An endowment is like the proverbial golden goose, a revenue source that never fails to deliver. Yet raising money for one is about as easy as catching barnyard chickens. When a nonprofit has so many pressing needs today, who wants to donate with an eye to the future?
For advice on how it can be done, we turned to veterans of a variety of nonprofits. Here are a few of their insights as to what makes endowment fundraising different and how it works best.
Endowment donors typically have a long view on giving. Those who give to an endowment are usually strong supporters already and want to see the institution carry on its work for years. They’re often older and perhaps thinking about the legacy they want to leave.
“I like to think of our endowment as our promise for the future,” says Dondi Cupp, associate vice president for development at the University of Michigan. “Donors who believe in endowment giving understand that and believe it’s important to provide that support for the future.
You’re hunting almost exclusively for big gifts. Endowments typically spin off 4 percent to 5 percent of their value annually. That means a $100 gift produces only $4 to $5 in revenue — not a very sexy number for donors.
Generally, endowment gifts are large donations, and they often come in the form of planned gifts or complex assets. Expect to secure these gifts in one-on-one cultivation of donors, not through mass appeals.
Most organizations don’t discuss endowments in annual appeals ... That can send mixed signals. The University of Michigan, for example, focuses its annual-giving campaign on raising money for current operations. Talk about the future “would take us off focus,” Mr. Cupp says.
... but donors sometimes like to think of their endowment gift as an extension of their annual giving. Here’s an example of this approach, from Thomas Hofmann, a fundraiser for Ohio Living, a nonprofit network of retirement and adult-care communities. He might approach donors who routinely give $1,000 a year and suggest that they make a single endowment gift of about $25,000. At a 4 percent investment return, that donation would generate the same $1,000 a year, indefinitely. Mr. Hofmann and others describe this as “endowing” a donor’s annual gift.
“All of a sudden, the person understands: ‘Oh, my annual gift will continue forever,’ " he says.
Endowment donors want lots of financial details. Endowment gifts are often seen as an investment in an organization, so donors frequently seek detailed information about the group’s finances, its business model, how the endowment is managed, its forecasted annual returns, etc.
“The ask is more sophisticated and can be somewhat transactional,” says Elizabeth Zeigler, chief executive officer of Graham-Pelton Consulting and a former college fundraiser.
Things tend to move slowly. Like any major contribution, an endowment gift has to percolate for some time. Expect five years of work, says Edward Montgomery, a volunteer fundraiser who’s led an endowment campaign for Philadelphia’s Curtis Institute of Music and is spearheading a similar effort for the United Way of Southeastern Pennsylvania. “It can’t be rushed,” he says.
At the beginning of the Curtis campaign, Mr. Montgomery says, he sought out the institute’s head and other key fundraisers to make sure they were committed for the long term.
Spread the word about your endowment among donors. Ohio Living publishes newsletters in many of its communities and almost always includes an article that touches on its endowment, according to Mr. Hofmann.
“We just talk about it all the time,” he says. “It needs to become part of your everyday language so that it’s not an exception.”
The payoff? More than once, Ohio Living residents left a bequest to the endowment though they had never talked to development staff, Mr. Hofmann says.
Donors sometimes balk at giving to organizations that have big endowments. “For some, it’s a nonstarter,” says Ms. Zeigler. But she says a creative fundraiser can find a gift opportunity nonetheless. While serving as head of individual giving at Fordham University, she worked with a donor who wanted to support his small high school in the Bronx, not the big college. The gift, he said, would have more impact there.
“He thought he was telling me ‘no’ and shutting the door,” Ms. Zeigler says. She countered: Maybe the donor could endow a Fordham scholarship for graduates of the high school?
“He looked at me, and said, ‘You’re good. Let’s do it.’ "
