gift just the thing you need to build a stable and sustainable financial future? Or is it the beginning of the end?

This type of “seed funding” (generally a significant sum of money) can mean a couple of different things:

1 )   The funding new nonprofits need to get started
2)   Support sought by an existing organization to launch a new program or special project

In either scenario, read on for 3 reasons why seed funding is not all you need to succeed…

Strings attached

Seed funding for new organizations often comes from the people who are running or governing the organization, or from close friends and family members of those people. These seed funders almost always have opinions about how the organization should be run, and they are not shy about sharing them. 

Beware of the day you look up from your desk and realize you are working harder at keeping your seed funders satisfied than at realizing your organization’s charitable mission. 

Blessing and a curse

A single, large seed funder can be a double-edged sword for the fledgling nonprofit. On one hand, a large infusion of cash up front can help nonprofit leaders rent space, hire staff, and begin working with clients. 

But it can also bring a false sense of security. A seed funder can make you feel like the need for money is taken care of. 

Necessity is the mother of invention. If you don’t NEED to fundraise from other sources, you probably won’t.

Question of sustainability

Most wells eventually run dry, and so will the capital from a seed funder. Depending on one source of funding for all of your organization’s revenues may be a great plan for 6 months, but not for 6 years. 

By nature, seed funding is a short-term fix. It will never take the place of longer term, diversified funding streams. As your start-up nonprofit grows and begins to spread its wings, potential investors will ask about your sustainability plan. 

They will want to see a diverse pool of donors to ensure long-term viability of your organization. And you’ll want this, too!

Say no to seed funding?

Unfortunately, I’ve seen some nonprofits fail after starting out strong with seed funding. I am not suggesting that you turn down this revenue source, or not seek it at all. Just take time to understand it’s true nature as a narrow, short-term solution. 

Brainstorm with your seed funder(s) ways her startup dollars could also fuel longer-term fundraising. Maybe, rather than one lump sum, this gift is given over several years with the amount tapering slightly each year. Or perhaps part of the gift is given as matching funds – to motivate other donors to jump in early and support your cause.

You may decide you’re not ready for seed funding and what makes sense instead is a planning grant. There are no hard and fast rules about how seed funding is structured, so be creative with both your organization’s short and long-term needs in mind.

Have you sought or secured seed funding for a new nonprofit or special project? Please share your experiences in the Comments box below!

Special gift for you: Conquer Your Fear of Asking for Money, a step-by-step guide, is available here (click).