Why do some nonprofits give up on applying for foundation grants?

Foundation grants are a significant revenue stream for many nonprofits, accounting for $104 billion, or 19% of total U.S. charitable giving, in 2023. Yet, our survey of nearly 4,000 U.S.-based nonprofits between August and October 2024 found that 9% hadn’t applied for any foundation grants between 2021 and 2023.

What barriers could prevent nonprofits from seeking foundation support, and what consequences can failed grant proposals have beyond finances? We asked 341 nonprofits that hadn’t applied for foundation grants their reasons for opting out.

Why don’t some nonprofits apply for foundation grants?

Lack of capacity was the most commonly mentioned barrier, cited by over half of nonprofits that didn’t apply for foundation grants. In comments, respondents described lacking staff, time, or resources to apply for and manage grants. “We don’t have capacity to manage grant reporting if we were awarded a grant,” one wrote.

Not knowing how to apply was the second most common reason, noted by over one-third of nonprofits. Many expressed uncertainty or intimidation around the application process. Nonprofits mentioned wanting clearer communications on whether foundations were open to unsolicited proposals, with one respondent sharing, “I called three funders and left messages but to no avail…. I wish I could simply reach out to any of the funders and simply get a ‘No.’”

Perceived ineligibility was cited by under one-third of nonprofits, citing barriers like legal structure, organizational age/size, niche focus areas, or religious affiliation. One representative shared, “Our work is such a small niche and I’m unaware of grants willing to fund a tiny nonprofit supporting a tiny village.”

Other barriers noted in comments included years of unsuccessful grant applications, poor program fit, and strategically prioritizing other fundraising approaches. Across their responses, a common thread emerged: After repeated rejections, the effort required to apply was no longer worth the potential payoff.

What happens when nonprofits are rejected for foundation grants?

Applying for, but not receiving, foundation grants created consequences that extended beyond budget shortfalls. To better understand how organizations were affected operationally, emotionally, and strategically, we conducted interviews with nonprofit leaders. We focused on leaders of Black-led nonprofits—organizations with majority Black leadership and serving predominately Black communities—because recent research suggests they are smaller, less well-funded, and receive 300% less revenue than nonprofits with majority white leadership.

Nonprofits that don’t get one grant are less likely to receive another. Many nonprofits found themselves caught in the “track record paradox.”: Foundations want to see a successful grant track record before awarding funding, yet nonprofits need funding to build that track record. One leader shared, “Our organization is continuously overlooked due to the fact that foundations…will not award grants to us because we have not received grants in the past.”

Nonprofits are discouraged from applying for future grants without funder feedback. In addition to the rejection itself, how foundations communicate—or fail to—impacted nonprofits. Leaders described receiving generic rejections with no meaningful feedback, leaving them uncertain about the reason for their rejection. One recounted, “When I followed up with a foundation we applied to, the response I received made me feel dismissed and undervalued.”

Nonprofits are forced to constantly “translate” themselves. Nonprofit leaders described the drain of constantly amending their work in ways that would resonate with different audiences, framing things differently than they would to their stakeholders. This point is relevant for already under-resourced organizations and Black-led nonprofits that are more likely to receive feedback about how they describe their work. As one leader explained, “How I relay [information about our nonprofit] should not be grayed or tainted because I’m worried about how I’m speaking…. I should just be able to show up with my authentic self.”

Moving forward

These findings have important implications at a time of significant funding cuts and economic uncertainty. Foundations are an important funding source, but many nonprofits lack the capacity to apply for foundation grants. Our data suggests that limited capacity, knowledge about the application process, and other barriers may outweigh the potential benefits for some nonprofits, particularly after repeated rejections.

So, what options do nonprofits have? Nonprofits that lack capacity to apply for multiple foundation grants could focus on pursuing funders with aligned priorities instead of casting a wide net. For example, Candid offers tools and resources to help nonprofits identify potential funders and strengthen grant proposals. For foundations, our findings underscore the value of transparent processes, constructive feedback, and application requirements that don’t inadvertently screen out nonprofits with limited capacity or experience.

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