Working with Start-Ups: Grantmakers and New Organizations

In this guide, grantmakers from a wide range of funding organizations describe their experiences as supporters of new nonprofits, or start-ups. Find out how they negotiated the path from idea to organization, and what they learned along the way about how to solve problems and help an organization sustain itself into the future. Contributors to this guide also offer their recommendations for online capacity-building resources.

Highlights

  • Deciding whether to fund a start-up
  • Figuring out the nuts and bolts
  • Helping a new organization build its capacity
  • Managing your role

What's in the Guide?

  • Understanding the Need: In deciding whether or not to fund a start-up, the first step is figuring out if a new organization is needed. It also makes sense to ask if the timing is right, if the right people are involved, and if you're the right funder for the job.
  • Moving from Idea to Organization: The nuts and bolts of assembling a sound organization may not be thrilling, but they usually have as much to do with long-term success or failure as the quality of the original idea itself.
  • Managing Your Role in Planning and Development: Eventually, a new organization needs to be independent, which means the funder's guiding and advising role normally has to wind down. How large that role should be and how long it should last are questions that need to be considered early, and maybe revisited later, as the start-up process moves along.
  • Building Supportive Constituencies: By involving interested people and helping the grantee communicate and make connections, a funder can strengthen the position of a new organization.
  • Establishing Strong Leadership and Governance: Every organization needs effective executive leadership and a committed board. Funders are often involved in recruiting the right people for those roles and helping them to work well together.
  • Getting the Most from Technical Assistance: Whether expert advice is paid for or donated, it's worthwhile to keep a few principles in mind.
  • Planning and Building a Stable Future: The duration and terms of the initial grant, as well as the financial plan, determine a lot about the organization's sustainability and its ability to attract other funders.
  • Helping a New Organization with Fundraising: Fundraising requires skill, contacts, and confidence — all of which a new organization needs to develop in its first few years. That process can be improved with help from an interested funder.
  • takeaways
    Financial Challenge Advice A Conversation with a Management Adviser

    Susan Kenny Stevens is a consultant and author specializing in financial management and organizational development. A GrantCraft interviewer spoke with her recently about the financial challenges typically faced by new organizations.

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  • takeaways
    Lessons from Grantmakers on Working with Startups
    • Don't fund a start-up unless it's really needed. Many contributors questioned what they see as a basic premise of many start-up organizations: that there aren't enough nonprofit organizations out there already.
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  • takeaways
    What Grantees Wish Grantmakers Knew

    Learn more about the funding interests and specialties of other funders. As one nonprofit director explained, “I hear from start-up grantees all the time who tell me that they asked their program officer where to look for funding and were told, ‘I don’t know. Go ask my other grantees.’

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  • takeaways
    Helping a New Organization Fundraise

    Serve as a “reference.” Being available to talk to potential funders can help open doors for a new organization.

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  • takeaways
    Being Available and Helpful After the Launch

    Meeting the demands of funders can be difficult and confusing for the people involved with a start-up, especially if they’ve never run an independent organization or been accountable to an external grantmaker.

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  • takeaways
    Planning and Building a Stable Future

    The initial grant to launch a start-up organization can be crucial for helping the organization develop a secure and sustainable funding base down the road. Meanwhile, though, it should also provide a start-up with the early security it needs to define its mission.

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  • takeaways
    Getting the Most From Technical Assistance

    Technical assistance can’t solve everything. As one grantmaker observed, technical assistance is “no substitute for the three things you really need — a strong entrepreneur, a strong idea, and a strong market.” Even with those elements in place, he cautioned, it’s sometimes necessary to admit that external solutions won’t fix an organization’s problems: “I was a technical assistance provider before I came to the foundation, and I saw a lot of situations where advice was not going to solve the problem.”

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  • takeaways
    Should a Foundation Have a Seat on the Board?

    Some grantmaking organizations prohibit staff members from serving on the board of any organization they support, to avoid potential conflicts between their role as a grantmaker and their role as a board member with fiduciary responsibility to the organization they serve.

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  • takeaways
    Building Capacity

    How can you help enlist a capable director?

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  • takeaways
    Building in Diversity

    The opportunity to build a new organization around diversity and related core values is one of the most appealing aspects of the start-up process:

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  • takeaways
    Getting and Sharing Credit

    A grantmaker who was involved in the creation of a new child advocacy group knew that the organization needed to build a formidable track record to attract additional funding.

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  • takeaways
    Building Supportive Constituencies
    • Engage key constituencies in the planning process. If stakeholders are included in the planning process, their participation should be real, not pro forma, to reap the full benefit of their involvement. Don’t, as one grantmaker put it, “have a plan and then bring people together to plan.”
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  • takeaways
    Funder’s Role in Planning and Development
    • Strive for balance.
    • Let plans take shape at a reasonable pace.
    • Match help with need.
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  • takeaways
    Are you the Right Funder?

    Before getting involved in a start-up, it is important to ask yourself whether there is a good fit between the scale and scope of the new organization and the knowledge and resources you as grantmaker bring to the table.

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  • takeaways
    Advice: Moving from Idea to Organization

    New organizations need three key elements to thrive: good leadership, a strong model, and a real market for their work. If those are present, an organization will probably succeed in solving its other problems.

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  • takeaways
    Gathering Information to Manage Risk

    Risk is a normal part of the business of philanthropy, yet start-ups arguably pose more risk than other kinds of grantmaking. The former director of a large community foundation argues that there are times when a big risk is warranted:

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  • takeaways
    Understanding the Need
    • Consult widely. It is a good idea to talk with practitioners, experts in the field, and other funders to see if a new organization makes sense.
    • Check for talent. Even when the need is real and the timing propitious, a start-up makes sense only if the right people are already involved in the project or interested in participating.
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  • takeaways
    Dealing with Turf Battles

    When people say a new organization isn’t needed, it’s only sensible to take their caution seriously. Yet several contributors warned that a certain amount of friction with older organizations is inevitable. Some people will be negative, they argue, even if a new organization is sorely needed and the idea is sound.

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  • takeaways
    Start-Up Organizations: What, Why, Who?

    What are some common start-up types?

    What intentions might a new organization fulfill?

    Who proposes a start-up?

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  • takeaways
    When to Partner with a Start-up

    Don’t fund a start-up unless it’s really needed. Many contributors questioned what they see as a basic premise of many start-up organizations: that there aren’t enough nonprofit organizations out there already. “It’s quite the opposite,” said one. “There are too many organizations as it is.”

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This guide was developed to help a grantmaker or donor think through a decision to support a start-up organization — by definition a new venture, with a new mission and no operational or financial track record. In addition to questions about the risk involved and the need for a new organization, grantmakers confront questions about their own role in helping a new organization get started and ensuring it has ongoing support.

Besides grantmakers, other people involved in a start-up may also need to grapple with some of these questions. You may wish to share this guide with:

  • A potential grantee with an idea for a new organization
  • The start-up organization's prospective board members or advisers
  • Candidates for leadership positions in a new organization
  • Partners in creating or funding a start-up

This guide may be helpful to them, or to grantmakers who need to frame conversations with them about start-up organizations.

Because it presents the words of grant makers describing an array of real dilemmas, the guide can also be a tool for training new staff about the approach, philosophy, and core values of a foundation or other donor institution.

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