This post first appeared in the Stanford Social Innovation Review.
It’s hard to raise money. But philanthropic funding is vital to nonprofits, and as a result, most organizations find themselves fundraising all the time. Between event organizing, due diligence, communications, and reporting, I’d guess that many nonprofits spend 50 percent of their time working on fundraising-related activities in one form or another.
Our nonprofit, Watsi, took that approach in the beginning, but we quickly found that it was nearly impossible to do a good job of fundraising and running the organization at the same time.
We decided to try something crazy. Instead of perpetually fundraising, we set out to raise a defined round of donations, taking an approach similar to companies that raise rounds of investment. Our goal was to raise $600,000 in three months. With that, we’d be able to hire six people and meet our organizational goal of funding health care for 2,000 patients over a two-year period.
We had no idea if our approach would work. But we agreed that regardless of how much we raised, we would stop fundraising after three months and go back to working on Watsi full time, even if it meant employing two people instead of six.
Here’s what we learned in the three months we spent trying to raise the round:
1. Raising a round makes fundraising more efficient.
When we started our fundraising efforts (before we tried raising a round), we had no idea how long it might take to reach the target we set for ourselves. That made it nearly impossible to prioritize fundraising alongside everything else we needed to do. We didn’t know if we were running a sprint or a marathon. As a result, we erratically switched between fundraising mode and work mode, and we failed at both.
In contrast, raising a round of donations made fundraising a priority, not a distraction. We scheduled 10 meetings per week, instead of 10 meetings one week and zero the next. This meant less time context-switching and less time preparing for each meeting. And because the feedback loop was tighter, we learned quickly and got better at fundraising with each passing week. If three potential funders in a row got confused when we presented a particular metric, it was clear we needed to change how we explained it.
2. Raising a round gets everyone aligned behind the same plan.
Everyone donates for different reasons. And before we started fundraising in rounds, we would get ready for each fundraising meeting by thinking: “How can we get them to donate?” We’d then adjust our plans as needed to reflect potential donors’ preferences. For example, if a donor wanted us to partner with a particular hospital in India, we’d consider doing it, regardless of whether we thought it was the approach that would help the most patients. Soon, even we had a hard time keeping straight what we were actually doing.
By contrast, when we were preparing for the round, we had to come up with one plan to raise money from everyone. This forced us to ask: “What’s going to have the biggest impact?” Going all in and committing to a single plan meant we were self-selecting for donors whose interests were aligned with our goals. We might have been able to raise more money in the short run if we’d tailored our plans to each donor, but we are more likely to succeed in the long run with a smaller group of donors who are all on the same page.
3. Raising a round brings clarity to relationships.
Originally, when donors asked us how much money we needed, we told them the biggest number we thought they could donate. And when they asked us when we needed the money, we’d say something like, “Whenever’s good for you!” for fear of scaring them off. As a result, we existed in a sort of purgatory, where no one donated but no one explicitly said “no.” We didn’t know whether people needed more time to consider supporting us or whether they were just avoiding turning us down. Our relationships with prospective donors became increasingly ambiguous and awkward.
During the round, when donors asked us how much we needed, we knew exactly what to tell them. There was no ambiguity and no awkward ask. And because of the deadline, donors were either in or they were out. Most important, since the round, our donors have become partners, not just funders. They aren’t constantly wondering whether we are going to ask them for more money. Instead, our meetings are explicitly focused on how Watsi can help more people.
Overall, we think rounds are better for everyone. In the three months we spent raising a round, we went to 138 meetings and raised $1.2 million from 14 donors. In the two years since then, we’ve exceeded our organizational goals and funded healthcare for more than 4,000 patients in 21 countries. Now we’re gearing up to raise a second round of donations to scale Watsi. And we’re convinced that this approach is better for organizations, donors, and most important, the people we serve.