Nonprofit innovation fuels fundraising success in small and midsize organizations

Small and midsize nonprofits are up against a large imbalance of resources in the U.S. nonprofit sector. Recent research by The Bridgespan Group finds that the largest nonprofits—those with annual revenue over $25 million—raise 45% of the nonprofit sector’s revenue, despite comprising less than 2% of all organizations. That means nonprofits that provide last-mile service delivery, are closest to communities, and fill needs unmet by larger organizations often struggle to secure the funding they need.

The good news is that small and midsize nonprofits can still build resilient fundraising strategies—through unique strengths and assets that reflect their missions, communities, expertise, histories, or organizational cultures. Our study identified strengths and assets small and midsize nonprofits can leverage in their fundraising strategies, including an appetite for fundraising innovation, deep roots in the community being served, and strong capabilities in a programmatic niche.

“You need to identify what is genuinely rare about your organization,” says Gabriela Kane, executive director of Latinitas, a community-based organization that provides culturally relevant education to empower girls and their communities in Austin and San Antonio, Texas. “Hone it, name it, and share it proudly. Find a way to build a strong brand around what makes you rare in a very saturated market.”

Here we’ll focus on how an innovation mindset can bolster small and midsize nonprofits, illustrated with examples from Latinitas and how its innovation mindset connects with other strengths and assets.

An appetite for fundraising innovation

One powerful asset can be a nonprofit’s appetite for fundraising innovation. Nonprofit innovation is possible for organizations of any size, but smaller ones can sometimes be more agile, less set in their ways, and more willing to experiment and take risks than their larger peers. Even if a current strategy is sound, there may still be good reasons to experiment. For instance, organizations might seek state funding in case their federal grants dry up, or try different ways to bring new donors into a successful annual campaign.

Latinitas found an opportunity to shift its fundraising strategy as its programs evolved. The new strategy embraced another of the organization’s strengths and assets: its deep roots in the community.

Linking nonprofit innovation in fundraising to community ties

In the 2010s, when Latinitas shifted its focus from media literacy education to science and math, it connected its work with girls and families in Austin to the longer-term workforce needs of the city’s growing tech sector. This enabled the nonprofit to ask companies “to invest in their community and their future workforce” and, as a result, no longer have to rely on private foundation funding.

This pivot built on both the organization’s appetite for innovation and its strong connections to local communities. But it also required Latinitas to experiment with new tactics. It began partnering with corporate employee resource groups, including those focused on women or Latinos in tech, inviting members to volunteer with Latinitas. Such relationships can lead to sponsorships or funding from corporate foundations.

“There are many different routes, but it usually starts with a friendly face inside the company who can make an introduction and point us to some resources,” says Kane.

Coming full circle back to programs

As its fundraising innovation showed signs of success and deepened ties with community businesses, Latinitas realized there was an opportunity to innovate its programs even more, with a workforce readiness program.

“There were some corporate partners who were very excited about it, seeing that we could help them build their future workforce,” says Kane.

Latinitas has continued to invest more resources in the program. The organization now has a staff person on its development team who focuses entirely on corporate engagement and volunteerism. Today, over half of its budget comes from corporations, including some of the original corporate partners from the early years of its pivot.

Nonprofit innovation—with flexibility and agility

When experimenting with new funding streams, organizations will also need to think about how to measure progress. In our experience, it’s rare for these investments to yield a net return in the first year or two. Innovation requires not only patience but also some well-thought-out interim measures. In exploring a corporate, individual, or foundation strategy, for example, interim measures could include tracking funder meetings held, grant proposals submitted, or growth in the number or size of donations or grants.

Of course, an innovation mindset alone cannot enable small and midsize nonprofits to innovate, experiment, and take risks. Not all organizations have the resources within to support innovation. But this kind of capacity building is something that donors will sometimes support; a two- or three-year grant could help create capacity that will become self-sustaining. So, it may be worth asking for a small capacity-building grant.

And, for most small and midsize nonprofits, embracing innovation can spread staff thin—even when initiatives align on both fundraising strategy and organizational mission. So, it’s vital to recognize when an experiment isn’t paying off and it’s time to call it quits. But smaller nonprofits, unburdened by internal bureaucracy, can often be nimble, with the ability to learn and innovate faster.

An innovation mindset is just one of many unique strengths and assets that every organization can draw upon to build a resilient fundraising strategy. But as Latinitas’ experience suggests, small and midsize nonprofits’ appetite for innovation can leverage other strengths and assets.

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