It’s striking how many people – specifically those who are new to fundraising – assume that grants are the key to success.

I can’t begin to count the number of conversations in which the word “grantwriting” (I prefer “grantseeking,” because the process goes way beyond writing) is substituted for the word “fundraising.”

They aren’t the same thing. In fact, for many well-established, well-funded nonprofits, grants comprise a small percentage of their overall income.

The truth about grants 

Broadly speaking, nonprofits raise money from three sources: philanthropy, government funding, and earned revenue – charging for their work. In 2019, philanthropic giving across the U.S. came from the following sources:

17%     Foundations
5%       Corporations
69%     Individuals
9%       Bequests

Year after year, 20-25% of philanthropic money comes from foundations and corporations (the institutions that give grants) and 75-80% comes from people.

Here’s the first truth about grants: compared to your other options, that’s not really where the money is.

Would you like some strings with your money? 

Yes, there are legitimate, powerful reasons to pursue grants. And yes, I even wrote a book on the subject – so I am not immune to grant fever.

Like all sources of funding, however, grants carry both benefits and challenges. In a recent post, Not All Money is Created Equal, I discussed the advantages and risks of each type of revenue. Here’s the summary on grants:

Pros	Cons
●     Large amounts ●     Program funds ●     Helps you get organized!	●     Lousy odds ●     Restricted money ●     Potential mission drift

The concerns about restricted money and mission drift are worth your attention. Perhaps 80% of grants are restricted to specific projects or programs.

Sometimes these restrictions are pretty rigorous. Nonprofits can twist themselves into pretzels trying to meet their grant requirements. Furthermore, funders can exert influence over your organization’s agenda based on what they’re willing to fund … or not fund.

Therefore, the second truth. What you really need is unrestricted money – the kind you can spend as you please. If that’s your goal, grants are a poor option.

An unexpected opportunity: Challenge grants

Many people are familiar with challenge grants or gifts. Under this model, a funder or donor pledges a certain amount once the receiving organization meets a fundraising benchmark.

The classic model is the dollar-for-dollar match, but all sorts of variations are possible and popular.

If you listen to public radio anywhere across the U.S., you’ve heard this pitch: “The Ginny Generous Foundation has pledged $5,000 if we can recruit 200 donors in the next two hours. Every gift – of any size – counts toward this exciting challenge.” That’s another example of a challenge gift.

Using this approach, you can leverage grants to diversify your income.

How to use grants to wean yourself off of grants

You might know about the nicotine skin patch, a tool to help people quit smoking. Each set of patches transmits progressively less nicotine, allowing smokers to “step down” and overcome their addiction gradually.

Now let’s apply the same principle to reducing your dependence on grants.

Imagine that a foundation gives you a yearly grant of $100,000. (Yes, this is wonderful.) The foundation has indicated that they won’t be funding you forever – because no grant is forever – and they encourage you diversify your funding.

In response, here’s your pitch: We want to use your grant to find new donors and inspire our current donors to give more. Therefore, we request a three-year commitment as follows:

	Foundation grant amount	Fundraising match requirement
Year 1	$75,000	$25,000
Year 2	$50,000	$50,000
Year 3	$25,000	$75,000

These match requirements must be firm. If you don’t reach the target, you don’t get the grant.

This model is inspirational for at least two reasons.

1. Motivated donors. During year one, for example, the value of their gifts are tripled through the foundation match. Such a deal!

2. Motivated fundraisers. Because you really, REALLY don’t want to lose that grant money…

Indeed, if your board is lagging behind on fundraising, this might be your backdoor approach to increase their involvement and follow-through.

Yes, you can suggest this strategy to funders

In the scenario above, the foundation comes to you and says, “We won’t support you forever.”

Since that’s the reality with all funders, why not initiate this conversation yourself? Say to them, “We have an idea about how to leverage your grant to raise more money and expand our base of _______.” Then fill in the blank: individual members, fundraising event income, local business support, major donors … maybe all of the above.

This is appealing because grantmakers love company. They don’t want to be your primary donors.

Ironically, the more you diversify your revenue – especially from your own community – the more likely that funders will keep giving you grants.