The 3 types of capital nonprofits need to succeed in 2025

To navigate the ongoing disruptions in the social sector, nonprofits need more than financial capital alone. In this article, I’ll share why nonprofits need three types of capital—financial, social, and psychological—to survive and thrive in today’s turbulent context, as well as how to cultivate each of them.  

Financial capital: the money for the mission  

When we think about what nonprofits need to survive, money often comes to mind first. After all, it takes money to hire staff and to create and maintain programs and services. Without adequate financial resources, most nonprofits will fail within months. A 2020 Candid analysis suggests that about half of nonprofits have less than six months’ worth of cash reserves.  

Nonprofits are facing ever-increasing challenges in obtaining financial capital, with reports of declines in individual donors, fundraising challenges, and proposed government spending cuts. Yet, even in financially difficult times, nonprofits need to invest in two other crucial forms of capital. 

Social capital: the ties that bind us together 

At its core, social capital is the value derived from positive connections between people. For nonprofits, this includes relationships with partner organizations, funders, volunteers, community members, and beneficiaries. We can think of social capital in terms of quality (trust, willingness to help), resources (what is gained through connections), and networks (who you can reach). Strong social capital enables nonprofits to mobilize resources, share knowledge, and create collaborative solutions.  

Relationships play a large role in how the social sector functions. For example, a 2021 report from the William and Flora Hewlett Foundation found that 89% of funders turn to trusted external peers or internal colleagues for knowledge about philanthropic practice. Social capital is also often a factor in securing invitations to submit grant proposals or work on initiatives. Furthermore, research has found that for leaders of color, lack of social capital is often a barrier to securing funding.   

Critically, social capital acts to fill gaps in emergencies, when bureaucratic institutions may fall short or move slowly. For example, during crises, well-connected nonprofits may experience greater increases in volunteers, better resource sharing, or swifter access to opportunities or information. Research suggests that nonprofits with strong social capital are also more likely to make it through disasters and economic downturns. In other words, when money is tight, relationships matter. 

Psychological capital: the ability to persist  

Finally, psychological capital encompasses the psychological resources nonprofit staff need to be well and work well. While psychological capital is easy to dismiss, perhaps because it’s a bit more nebulous, it’s just as critical for navigating uncertainty or crisis. 

Studies have found that psychological capital is made up of four components—hope, optimism, resilience, and self-efficacy (confidence in one’s ability to complete a task or attain a goal)—and that having all four components predicts better outcomes than any single component alone. People with psychological capital demonstrate higher levels of job satisfaction, engagement, and performance and experience lower rates of workplace burnout. 

The importance of psychological capital is particularly clear during tough times. When funding is tight or programs face setbacks, nonprofits that build up their team’s psychological capital are more likely to weather the storm. Conversely, without psychological capital, even financially secure nonprofits may struggle during tumultuous times, as burnout undermines effectiveness and innovation. 

How to build the three types of capital 

Given how these different capital types interact during crises, nonprofits need to remember to consider all three as they work on their 2025 strategies. Here are some resources and evidence-based tips to help you invest in each type of capital. 

Building financial capital

• Explore Candid Learning for fundraising and grant seeking tips and read recent Candid insights articles by experts on the topic. 

Building social capital  

• Intentionally consider the types of social capital your nonprofit needs and seek out opportunities to make connections. This might mean attending conferences, joining peer communities, or volunteering to find the relationships you value.  

• Make your connections count by learning how to build high-quality connections. 

• Look for opportunities to help others. People are more willing to help givers when they need help in the future. And don’t forget to ask your network for help when you need it. 

Building psychological capital  

• Individuals can invest in their own psychological capital by learning about hope, optimism, resilience, and self-efficacy.  

• Organizations can foster a culture of psychological capital by creating work flexibility, offering development opportunities, and celebrating efforts and contributions.  

• Nonprofit leaders can offer support, articulate vision, and provide realistic intellectual challenges—all of which have been shown to build teams’ psychological capital.

Money may keep the lights on, but it’s the combination of financial, social, and psychological capital that will ultimately enable nonprofits to navigate uncertainty, fulfill their missions, and create lasting impact. 

Photo credit: fizkes via Getty Images