Funding for Success

As many readers and those who have heard me speak and teach about grantmaking know, one of my mantras is that funders should “fund for success.”

My intention in this formulation was to challenge the tendency of many funders to ask how little they need to give for a project. They often assume that a grant request is padded and the grantseeker has built in an expectation of a discounted grant amount.

Funders are not unreasonable in thinking this way. It is certainly true that there is a long history of grantseekers assuming that they will never get all that they ask for so they pad. It is also true that funders want their money to go further so they choose to give less, but to more recipients. Reasonable.

What is also true is a more challenging cultural reality. Let’s be honest. Most funders made their money the old fashioned way: they “bought low and sold high.” They negotiated the best deals, putting the least possible investment with the greatest possible return. Not a bad way to make money. Not surprising at all that funders then apply the same thinking to their grantmaking – as if it is a negotiation. Thus the mentality that funders respond to funding requests with the reply with the functional equivalent question of “how little can I give you and still do the project?”

However, grantmaking is not the same thing as a business negotiation. Or more to the point, it should be more in line with the full due diligence which a businessperson is likely to do. The questions that funders should ask when looking at a grant request is not “how little” is needed to pull off a project but rather what is necessary for a project to succeed. A funder should have as much at stake as a recipient that a proposed funded project succeed and is properly capitalized. To be sure, sometimes that may mean that a request is overblown, that a careful analysis shows that the requisite amount for a project to succeed is indeed less than what was stated in the request.

However, there are many times when a request understates its needs – that, reluctant to ask for what would really make a difference or perhaps naïve about their own real needs, the grantseeker is actually understating what would be required to have a project or program achieve its potential. It is here that the mantra “fund for success” really applies. A funder with commitment to a project can truly reshape a request so that the grantee can fulfill its aspirations and the funder can see the results of the investment. There may even be times when it is appropriate and prudent to give more than that requested when this principle is applied.

This concept is not so new or radical, and has been applied by many knowledgeable funders for a long time. But it does catch some by surprise and newer funders often need to learn to focus their thinking on grantee relations to become good partners.

Last week, though, I learned that my mantra can be – and perhaps has been – misunderstood: one very experienced and knowledgeable foundation exec assumed that my message of “fund for success” was that funders should only fund projects with a high likelihood of success, that they should eschew risk wherever possible. He rebutted that funders should be very open to risk in certain circumstances and have a high failure tolerance.

As it happens, I fully agree with him and am taking this opportunity to address any misunderstanding. I profoundly wish that funders were less risk averse and that they were more open to failure. I don’t believe that only funding safe “successful” projects is an ideal or necessarily a preferred way to fund. Private philanthropy is the risk capital of a society, and as such there needs to be a healthy dose of thoughtful risk taking in the work we do.

Funding FOR success is not the same as only funding successful and safe projects. It means that we should fund whatever we fund with an eye toward what a project truly needs and not simply what a proposal asks for. If it fails, with all of the best thought and planning, so be it; let’s learn from that failure to fund another day. But to only fund safely is too often [not always] the preservation of mediocrity or that which is less interesting.

Richard Marker serves as an advisor to foundations, independent funders, and not-for-profit organizations; he is a Senior Fellow in Philanthropy at NYU’s George Heyman Jr. Center for Philanthropy. Richard specializes in strategic philanthropy and planning. He is an occasional contributor to eJewish Philanthropy and regularly blogs at Wise Philanthropy.