Nonprofit organizations rely on funding dollars awarded by grants to keep operations and service delivery up and running. Funders, or individuals and entities that provide a significant amount of money for a nonprofit, go above and beyond to implement lasting change.
While all funders do great work for nonprofits, it’s important to distinguish between some of the types of nonprofit funders. On one hand, you have the checkbook philanthropist. They invest a lot of money into a mission once and then the next year, they’ll do it again. They help the nonprofit monetarily, but they rarely check back in to see how their funding dollars are making a difference.
Now we go to the impact funder. They invest in a nonprofit’s mission and then continue their investment in an active role with the nonprofit. This happens to ensure their money is being spent in the best way so it can impact the most lives. They can be characterized as investing in two different cycles – they invest with their money and with their dedication to the nonprofit’s mission. And, beyond that, they invest with the intention of getting returns that will continue to invigorate the nonprofit for years to come.
How Impact Funders Work
Impact investors go through a rigorous research and evaluation process before they decide where their funding dollars should go. They don’t rely on a nonprofit’s mission statement – they look at a nonprofit’s impact.
There has been a growing trend within the nonprofit community where people are focusing on a nonprofit’s impact. Impact funders are looking to creating the most impact with their dollars, so nonprofits are tasked to make their impact well-known and documented.
The most important thing about impact funding is, however, their commitment to improve the lives of the people they’re helping. An individual funder’s money can make a world of difference, but an active participation in the organization’s operations bolsters your funds and actually raises more money in the longrun.
Being invested in your financial commitment means that you are able to see how your dollars are going into the mission, see what the mission is doing for the community, and ensure that your investment will give off lasting returns to empower the mission even more.
How to Become an Impact Funder
So, how do you make the shift from checkbook philanthropist to impact funder?
The key element of switching to impact funding is to value data, reporting, and ongoing course correction from the nonprofit. In today’s climate, funding dollars are limited. It’s more important than ever to rely on hard facts and require the nonprofits you’re considering funding to provide historical data on how they are impacting their clients and how they plan on doing so with your dollars in the future.
In our most recent study, we talked to funders from around the country and they all agree – an organization’s impact is the best way to indicate if they will give to them. To read more about what other impact funders look for when evaluating nonprofit’s, download the Nonprofit Funding Kit today.