Transcript Grantmaking 101 A few words about the nonprofit sector What is a 501(c)3?  501c3 is the tax code that defines what.

Grantmaking 101
A few words about
the nonprofit sector
What is a 501(c)3?
 501c3 is the tax code that defines what we call
“nonprofit” organizations
 Must operate only for exempt purposes
 No earnings to shareholders/individuals
 May not attempt to influence legislation as a
substantial part of activities
 No participation in campaign activity related to
political candidates
Nonprofit Structure
BOARD OF DIRECTORS
Executive Director
Staff Members
(and volunteers)
Staff Members
(and volunteers)
Staff Members
(and volunteers)
Staff Members
(and volunteers)
“Nonprofit” is a broad category
 Religious Institutions
 Schools, Universities and Summer Camps
 Hospitals and Medical Centers
 Human Service Providers (housing, food, clothing,
tutoring, after-school-enrichment)
 Environmentally-Focused Organizations
What does the nonprofit “sector” look like?
 In California, there are almost 140,000 nonprofits total
 Of those, only about 25,000 filed the tax return forms required if your
budget is >$25,000  most are very small!
Source: www.canonprofits.org
Where does nonprofit revenue come from?
54% sales,
fees, earned
income
36%
government
funding
10%
philanthropic
donations from
individuals &
foundations
Source: www.canonprofits.org
Where do philanthropic dollars come from?
30%
foundations
70%
individual
donations
Main
Goals
$$ In
$$ Out
Profit driven
Sales of good
and services –
fully taxed
Money left
over can be
distributed to
owners
(private or
public)
People/Society
driven within
specific
domains
Taxes
- Employer
-Employee
- Sales
- Property
-Etc.
No owners,
but can pay
down debt,
invest in
projects, etc.)
Mission driven
Grants,
donations
(taxdeductible to
donor) & Sales
of goods and
services -not taxed
No owners of a
nonprofit –
Money left
over can’t be
distributed to
anyone
For Profit
Government
Non Profit
(Often fills a
gap in services
by the other
two)
Key things to remember
NONPROFITS
 … are mission-driven organizations focused in lots of
different areas
 … can earn money just like for profits, as long as it’s in
line with their mission, and they don’t pay taxes on the
money they take in
 ….can accept donations and certify to donors that their
contribution is tax-deductible
 … can pay people reasonable salaries and bonuses, just
like for-profits, but there are no “owners” and thus no
extra payouts to anyone
A few words about
fundraising & revenue models
Nonprofit Revenue Models
 Every nonprofit should have a revenue plan
 Are “diversified sources of donations” important?
 We’re seeing a possible trend toward revenue models
that rely less than 100% on philanthropy
Fundraising in one slide!
 It’s a reality of the nonprofit sector
 Important as an engaged funder and advisor to
understand an organization’s fundraising plan
 What makes most people uncomfortable is
“solicitation without cultivation” or cold-calling – with
cultivation, fundraising is much less stressful 
A few words about
the lifecycle of a nonprofit
Lifecycle Stage Matters Because…
 Organizational capacities, needs, and foci vary and
change at different stages in the lifecycle – what may
be an appropriate strategy in one stage can be a
problem in the next!
 The lifecycle stage of a nonprofit has implications for
strengths, weaknesses, opportunities and challenges
that an organization will have and face
 Nonprofits may need to address “gating items” of
organizational capacity to move through the lifecycle
from one stage to the next
The Nonprofit Organizational Lifecycle Model
And now more about
SV2’s grantmaking process
What does a grant round look like?
 Kickoff meeting – broad field updates, inspiration
 Lots of learning at all stages
 Selecting a focus
 Finding great potential Grantee nonprofits – usually a
closed process, we do the research
 Due diligence – internet research, phone calls, site
visits, proposals, presentations by finalists, reference
calls with board members, funders, etc.
 Selection of a Grantee
SV2 Grantmaking Criteria
SV2 funds organizations that:
 Are 501c3 nonprofits
 Are based in the Bay Area (extent to which programs are in the Bay
Area varies by group)
 Are at a lifecycle point where our dollars and time are significant (proxy
is budget size of $250K-$2million)
 Have high potential Executive Director & Board leadership
 Have a well articulated/thought out model, approach, impact and a
focus on outcomes
 Are at an inflection point where they are ready for and interested in
scaling (definition of scale can vary)
 Want SV2 Partner involvement beyond the dollars (thought partners,
advisors, connections, etc.)
 SV2 Partners are interested in working with as Lead Partners and
advisors to that nonprofit
Details on our Grantmaking Groups
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Education
Environment
Health
International
HOW IT WORKS
 Groups rotate through a strategy/learning year
 We give 3-year, $100-150K grants (so $30-50K/year) –
means 9 active grantee in the portfolio
 Grants focus on capacity building
What is capacity building?
Strengthening the infrastructure/core of an organization in
areas such as:
 Mission/vision/strategy
 Board leadership
 Staff leadership
 Program design and evaluation
 Financial management
 Fund development
 Marketing and communications
 IT
 HR
 Legal
What happens after the grant?
 Lead Partners & staff do OCAT & orientation
 Grant Agreement (goals/outcomes) finalized
 Open Advising Meetings held quarterly
 Lead Partners:
 Ensure accountability to grant goals
 Act as ongoing connectors to SV2 Partners, resources
within and outside SV2, etc.
 Annual Investment Review by Board Committee
How SV2 differs from a foundation
GRANTMAKING
 Group process and vote to decide
 Combine analysis and passion to make decision
 Relatively long due diligence process
 Multi-year, non-renewable capacity-building funding
 Grant funding raised annually; no endowment
AFTER THE GRANT
 Want hands-on engagement/personal relationship
 Eager to be engaged in the challenges, not just see
successes
How SV2 differs from an individual
GRANTMAKING
 Group process and vote to decide; might involve
compromise
 Learning/access to information and diverse
perspectives from fellow Partners to inform decision
 Increased access to organizations and information
 All Partners are invested in the full grantee portfolio
AFTER THE GRANT
 More avenues to engage with leadership
Avenues for Engagement at SV2
 Grantmaking
 Educational events – First Fridays, Chew on This
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Dinners, tours, etc.
Open Advising Meetings with Grantees
SV2 Teens and Kids programs
Annual (Fall), Holiday and Spring meetings
Leadership roles – Grant Round Leader, Lead Partner,
Board Member, etc.
Due Diligence
Looking on a nonprofit’s website
 What do they do/how do they do it?
 Impact they’re making
 Leadership
 Board
 Location(s)
 Annual Report/990 (more rare)
 Let’s check out a website or two!
Guidestar.org for initial financials
 Revenue & Expenses
 Scroll through for anything else you notice
 A word on % to programs vs. overhead
 Let’s check out a real 990
Reading a grant proposal
 Now let’s look at a real SV2 grant proposal and discuss
as a group