Fundraising Update

Welcome to Fundraising Update. This week, two reports look at how charities are raising money from donors who give at least $1,000 and as much as six figures. Plus, what Biden’s budget proposals could mean for giving.

I’m Eden Stiffman, senior editor at the Chronicle of Philanthropy. If you have ideas, comments, or questions about this newsletter, please write me at eden.stiffman@philanthropy.com.

Midlevel Donors, Major Opportunities

Midlevel donors, who give at least $1,000 and up to six figures, may represent only a small percentage of an organization’s supporters, but they give an outsize amount of money. Nonetheless, these supporters have long been neglected by fundraising teams. In recent years, however, some organizations recognized the potential that engaging these supporters could have on the bottom line. Nonprofits had begun expanding their efforts to attract midlevel donors even before the pandemic, but Covid-19 forced some to accelerate their work to cultivate this group of donors.

A new report from the fundraising consultancy Sea Change Strategies provides a snapshot of how 19 nonprofits work with midlevel donors and how that’s evolving.

Among the changes charted in late 2020 and early 2021: The nonprofits added more staff members to cultivate and retain midlevel donors and got them involved in the group’s mission through digital events. Now, the authors ask what will persist beyond the pandemic.

Sea Change Strategies has been tracking the evolution of midlevel giving for years. The company released its first “Missing Middle” study in 2014. At that time, few organizations had even one full-time person dedicated to raising money from midlevel donors, and there was little coordination between direct-marketing and major-giving teams about engaging midsize donors.

A follow-up study in 2018 found that efforts to attract midlevel donors had grown in sophistication — many organizations had hired one or more development staff members whose primary responsibility was to focus on these supporters. And fundraisers with other specialities, such as annual fund and major gifts, were becoming more sophisticated about working together to offer a personalized experience at a larger scale.

Today, the 19 organizations in the study report an average of 3.2 full-time employees supporting midlevel donors.

“2018 was the year of the midlevel manager; 2021 is the year of the midlevel team,” says Alia McKee, a principal at Sea Change Strategies and a co-author of the report.

Some of that happened even before the pandemic, McKee says. Organizations that saw a surge in gifts from new midlevel donors made the case to hire additional staff to provide these supporters more attention to keep them in the fold.

Many charities McKee and her colleagues interviewed were smart about redeploying staff and volunteers who could no longer operate in the same way they did before the pandemic. Those individuals pitched in to provide donors additional personal attention. McKee offers some words of caution as organizations head into a more normal way of life.

“The bar pre-Covid was really quite low, but now we set the bar a little high,” McKee says, and that’s causing concern. “Groups are going to need to make sure we don’t disappoint donors who may have gotten accustomed to a certain level of cultivation and stewardship. The question is, are they going to continue investing that way?”

Read more about how fundraisers are experimenting with the best techniques to involve midlevel donors and doing research to learn how to better retain these supporters going forward.

Plus, in a recent Chronicle opinion piece, Sylvia Brown, creator of the “Smart Donors … Make a Difference” online courses and workshops, also makes the case for focusing more attention on middle donors.

Brown worked with Cal Halvorsen, an assistant professor at the Boston College School of Social Work, to commission a study of 1,260 Americans age 35 and older who gave a total of $2,000 to $20,000 in 2019.

Because recent forecasts suggest many wealthy donors are already returning to their old patterns of giving as the pandemic recedes, it’s especially important for fundraisers to train their sights on people who earn $100,000 to $200,000 a year — about one-fifth of Americans, she writes.

Brown and Halvorsen found that respondents to their survey gave a higher share of their income (1.9 percent) than the national average — and an impressive 40 percent of those earning under $100,000 (41 percent of the sample) gave more than $5,000 to charity in 2019. Almost all the donors had maintained or increased their giving levels over the past five years. More than half of those giving more than $10,000 annually had increased their giving in 2019.

And importantly, these donors are loyal: When asked about their most significant gift of 2019, more than two-thirds had been supporting the same organization for more than five years.

Hear From You

Does your organization have a team of fundraisers dedicated to midlevel donors? How are you connecting with supporters who give substantial amounts but aren’t quite at the major-donor level? How do you gather information about what kind of communication those donors prefer? Drop me a line. I’d love to hear from you.

Need to Know

— Association of Fundraising Professional’s Michael Nilsen on proposals in Biden’s budget to increase the capital-gains tax on the wealthy

President Biden’s first budget proposal calls for a big boost in domestic spending to help low-income people while proposing certain tax increases that could boost incentives for charitable giving, experts told my colleague Dan Parks. Advocates for nonprofits — also noting the absence of an effort to limit the value of itemized deductions, including contributions to charity — generally gave the budget plan high marks.

Nilsen, vice president of communications and public policy at the Association of Fundraising Professionals, also pointed out that Biden’s proposed changes to capital-gains and estate taxes “could cause heirs to incur significant capital-gains taxes” and therefore “could create a strong incentive for some taxpayers to contribute property or shares of stock to charity.”

The National Council of Nonprofits notes that the budget calls for a 16 percent increase in domestic spending. David Thompson, vice president for public policy at the council, told Dan that such strong growth in domestic spending likely would mean extra revenue for nonprofits that contract with the government to provide services to poor and low-income people. The council also praised the budget and associated documents for proposing to make “permanent several temporary tax provisions, including the expanded Earned Income Tax Credit, the Premium Tax Credit, the Child Tax Credit, and the Child and Dependent Care Credit.”

However, Thompson expressed disappointment that the budget does not call for an extension of a tax deduction available to people who don’t itemize their tax returns.

Plus,

• My colleague Michael Theis has been keeping tabs on some of the key economic indicators that matter to fundraisers. This month’s edition points to some potential warning signs. While overall growth remains strong (the U.S. economy expanded at an annualized 6.4 percent pace in the first quarter), consumer confidence fell by 6.2 percent. “Consumers were a bit shaken by forecasts of higher inflation possibly to come this year, which could put a dent in their spending power just as the economy is reopening,” Michael writes. But according to the University of Michigan’s preliminary May 2021 Consumer Sentiment Index, consumers’ long-term expectations remain optimistic: Most anticipate a booming economy with a high rate of hiring over the next year. The stock market was largely flat, and unemployment remains stuck well above pre-pandemic levels.

The MacKenzie Scott Issue

I hope you’ll take time to read my colleague Maria Di Mento’s article in our June issue about the ripple effects of MacKenzie Scott’s philanthropy. Maria digs into how Scott’s $5.6 billion in unrestricted gifts last year are reverberating far beyond the organizations that received donations.

Some recipients of her largesse have found a thoughtful way to talk to donors who might assume their support is no longer needed.

Take Walla Walla Community College, for example. The school, located in a rural part of Washington State, received $15 million from Scott.

“If my first reaction was one of awe and being humbled by what we can do with the money, my second thought was how do I make sure that the donors we already have don’t feel that this somehow makes their giving irrelevant,” says Jessica Cook, executive director of the college’s foundation. “One of the things that I’ve been focusing on with [donors] is that this is a continuation of the work that they’ve already been doing.”

She and the community college’s president, Chad Emerson Hickox, stress to donors that one of the reasons Scott decided to donate to the college is its track record of helping people who wouldn’t otherwise go to college obtain training or an associate’s degree so that they can improve their futures and that of their families.

“We’re able to celebrate this and take a victory lap for the community and say, ‘We were able to receive this award because of all of you — because of your engagement, because of your commitment to our success and your support over the years,’” says Hickox.

There’s a lot more to dig into online.

Tips & Tools

• How to Recognize and Prevent ‘Bottom-Line Mentality’ in Fundraising: It can occur when professionals become so focused on a job-related goal that they neglect other important goals or aspects of their lives.
• After a Year of Zoom Galas, Are Charities and Donors Ready to Party — and Attend Other Events — in Person? Many fundraisers were pleasantly surprised by the continued support they got from attendees and sponsors of virtual events last year. As they tiptoe toward gathering in person, some wonder whether the donors will follow.
• They Came Through in a Crisis. Will 2020’s New Donors Keep Giving? For many nonprofits, last year’s surge in support from new donors was critical. As fundraisers look ahead, they’re grappling with questions about sustainability, staffing, and responding to persistent needs.

What We’re Reading & Watching

A major donor to the University of North Carolina-Chapel Hill’s school of journalism lobbied behind the scenes for months to forestall Nikole Hannah-Jones’s appointment there. Unlike her predecessors, when Hannah-Jones was recruited for the school’s Knight Chair in Race and Investigative Journalism, she was not offered tenure, even though the hiring process had recommended it. Meanwhile, Walter Hussman Jr., who had pledged $25 million to the school, which now bears his name, told university administrators that he feared Hannah-Jones’s appointment would damage the school’s reputation for balance and objectivity. Hussman, who is white, runs a media company and considers himself a journalist. Hannah-Jones, who won the Pulitzer Prize for helming the New York Times’s 1619 Project, has argued that the traditional journalistic value of objectivity is a “fallacy” and that growing up white, comfortable, and safe affects a reporter’s coverage just as an oppressed and deprived childhood does. (Assembly)

Plus:

• Billionaires Are Giving Away Their Money. Here’s Where It’s Going (Bloomberg)