Fundraising 101 from the Community Leadership Summit

Josh Berkus explained the principles behind fundraising, applicable to all types of projects and organizations, at the Community Leadership Summit (CLS), which was held on the weekend before OSCON. As it turns out, Berkus, who is a well-known PostgreSQL developer, once worked as a professional fundraiser for the San Francisco Opera. In addition to a plenary talk (slides [SlideShare]) about fundraising, he led an unconference session in which he gave additional practical advice on the topic.

Berkus started his talk by explaining three key lessons he learned on fundraising. First, fundraising is a science. "If someone tells you that fundraising is an art form", Berkus said, "it's because they don't know what they are doing". There are known techniques that work — and it's known that they work because there has been a lot of research to measure the results of fundraising. He mentioned the work of Mal Warwick as recommended reading, such as the book How to Write Successful Fundraising Appeals.

Second, fundraising is the same for all organizations. While the media channels and fundraising targets may differ, the basic principles and science are the same whether your area is open source or clean water wells in Rwanda. Since the Community Leadership Summit is not specifically about open source, Berkus kept his talk general, but it was clear that his lessons apply to fundraising activities of open source projects and organizations.

Third, all fundraising is sales. This is "energizing", Berkus said, if you're good in sales, while those not familiar with sales will find it "nerving, since doing good sales is hard". Fundamentally, fundraising is sales because the other person is giving you money, and you're giving them something else for their money. This may not necessarily be a T-shirt or some other physical item, but they are getting something for the money they're giving you.

Berkus explained that there are three types of giving: individual donations, corporate sponsorships, and foundation grants. Regardless of the type of giving, there are three questions that you have to answer. First, who are they? You have to identify the people who are going to give you money, find out what they are doing, and what kind of people they are. Second, what do they want? You have to ask why it's a good idea for them to give you money. Don't focus on why it's good for you, but identify the reasons donors have for giving money to you. Third, how do you reach them? Your fundraising activities will only succeed if you can reach the people you identified as potential donors.

Individual donations

Individuals are an important source of donations. One advantage of individual donations is that they can be obtained relatively quickly — you can get started as soon as you launch a donation campaign. Individual donations are relatively small, though, and build up slowly. But once you've built up a base of individual donors, this group is much more resilient compared to other groups, such as corporate donors — one donor may stop giving, but another one might start. Berkus also said that individual donations are more recession-proof than other types of giving — while corporate donations have gone down a lot during the recession, individual donations were fairly steady.

Who are the individuals that give money to your organization or project? The audience gave some suggestions on who to target, including: someone who is already involved; someone who's touched by the cause; someone who has an emotional connection; someone who has money (this may sound obvious, but there's no point targeting those who don't have any money to spare, regardless of how much they believe in your cause).

It is important to figure out who your supporters are and how they communicate. "If you don't know who they are, you cannot target them", emphasized Berkus. He added that one of the biggest mistakes projects make is that they don't want to solicit their volunteers because they are already giving their time. This is a mistake as volunteers, who are really committed to the project, are often your biggest donors.

What do those donors want? Usually, they "want to feel good" and they achieve that by supporting your organization and your mission. "What about stuff?", asked Berkus. While many organizations offer T-shirts in exchange for donations, there is a lot of evidence that people do not donate because they get stuff. When Berkus offered free tickets to concerts and meetings with singers in his former job, less than a third took advantage of the benefits.

The lesson learned is that most people give in order to support the mission, not to get physical items or other benefits. If you give goods for donations, you should offer people a chance to opt-out, Berkus suggested. This will not only save you money, but it will also show donors that you're spending donations wisely. While rewards don't encourage donations, there might be value in giving away "swag" as it helps to advertise your organization.

There are several ways to reach potential individual donors. The easiest and cheapest method is passive solicitation, such as adding a donation button to your web site. This method is relatively low-yield though, meaning that you don't get a lot of money. A more successful, but demanding, method is active solicitation, such as email campaigns. Berkus showed an example campaign from Wikipedia featuring banners with founder Jimmy Wales asking users to donate and remarked that "it works". Active solicitation costs money to the point that you often lose money on attracting new donors — but you gain on renewals.

Another method to recruit individual donors is a special appeal. This is where you raise funds for a specific, one-time goal. Such campaigns work because people like well-defined targets. Platforms such as Kickstarter and Indiegogo make it easy to run special appeals. Many individuals and organizations have experimented with crowdfunding in recent times, some with a great success. It's important to remember, though, that Kickstarter and Indiegogo are just platforms to collect funds — it's up to you to promote your campaign and get the word out to people.

Events are also a good venue to meet potential donors. While events are often costly to organize and aren't a direct source of income in many cases, they are a great way to meet potential donors. Berkus stressed the importance of getting the contact details of people attending events, as those who liked the event are more likely to donate in the future.

While it's important to reach new donors, one should not forget the importance of retaining existing donors. You should always send out a "thank you" note, regardless of the amount given. A newsletter may also be a good idea. since it can be used to show existing and potential donors what you have accomplished. It will also help to keep your project on their minds. Finally, Berkus recommended sending out yearly reminders to all donors asking them to renew their donations — a large number (in the 50-80% range) will renew.

Corporate sponsorship

The best corporate donors are those that are "local to you" — either in a regional sense or in terms of your mission. Most corporations give for marketing reasons. Usually, their main objective is to improve their image. Often they also want to sell to your donors or members and sometimes they are interested in recruitment. Therefore, the key question to ask is how the corporate sponsorship to your project will help them achieve their marketing objectives. Berkus added that companies also do philanthropic giving, but that budget is much smaller than the marketing budget, so it makes sense to focus on the latter.

There are multiple ways to identify and reach out to corporations. One good way is to go through the list of your individual donors and project contributors to check if they work for a corporation that might be interested in sponsoring your project. Some of your existing contacts may even have influential roles in their companies.

Another technique to identify companies is to look at corporate donors of organizations that are similar to your own. Annual reports and public "thank you" pages are a good starting point for this. Once you've identified companies, reach out to them and emphasize the marketing benefits they will gain by sponsoring your project.

Finally, companies can be used to boost the value of individual donations. Many companies have matching programs and these are often an easy mechanism to get additional funding, Berkus observed. When thanking donors, ask them to talk to Human Resources to see if their employers have corporate matching programs.

Foundation grants

There are many foundations and organizations that give grants. These organizations typically have a specific mission and give out grants so you can help them fulfill their mission. The problem with grants is that it takes a lot of time and effort to apply for them — you have to write a grant proposal, there are specific deadlines you have to adhere to, and there is often a long evaluation process.

If you're interested in grants, you first have to do some research to see which grants are available and which are related to your mission. Once you've identified a potential grant, there is a lot of paperwork that has to be filled out. Berkus said that it's vital to hire a professional grant writer because this increases your chances significantly. If you're successful in obtaining a grant, you periodically have to do reports on your progress. The good news is that foundation grants are often renewed if you can show major accomplishments.

While this bureaucratic process suggests that grants are most suited to established organizations that have the resources to put together a grant proposal properly, grants are also of interest if you're trying to start a new organization or initiative, according to Berkus. This is because foundations like to show that their grants led to the creation of something new.

Conclusion

As open source projects and organizations are trying to find new ways to sustain their activities, fundraising is an important skill that many in the open source community will have to learn. Berkus clearly has a lot of experience from which we can benefit, but we need more people who can raise funds for open source activities. Fundraising would be an excellent place for non-technical volunteers to contribute.