How to Fund Your Nonprofit Startup

University Lab Partners / How to Fund Your Nonprofit Startup

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Funding your nonprofit startup

Having a great idea for a nonprofit business is only a small part of what’s necessary to get your startup off the ground. Actually running and managing a it effectively can make for a difficult process when you’re strapped for cash, which means that your potential for growth and continued success may be severely limited.

There are currently more than 1.5 million nonprofit organizations that exist within the United States, many of which are startups that have launched with the hopes of bettering the community and world around them. While these goals are admirable and may prove to be as beneficial as you intend, you’ll require some initial funding if you want your startup to succeed over time with the appropriate resources including office space, equipment, and professional opportunities. Due to the altruistic nature of many nonprofit startups, there are numerous funding sources that you may be able to pull from for your organization.

Keep in mind that these solutions are not a one-size-fits-all, which means that you will be required to identify what your needs are and how they can be met. Once you do, you should be able to ascertain which source of funding would be able to most effectively contribute to the success of your startup!

Self funding your nonprofit startup

Self-funding, Friends, & Family Donations

The first type of funding that you should explore for your nonprofit startup involves smaller types of funding through self-funding, friends, or family donations. While this initial round of funding likely won’t provide you with an extensive amount of funds, it can help you get started with turning your idea for a nonprofit startup into reality.

If you have some extra funds that you can dip into, doing so can be very beneficial as long as you’re aware to not take on too much debt. There will also be no expectations for repayments since the money is coming from your own pocket.

As for seeking funding from friends and family, donations from them are possible because they are more likely to have a firm belief in your vision and what you’re setting out to accomplish. Make sure that you use your personal and professional network to reach out to members of the industry you’re operating in who may be well-connected.

When you’re attempting to seek funding from your friends and family, it’s highly recommended that you do so by sending them a detailed and informative correspondence. This correspondence (often in person or via email) should provide these individuals with such information as why you’ve started this organization and what your vision is, how the money that you’re seeking will help you realize this vision, and how these people can contribute, the latter of which should be something like directing contacts directly to a donation page. The amount of funds that you obtain will likely be relatively small with this round of funding and typically ranges from $5,000-$50,000 at most.

This funding should be used to create a proof-of-concept of your nonprofit startup. The proof-of-concept phase for nonprofits will typically involve conducting a pilot experiment that tests the costs, feasibility, and results of the programs that your startup is going to manage as a nonprofit. What you create at this moment will be essential towards obtaining additional funding in the future.

Crowdfunding your nonprofit startup

Crowdfunding

You may also want to look into crowdfunding for your nonprofit. This type of online funding is among the most popular ways for nonprofit startups to receive the funding that they require.

When you make a request for crowdfunding from one of the many nonprofit crowdfunding platforms, you’ll need to be clear about your vision and goals that you wish to achieve with this funding. The funds you bring in will come from many individuals who are providing you with small donations, which can be anything from $10-$1,000. You should also consider placing rewards at certain donation levels, which could be something like a free membership for a $10 donation.

While it’s possible for companies to seek various types of crowdfunding like equity crowdfunding and reward-based crowdfunding, the best option for nonprofit startups is the standard donation-based crowdfunding. In order to get the response you’re looking for and to provide value to the individuals who contribute to your nonprofit, you’ll want to make sure that your main crowdfunding page is interesting, appealing, and your campaign is properly designed. You should use images and videos that have decent production values and are compelling to the target audience.

You’ll also need to keep your audience engaged with consistent updates, incentives for different levels of funding, and a page on social media. For a nonprofit startup, it’s essential that you tell a story of your nonprofit and what you’re attempting to do in the months and years to come.

A couple of the best platforms for nonprofit crowdfunding include CrowdRise and Mightycause, the former of which is a spin-off of GoFundMe. When you decide to seek donations with CrowdRise, your nonprofit startup will first need to be a registered 501c3 that has no outstanding issues with the IRS. Likely the best feature of the CrowdRise platform is that you can create a crowdfunding campaign without spending any up-front cash. You’ll only be required to pay a small transaction fee on the amount of money that you raise. You could also make use of their paid subscription membership that takes away this fee and provides you with additional features to use while raising funds. Many people who donate through this platform decide to take care of the transaction fee themselves, which lessens the amount you need to pay to the provider.

Mightycause is another fantastic crowdfunding platform that was formerly known as Razoo. As is the case with CrowdRise, your nonprofit startup must be a registered 501c3. The fees for this crowdfunding platform are set to four percent off of the entire sum of money you receive as well as a transaction fee of 2.2 percent and .29 cents per donation. You could also select a subscription plan that eliminates this fee altogether.

With this platform, you’ll have the ability to create unlimited fundraising campaigns for your startup. The average amount of funds that a nonprofit is able to generate in a single campaign is around $10,000.

Walking into a state building

State & Municipal Grants

Another great way to fund your nonprofit startup is through state and municipal grants. The best aspect of a grant is that it likely doesn’t need to be repaid, which allows you to focus entirely on growing your nonprofit with the funds you’ve received without needing to worry about building up the cash flow to pay back a loan.

Look towards regional commissions, small foundations, and state and city governments for grants that might apply to your specific situation as a nonprofit startup. Many of these entities are looking for ways in which they can invest in nonprofit organizations that are located nearby.

Make sure that the first places you look are the websites for your city and state governments. These websites typically make it easy to search for available grants. The majority of state government agencies also have humanities or arts endowments that could apply to your nonprofit. Some of these grants will be more vague and could be used by any nonprofit startup. On the other hand, certain grant funds can have very specific requirements. Don’t be afraid to contact your local government to inquire about such opportunities.

The funds that you receive from a state or municipal grant will typically range in size from $2,000-$10,000.

Federal building, Capital Hill

Federal Nonprofit Grant Programs

Along with state and municipal grant programs, there are also a wide range of federal nonprofit grant programs that you can look into for additional funding.

These grant programs and endowments can be most readily accessed at Grants.gov, which is an extensive database of available grant resources. You can enter a wide array of parameters into the search engine when looking for a grant that might apply to your nonprofit startup. Some of these grants and endowments can even be accessed by nonprofit startups that have yet to receive a 501c3 status.

Keep in mind that the only way to effectively use this database is to register for it, which can take some time. The largest federal endowments available to nonprofit projects include the National Endowment for the Arts and the National Endowment for the Humanities, both of which can be accessed by even the smallest of nonprofit startups.

When it comes to endowments and grants, there will likely be a substantial amount of competition for you to deal with, which is why it’s important that your case for receiving such grants is clear and detailed. The average grant sizes range from $6,000-$10,000 depending on the amount of assets the startup has.

Mentor guiding a startup

Private Foundation Grants

Once you’ve explored your options for funding with the previous suggestions, you should definitely consider looking into private foundation grants. There are a myriad of private foundations dedicated solely to improving society by providing useful support to nonprofit startups such as yours. If you have yet to build an extensive network of like-minded professionals within your industry, it can be difficult to know where to start when considering private foundation grants.

First, look at some of the more major foundations that provide grants in your region. You will need to be fully prepared when approaching one of these foundations, which means that you should have a business plan for your nonprofit startup, information about projected budgets and what you require funds for, a cover letter to request startup funding, and a description of your startup vision and mission. The funds provided by these grants can be anywhere from a few thousand to upwards of $200,000.

Partnerships

Corporate Giving Programs

Many corporations strive to take part in philanthropic causes, which can include providing funding for nonprofit startups through giving programs. There are three core types of giving programs available to nonprofits by certain corporations, which include

  • Volunteer grant programs wherein the company financially matches the amount of volunteer time that their employees donate to your nonprofit
  • Matching gift programs wherein the company matches donations made by their employees to nonprofit organizations
  • Individual policies and donation requests where a company may decide to support your nonprofit upon request

The average amount of funding provided through such programs is around $5,000-$15,000. In 2018, around 49 percent of nonprofit organizations identified corporate giving programs as being key towards their growth strategy, which shows just how useful this funding option can be!

Sell branded products to fund your nonprofit startup

Selling Branded Goods & Services

If doing so is feasible, you could think about selling secondary branded materials or services in order to fund your primary nonprofit objective, which is an option that’s used by many nonprofit startups. You could sell branded shirts, coffee mugs, messenger bags, or even baked goods.

Since your organization will be representing a good cause, many individuals will support your organization by purchasing these items. You could also charge fees for specific services like selling tickets for events or selling publications that you’ve created. Make sure that you keep track of how much revenue you make by selling such goods and services for tax purposes.

Conclusion

Without a proper finding source or financial plan, starting your nonprofit could be extremely difficult when you do not have the capital to grow. With the information we’ve provided, we hope you will have the insight necessary to help you find the right funding source for your nonprofit startup.

If you’re a bioscience or medtech startup in the Orange County area searching for an independent nonprofit incubator, apply today for the University Lab Partners wet lab incubator program. Accelerate the growth of your startup and leverage the extensive UC Irvine university community and professional network at the UCI Research Park!

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