Working With Funders
Building and Maintaining Positive Partnerships
Think about when you last donated to your favorite charity.
You probably had certain expectations.
For instance, you might have expected it to use almost all of your contribution to support its beneficiaries, or for it to thank you in some way.
Now think about how you'd feel if you heard that the charity's chief executive received an extravagant pay package, or if the organization failed to thank you for your donation.
You'd likely feel less committed, and you might even look for a different cause to support.
We expect professionals who work for nonprofits to set up and maintain good relationships with the people who fund their organizations. However, the same is true for profit-making organizations, particularly if they depend on others for financial support.
As a manager in either of these kinds of organizations, you need to be both professional and thoughtful in the way that you build relationships with funders.
What Are Funders?
Funders are external people or groups that contribute money to your organization.
They include individual, corporate, or government donors, investors, and shareholders, and they play a role in many kinds of organizations, from nonprofits and state agencies, to start-ups and large companies.
For example, an organization might accept an investment from a private donor to fund a specific project. Start-ups may need external funds, initially from angel investors, and later from venture capitalists, to help them develop and scale up. Of course, publicly traded companies are partly funded by shareholders.
You may work directly with people who fund your organization – for example, company directors or other staff who have a financial stake in the business.
We've excluded this group from our definition of funders, because you'll need to manage your relationship with them in a different way. Read our article on working with powerful people for more on this.
How to Manage Funder Relationships
When you build and maintain good relationships with funders, you can open up access to long-term financial support. You may also benefit from other opportunities, such as expertise within funders' networks.
Use the strategies below to build positive relationships with your funders.
Build and Maintain Trust
Funders show trust in your organization when they invest in it, or donate to your cause. It's up to you to maintain that trust.
Set up a strong relationship from the start: listen carefully to any concerns, follow through on promised actions, and be honest about any difficulties that could affect a funder's involvement.
Funders rightly expect responsible stewardship of their contribution, and of your organization's resources in general. For instance, they likely expect you to have robust governance procedures in place, to have done due diligence on any partnerships that you've entered into, and to be transparent about how funding is used.
Funders will also need information about how you're using their contribution. For example:
- Small donors may want regular information (such as email newsletters) on the projects that they're funding, so that they can understand the impact of their contributions, and see that these have been used well.
- Shareholders will want to see financial performance figures and detailed plans that show how their investments will be used. They may be legally or contractually entitled to this information, depending on the nature of their funding.
- Venture capitalists, angel investors, and other lenders will need regular updates on the progress of the company, such as monthly management accounts and an audited annual report, and they may want to see more detailed information such as sales, accounting, and strategy reports, and activity and resource forecasts.
- Nonprofits that receive large-scale funding from trusts, government bodies, or philanthropic donors may have to provide structured quantitative evidence of how people have benefited as a result of their financial support.
Confirm with funders what information they need, how often they need it, and in what format it should appear. Then, put reliable systems into place so that you can deliver the necessary information appropriately, and on time.
Funders may also expect other evidence that you're a trustworthy organization, and that you're using funds wisely.
This includes paying moderate salaries (including to senior staff), choosing suitably modest premises, and maintaining a positive reputation.
Understand and Manage Expectations
Some donors will make specific demands about how recipient organizations must use their investment. For example:
- Investors in start-ups may provide financial support on the understanding that the organization will use it to grow into a specific sector.
- Funders to nonprofits may request that their donation is not used to fund certain activities or causes that they disapprove of.
Before you accept any substantial donation or investment from funders, find out whether any strings are attached. Then, ensure that you and other leaders can reliably meet these terms before you agree to any funding.
Think About What You Need From Funders
There's likely to be information or input that you need from your funders – for example, they may need to attend meetings, contribute information for reports, or sign off documents.
Be clear about what you'll need, and confirm with your funders that they'll be able to provide it.
Actively Manage the Relationship
Plan communications such as regular emails, newsletters, or phone calls to keep funders up to date on how their money is being used (but bear in mind that they may find too much information overwhelming).
Remember that communication is two-way, and that funders may want the opportunity to ask questions, or to meet you and your colleagues in person.
You could set up a dedicated email inbox for funders (make sure that you have the capacity to monitor it and to respond promptly). Alternatively, consider an open day or webinar presentation, so that your funders can hear your news directly.
Deal with any problems or misunderstandings that arise swiftly and professionally. If you run into problems, our article on dealing with unhappy customers provides guidance on how to repair relationships, and move on.
Say "Thank You"
When you thank your funders, you acknowledge their commitment to your organization. This recognition is an important part of your relationship, and funders will have different expectations about how they'd like to be thanked.
Make sure that you've understood and logged these as part of the data you keep on funders. And, if you plan to offer tangible "thank yous," make sure that they're appropriate, and check your organization's policies about making gifts to avoid difficulties or misunderstandings.
Keep in mind that not everyone wants to be thanked in the same way. Some funders may have high expectations, and you may need to manage these carefully; others may be happy with a mention on your website. Some may even prefer to be anonymous.
Funders are external individuals or groups that are financially involved with your organization. They include shareholders, investors, and individual, corporate, or government donors.
To work effectively with funders, set up systems that allow you to log information carefully, and report to them fully and openly. Ensure that all of the messages that you give out – from occasional emails to the salaries that you pay your people – create the right impression.
Take time to build trust, and to manage expectations and relationships carefully. This will help you maintain funders' support in the long term.