Last year, we organized our first workshop in Washington D.C. where almost 40 participants from over 30 different organizations gathered to explore various solutions and strategies to diversify their funding. This article gives you a glimpse of the 5 main reasons that drive organizations to increase their funding sources, as well as the opportunities diversification offers.

Lowering financial risk

Putting all of your eggs in one basket is a big risk. The organization is left to wonder, what if the donor decides to change a programmatic or strategic priority? Or what if the donor funding amounts change and there is less resource?  Without alternative funding streams, the organization will be vulnerable to suffering the consequences.

Organizations that spread their sources of income have more alternatives. If one source is under pressure, there are still other sources that are supporting operations and programs.

Better and longer-term planning

Dealing with one donor means that long-term planning is difficult. Your planning cannot go further than the commitments your donor gives you. This might result in higher costs and for example staff leaving your organization as the end of the assignment is getting closer.

The more sources of funding you have, the better you can plan ahead. When an organization is funded by different donors, there are different end dates to agreements — which diminishes the chances of funding gaps. This might be enough to lower your costs and make sure that your key staff and partners remain committed to your organization.

Maintaining control

We have observed that donors are getting ever more involved in the operations of organizations. They might have a strong opinion on your activities and strategy and exercise that more frequently, in particular when they are aware that they are your main source of funding.

When you have multiple donors,  you can afford to push back with your donors when you believe they are becoming too involved. There is security in a more balanced power dynamic.  

Interest in increasing programmatic impact

The fact that donors are getting more involved could mean that you hear more ideas on how your project can improve. When projects or initiatives are funded by a single donor, ideas will most likely be coming from one or two people involved in the project on the donor side.

Working together with different types of donors will boost the chance for innovative ideas and increased impact. For example, a project funded by the local government, an international foundation and a large corporate will be more dynamic than a project that is funded by a single donor.

Ability to leverage the funding

Each donor has its financial requirements. Some put limitations on your overhead, others have specific requirements on other costs you have to make in your project. Many donors have the requirement to bring in match funding.

By receiving funding from different donors for one project, an organization can solve match funding issues. The funding from donor A can count as match funding for donor B and vice versa. The result is larger projects with more flexibility and impact.

Do you have other reasons why you want to diversify your funding? Please let us know!

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