Conventional wisdom says social-service charities aren’t well suited for endowment fundraising. Their development staffs are geared to annual-giving campaigns. Unlike universities, hospitals, or cultural groups, service charities typically don’t have buildings to endow. And a pot of cash set aside to accrue interest and pay for work of the future can turn off donors when today’s needs are urgent.
Still, United Way Worldwide chapters have proved they can build endowments — often big ones. About half of the local affiliates in the United States have one; many started after the recession, when a lot of cash-starved nonprofits learned the value of a reliable revenue stream during economic storms.
United Way endowments weigh in at an average of $3 million, while the two biggest top $100 million. (The endowment of the Seattle-area affiliate stands at more than $150 million, thanks in part to $85 million in funding and challenge grants from the Gates Foundation.)
Greater Twin Cities United Way ran one of the best campaigns in recent years. It more than doubled its $35 million endowment as part of a centennial-anniversary campaign that also brought in $22 million for new programs.
Here are six key ingredients any charity considering an endowment effort should possess:
Your charity is mature and financially stable.
Sarah Caruso, president of the Twin Cities affiliate, says groups often come to her hoping to start an endowment. “Everybody wants one,” she says. “They see it as easy money.”
Yet endowments aren’t easy to build. You’re asking donors to fund you in perpetuity, Ms. Caruso says, and new charities aren’t likely to persuade donors to give to a future that’s uncertain. It takes time to build a track record and a trusted name associated with impact.
“These are the most precious funds an organization can be given,” Ms. Caruso says, “and they’re the hardest to raise.”
You have a deep pool of loyal donors.
Greater Twin Cities United Way has 6,000 supporters who have contributed annually for 10 years or more. Those are the type of donors who will make endowment gifts, Ms. Caruso says. They know the group’s work well, and their consistent giving shows they want it to continue.
Increasing endowment is not your campaign’s sole focus.
Many fundraising experts urge organizations to bundle an endowment effort into a broader campaign. Some United Way affiliates have held drives in conjunction with a milestone.
Greater Twin Cities United Way built its campaign around the 2015 celebration of its 100th anniversary. Among its other priorities: recruit 100,000 volunteers and raise as much as $15 million for new efforts.
You can handle planned gifts. Experts say a lot of endowment contributions come in the form of bequests or other types of planned gifts; Greater Twin Cities United Way already had planned-giving officers but added one more.
Committed and talented volunteers can lead the campaign.
Ms. Caruso had not-so-secret weapons in campaign co-chairs John and Nancy Lindahl, two of the area’s biggest philanthropists. Mr. Lindahl is managing general partner of a Minneapolis investment firm; Ms. Lindahl is the founder of a consulting firm that helps nonprofits with strategy. The two had previously led a campaign that raised $91 million for a new University of Minnesota football stadium.
The organization used the couple in its appeals; in one that featured a photo of the Lindahls, their grown children, and grandchildren, it discussed how they had set up a named family endowment fund.
You have time to do it right.
Greater Twin Cities spent nearly three years planning its campaign and another year securing large lead gifts in the quiet phase. By the time the campaign went public on January 1, 2015, it had raised 80 percent of its target.
Don’t expect to create a successful campaign six months before an anniversary, Ms. Caruso says. “It’ll be hard to make the magic happen.”