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T H E E N D O FF U N D R A I S I N G

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THE END OF

FUNDRAISING

RAISE MORE MONEYBY SELLING YOUR IMPACT

JASON SAUL

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Copyright 2011 by Jason Saul. All rights reserved.

Published by Jossey-BassA Wiley Imprint989 Market Street, San Francisco, CA 94103-1741—www.josseybass.com

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in anyform or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise,except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, withouteither the prior written permission of the publisher, or authorization through payment of theappropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers,MA 01923, 978-750-8400, fax 978-646-8600, or on the Web at www.copyright.com. Requests tothe publisher for permission should be addressed to the Permissions Department, John Wiley &Sons, Inc., 111 River Street, Hoboken, NJ 07030, 201-748-6011, fax 201-748-6008, or online atwww.wiley.com/go/permissions.

Readers should be aware that Internet Web sites offered as citations and/or sources for furtherinformation may have changed or disappeared between the time this was written and when it isread.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their bestefforts in preparing this book, they make no representations or warranties with respect to theaccuracy or completeness of the contents of this book and specifically disclaim any impliedwarranties of merchantability or fitness for a particular purpose. No warranty may be created orextended by sales representatives or written sales materials. The advice and strategies containedherein may not be suitable for your situation. You should consult with a professional whereappropriate. Neither the publisher nor author shall be liable for any loss of profit or any othercommercial damages, including but not limited to special, incidental, consequential, or otherdamages.

Jossey-Bass books and products are available through most bookstores. To contact Jossey-Bassdirectly call our Customer Care Department within the U.S. at 800-956-7739, outside the U.S. at317-572-3986, or fax 317-572-4002.

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Library of Congress Cataloging-in-Publication DataSaul, Jason, 1969-The End of Fundraising : Raise More Money by Selling Your Impact / Jason Saul. — First edition.

p. cmIncludes index.ISBN 978-0-470-59707-1, 978-1-118-01005-1 (ebk), 978-1-118-01006-8 (ebk),

978-1-118-01007-5 (ebk)1. Fund raising. 2. Marketing. 3. Nonprofit organizations–Public relations. I. Title.HV41.2.S28 2011658.15′224–dc22

2010048720

Printed in the United States of Americafirst editionHB Printing 10 9 8 7 6 5 4 3 2 1

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To my wife, Lisa, whose love and selfless devotion is theonly reason I was able to write two books in the same year;and to my two little ones, Jonah and Max Julius, who madethe ultimate in-kind donation: sacrificing precious time with

their daddy to benefit the greater good.

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Contents

Preface ix

Introduction: The End of Fundraising as We Know It 1

Part ICAPTURING YOUR IMPACT:

FROM ‘‘WHAT’’ TO ‘‘SO WHAT?’’ 27

1 From Accountability to Value 332 Measurement 473 Creating a Product Called Impact 59

Part IIMARKETING YOUR IMPACT:

HOW TO CONNECT YOUR VALUETO THE MARKET 79

4 New Market Stakeholders 875 Not All Outcomes Are Created Equal 1156 How to Increase Your Value 131

Part IIISELLING YOUR IMPACT:

CREATING AND CLOSING DEALS INTHE SOCIAL CAPITAL MARKET 143

7 It’s Not About You, It’s About Them 1458 The Art of the Deal 1619 The Seven Immutable Laws of Selling Your Impact 173

v

vi Contents

Conclusion: Implications of the Social Capital Market 177Epilogue: Frequently Asked Questions 183Notes 189Acknowledgments 209Index 211

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Preface

Over the last fifteen years I have helped thousands of nonprofitsto answer one question: How do we measure our social

impact? Many—myself included—believed that if we could justprove impact, more funding would come our way. Measurement wasthe currency that would finally give us leverage. But alas, researchshows that only 3 percent of donors really care about results.1 Doesthat mean we should give up trying to measure? Or develop evenmore metrics? Or try to educate donors to care about performance?

No. My epiphany was that the reason we are spinning ourwheels so hard is that we may, in fact, be trying to convince thewrong people.

You can create leverage only with people who value what youhave to offer. Of course donors and foundations ‘‘value’’ our workfrom a psychic—that is, an emotive—point of view. But imagineif there were people who really valued our work—who economicallybenefited from the social outcomes that we produce. We wouldn’thave to ‘‘beg’’ for contributions; we could actually ‘‘sell’’ ourimpact. We wouldn’t have to traffic in the currency of psychic ben-efit; we could actually have leverage with rational decision makers.We could be judged not by the content of our programs, but by thequality of our outcomes. Would that such a world existed …

But it does! Today we live in a very different world fromthe ‘‘independent sector’’ of yore. Today the mainstream econ-omy—Wall Street, corporations, consumers, employees, andinvestors—has begun to embrace the value of social change.Today there is real economic currency to the outcomes we producefor education, the environment, health care, global development,even the arts and animal rights.

Still, as much as the market has embraced our work, we have yetto embrace the market. We continue to market to donors who ‘‘feel

ix

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x Preface

good’’ about our work, rather than mainstream economic actorswho ‘‘value’’ our work. We continue to fundraise outside the wallsof the economy, when we could be selling our impact within.

It is time we change. This book is about empowering nonprofitsto make that change—to part the Red Sea and deliver our sectorinto the economic holy land.

To raise funds in today’s ‘‘enlightened’’ economy, we mustfull-on embrace the fact that social change is a fundamental partof creating economic value. And we must use our energy, ourcreativity, and our entrepreneurialism to innovate new ways offorging social outcomes into economic currency. We will notfind the answers by frittering around the edges of the economy:impact investing, venture philanthropy, low-profit limited liabilitycorporations, and social return on investment are not going to cutit. As I write this, I am surrounded by a litter of books that purportto have the ‘‘answer’’—the ultimate solution to save the nonprofitsector:

The Power of Unreasonable People: How Social EntrepreneursCreate Markets That Change the World

ROI for Nonprofits: The New Key to Sustainability

Forces for Good: The Six Practices of High-Impact Nonprofits

Creating Philanthropic Capital Markets: The Deliberate Evolution

Billions of Drops in Millions of Buckets: Why Philanthropy Doesn’tAdvance Social Progress

The Power of Social Innovation: How Civic Entrepreneurs IgniteCommunity Networks for Good

Uncharitable: How Restraints on Nonprofits Undermine TheirPotential

Philanthrocapitalism: How Giving Can Save the World

The advice is thoughtful, creative, and daring. The problem is,these books are written for a different paradigm—a world in which

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Preface xi

nonprofits live outside of the economy. But we don’t need to createa parallel economy: a ‘‘nonprofit stock exchange’’ or philanthropiccapital market. The market we have is a perfectly good one. Wejust need to find a better way to play within it.

Specifically, this book will teach you to:

• Understand the role of social change in oureconomy

• Learn how to engage stakeholders

• Define your impact by outcomes, not activities

• Determine which stakeholders value your outcomes themost

• Translate your work into high-value outcomes

• Create powerful value propositions to increase yourleverage

• Improve the success of your pitches to funders

This book is organized into four main sections.

The End of Fundraising as We Know It sets the stage for what Icall the ‘‘social capital market’’ and describes the implications ofthis new economy for the way nonprofits do business. The purposeof this section is to change the fundraising paradigm and to shiftour focus to a much larger source of capital than psychic donations.

Capturing Your Impact provides the background, concepts, andtools you will need to turn measurement into a fundraising asset.The purpose of this section is to help organizations define theiroutcomes and performance measures, which form the basis for yourvalue proposition to the market.

Marketing Your Impact names a new set of stakeholders (called‘‘impact buyers’’) who are willing to pay for social outcomes andidentifies the three highest-value outcomes that these funders

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xii Preface

want to buy. This section teaches you how to create leverage byconnecting your outcomes to the market.

Selling Your Impact will give you the core sales skills and tipsyou’ll need to make a more effective pitch and close the deal. Thissection is designed to help you identify the right ‘‘buyers’’ andmaximize leverage by communicating the right value propositions.

Who This Book Is For

This book is aimed at nonprofits (big and small), grantmakers,corporate giving and CSR departments, government agencies, andacademic institutions. It is written for executives and fundraisers,board members and funders, academics and practitioners, graduatestudents and undergrads, socially conscious thinkers and hard-nosed business people. This book is written to be inspiring and alsosupremely practical. Although the concepts are big, the insights,case studies, and tools in this book are very real, and based on yearsof rigorous research and field testing.

I wrote this book as a companion to my recently completed work,Social Innovation, Inc.: 5 Strategies for Business Growth Through SocialChange (Jossey-Bass, October 2010). That book is based on a similarpremise—that social change can have economic currency—andadvises corporations on how to design a new generation of socialstrategies to create business value. Together, these books invitenonmarket and market players to push beyond what we can dowith philanthropy—and to solve social problems by leveraging theengine of the economy.

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Introduction

THE END OF FUNDRAISING

AS WE KNOW IT

Afood bank wanted to know how they could raise moremoney. ‘‘All we can show is how many meals we served,’’

they confessed. I suggested that they focus on a ‘‘higher value’’outcome—not just feeding people but registering families forSNAP/food stamps to become more economically stable. ThenI asked them who valued that outcome. They struggled: Hungryfamilies? The government? I explained that ‘‘valuing an outcome’’means someone attaches economic value to it and has the abilityto pay. I offered an idea: a large percentage of food stamps inAmerica are spent at one store—Wal-mart. Assume your foodbank can enroll 100,000 new families in the program statewide.Given that the average food stamp benefit is $133/month,1 that’s$13 million per month in new spending at retailers like Wal-mart.Now, instead of going through the back door to the Wal-Martcorporate foundation and asking for a handout, walk through thefront door to their sales or marketing department and ask for $1million! That’s selling your impact.

It wasn’t always this way. It used to be that doing good was goodenough …

It used to be that if you were working for a ‘‘good cause’’—savingchildren, housing the homeless, feeding the hungry, curingcancer—donors could be rallied to support you. No one re-

1


2 The End of Fundraising

ally knew whether you made a difference, and you couldn’t reallyprove it. Still, they gave. They gave because of guilt, compassion,gratitude, tradition, religion, moral duty, personal reputation,status, peer pressure, relationships, superstition, and tax advantage.At the end of the day, giving was driven by psychic benefits—thefeel-good factor. The only leverage we were able to create wasforce of emotion: compelling videos, tear-jerking anecdotes, orthe personal connections between the donor and the cause. OneFortune 500 company I advised primarily supported domesticviolence charities through its corporate foundation—because thewife of the CEO was really passionate about that cause. This is lifein the so-called ‘‘independent sector.’’ It is unruly, unpredictable,uncontrollable, and totally unsustainable.

For most of the economy, charity has always been an after-thought—a gesture that is made after the bills are paid, the profitsare booked, and the margins are met. As a result, nonprofits havehad to literally subsist off the leftovers of the economy: leftovermoney (donations) and leftover time (volunteering). Needless tosay, the independent sector has been (and continues to be) afrustrating place to be a fundraiser. Because nonprofits have noreal leverage with donors beyond emotion, it is nearly impossibleto convince anyone that they have to cut a check. It is purely adiscretionary, often arbitrary, volition. If a foundation or a donordecides not to award you a grant, they suffer no actual or economicconsequence. It is just ‘‘nice’’ if they give you money.

Think about how often you’ve met with a program officer ata foundation who said, ‘‘This is really important work, but we’rereally sorry, we just can’t fund your project.’’ What could you sayto convince them otherwise? The fact is, the only real leverage orinfluence you have is pointing out to the foundation that they facean ‘‘opportunity cost’’ of losing out on making a great grant. That’spretty weak. I remember one of the first times I applied for a grantfor an organization I founded called The Center for What Works.We applied to a large foundation and spent months working with



the program officer to write and rewrite the grant proposal, provideall of the backup documentation, and answer every question thatcame up. After several more months of consideration, the programofficer called me and said, ‘‘Jason, we really love your organization;you’re doing great work. But we just can’t give you a grant; it’s toorisky.’’ Too risky? It’s not like they were ever going to get theirmoney back anyway!

Here’s how the Global Business Network and Monitor Institute,in their report Cultivating Change in Philanthropy, describes the‘‘givens’’ that characterize life in the independent sector:2

• Philanthropy is profoundly voluntary; by definition it isunforced. Freedom and independence are proud features ofwhat it means to be philanthropic, and any effort to dictate toothers how they ought to give risks being rejected or simplyignored. Attempts to mandate or impose new structures andrules can constrain the creativity at the heart of much greatphilanthropy, or cause unintended consequences. Too manyrules and requirements may simply cause some people tochoose not to give.

• Much of philanthropy is expressive rather than instrumental—that is, the core attribute of much giving is that it expresses thevalues and beliefs of the institution or giver. As a consequence,an outsider’s judgment that a gift is not ‘‘effective’’matters less than the values it represents to the donor, thepersonal commitments it reflects, or the web of relationshipsit helps to maintain. As Harvard scholar Peter Frumkinobserved to us, ‘‘At its core, [philanthropy] is about expressingvalues, not outcomes. Philanthropy is a vehicle of speech.’’

• At the individual level at least, philanthropy is oftenmotivated by the pleasure associated with giving (whether thatpleasure is motivated by a true desire to serve or by the



personal gratification that often comes with it). To make itmore ‘‘professional’’ or ‘‘effective’’ is often going to make itharder. This is the paradox of efforts to professionalizephilanthropy: complexity, assessment, and evaluation requireexpertise and diligence, but more professionalization createsthe danger of losing connection to the very personal reasonswhy people give. That’s why professionals, used to beingstrategic in other domains, often behave in very different wayswhen it comes to their private philanthropy.

• Endowed philanthropic organizations have little ‘‘survivalanxiety’’—the anxiety that comes from sensing that if you donot improve your performance, you will be forced out of yourposition or out of business entirely. This idea comes fromorganizational theorist Edgar Schein, who observes thatlearning is hard because it requires giving up something youknow and are comfortable with. According to Schein, theonly time organizations learn is when the normal level of‘‘learning anxiety’’—the anxiety produced by having to learnsomething new—is trumped by ‘‘survival anxiety’’—theanxiety produced upon realizing that if something doesn’tchange, they will not survive. Among endowed philanthropicinstitutions, there is almost never a threat that raises survivalanxiety, which means, in turn, that there is nothing thatcauses philanthropic organizations to get over their learninganxiety in any consistent way. The result is a field in whichthere is limited (if any) feedback about donor performance,except at the pleasure of the donor, and little real need toconfront and share failure.3

In the late 1980s, economist James Andreoni argued that theinternal motives for giving were based on what he called the ‘‘warmglow’’ theory—people give money not just to do good (for example,to save the whales) but also to feel the ‘‘glow’’ that comes with being



the kind of person who’s helping to save the whales.4 Andreoni’sresearch shows that the independent sector operates primarily ona ‘‘psychic’’ return to donors. Or put differently, based on thecurrent motivations and underlying dynamics of the independentsector, the primary way that nonprofits raise money is by makingpeople feel good. And although the independent sector manages togenerate a significant amount of economic activity, it is piecemealand inherently unsustainable.

But over the last five years, something extraordinary has takenplace: the market has begun to place an economic value on socialoutcomes. Indeed, social impact has become a valuable economiccommodity: people are willing to pay for it, sacrifice for it, investin it, and work for it. This phenomenon extends well beyond do-gooders and environmentalists to include mainstream consumers,investors, corporations, employees, and governments. Corporationsalone are spending billions on environmental sustainability, socialresponsibility, and philanthropy. Consumers are spending morefor goods and services related to health, the environment, socialjustice, and sustainable living. Governments are spending morethan ever on education and health care, not just because theyare social entitlements, but because they are affecting our nation’seconomic competitiveness.5 Case in point: in 2005, Safeway spentabout $1 billion on health care costs—more than the companymade in profit!6

Yesterday’s social issues have become today’s business issues.Consumers, employees, investors, and other economic actors have‘‘priced’’ social externalities into their decision making. Here aresome compelling statistics that illustrate the point:

• Eighty percent of consumers say that corporate supportof causes wins their trust in that company.7

• Seventy-nine percent of consumers would switchbrands to support a cause they care about (price and



quality being equal)—and for Millennials (ageseighteen through twenty-four), it’s 88 percent!8

• Ninety-two percent of consumers have a more positiveimage of a company that supports a cause theycare about.9

These trends are emblematic of a new economy—a social capitalmarket—that appreciates the economic value of social change andis willing to pay for it. As you will see, this marketplace is signifi-cantly larger and more robust than the market for philanthropic orpsychic benefit dollars. It’s where the nonprofits of the future willneed to invest their energy in order to survive and thrive.

The Rise of the Social Capital Market

Manifestations of the social capital market are everywhere. Hereare some recent stories from the Wall Street Journal—the bastionof hard-core business journalism—that will give you a snapshot oflife in the social capital market:

• ‘‘IPO Pits Profit vs. Altruism’’ (Wall Street Journal, July9, 2010). In August 2010, SKS Microfinance Ltd., an Indianmicrofinance corporation and the country’s largest lender tothe poor, had a glittering IPO. The offering raised $347 millionin capital with a market capitalization of $1.1 billion.10 Theoffering was oversubscribed by more than thirteen timesthe offered stocks. ‘‘The only place you can get the amountof money that is needed to help the poor is in the capitalmarkets,’’ Vikram Akula, founder and chairman of SKS,said in an interview. ‘‘That’s why we are doing this IPO.’’11

• ‘‘For Money Managers, a Smarter Approach to SocialResponsibility’’ (Wall Street Journal, November 5, 2007).



‘‘The old strategy was simple: Avoid sin stocks. These days, it’sa lot more sophisticated—and attracting the attention ofmainstream firms. Changes in investing are bringing themethods of so-called socially responsible investors and those ofmore mainstream investors closer together. It’s a trend drivenby increasing sophistication among the former group, andconcerns about global warming and other social issues amongthe latter.’’12 The article also noted that Goldman SachsGroup Inc. released a report titled ‘‘GS Sustain’’ in which itrecommended forty-four companies based on a combination ofthe companies’ environmental, social, and governance (ESG)performance and fundamentals. Goldman argued that its picksoutperformed the Morgan Stanley Capital InternationalWorld Index by 25 percent over the preceding two years.13

• ‘‘MBAs Seek Social Change: Enterprises with a Cause GainGround on Campus’’ (Wall Street Journal, October 15, 2009).‘‘This type of social entrepreneurship—that is, building afor-profit company with a social conscious [sic] or linked with asocial cause—is becoming increasingly attractive to would-bebusiness founders. The idea is to make money while eitherdirectly impacting consumers with its services or funneling aportion of profits to charities. Often, these companies employpeople or source resources from economically depressed areasof the world that then also benefit from the charitabledonations from the profits.’’14 As a result, world-class businessschools like Oxford, Dartmouth, and Cornell have had tocreate a whole new set of courses and study tracks to keep upwith the student demand.

• ‘‘More Companies Conduct ‘Social Audit’ to Find Impactof Action’’ (Wall Street Journal, March 4, 2010). The articlehighlights a project undertaken by an MBA student as part ofa mentorship program organized by the Center for Sustainable



Enterprise at the University of North Carolina Kenan-FlaglerBusiness School. The program linked the student with aninsurance provider that works with YMCAs, Jewishcommunity centers, and resident camps throughout thecountry to conduct a ‘‘social audit.’’ Akin to a traditionalfinancial audit, the social audit focused on what the companyis doing in the areas of the environment and ethics and itsoverall social impact. ‘‘It’s an effort a growing number ofcompanies are undertaking, as they look to track the outcomesof social responsibility efforts and prove their value.’’15

• ‘‘Education Contest Yields 18 Finalists’’ (Wall Street Journal,July 28, 2010). U.S. Secretary of Education Arne Duncanannounced finalists in the race for federal money to helpoverhaul troubled schools during a speech at the NationalPress Club, where he called the competition part of a ‘‘quietrevolution’’ sweeping America to transform public education.[The program] ‘‘has unleashed an avalanche of pent-upeducation-reform activity,’’ Mr. Duncan said. ‘‘It is absolutelystunning to see how much change has happened at the stateand local level.’’ Race to the Top, the centerpiece ofMr. Duncan’s efforts to push innovation, aims to reward statesthat promote charter schools—public schools run bynon-government entities—tie teacher evaluation to studentperformance and adopt rigorous learning standards.16

• ‘‘Hospitals Find Way to Make Care Cheaper—Make ItBetter’’ (Wall Street Journal, October 8, 2009). Be it cereal orcars, buyers usually have an idea of how good the products areand how much they cost before they buy them. That’s not howU.S. health care works. Patients rarely know which hospitalsoffer top-quality lung or aortic surgery, and which are morelikely to harm them. Hospitals don’t compete on price andrarely publish measurements of their quality, if they measure itat all. Except in Pennsylvania. For two decades, a state agency



has published ‘‘medical outcomes’’—death and complicationrates—from more than 50 types of treatments and surgery athospitals. The state has found that publishing results canprompt hospitals to improve, and that good medical treatmentis often less expensive than bad care.17

As these headlines illustrate, social impact now cuts acrossalmost every dimension of our economic landscape. And whatis particularly noteworthy is that it’s not just that social issuesare more visible, it’s that they’re more valuable. Because of this,there is greater emphasis than ever on measuring social outcomes.We cannot value what we cannot measure, as these articles wellillustrate. The social capital market has also marked the advent ofa new generation of stakeholders who value social change and arewilling to invest in it: consumers, corporations, investors, analysts,employees, and government agencies want to buy what nonprofitshave to sell. Here’s a closer look at some of these new market actors.

Consumers. A growing segment of consumers, called ‘‘LOHAS’’(lifestyles of health and sustainability) consumers, has becomea powerful force in the economy. The LOHAS marketplace isdescribed in the LOHAS Journal published by Natural BusinessCommunications as ‘‘a marketplace for goods and services thatappeal to consumers who value health, the environment, social jus-tice, personal development, and sustainable living.’’18 Consumersspent close to $300 billion on LOHAS products and services in2008. These consumers integrate social outcomes into their com-mercial decision making, and number more than 63 million, or 30percent of the U.S. market.19 They are not necessarily wealthierthan other Americans, but they have proven themselves willingto spend up to an astounding 20 percent premium on clean, greenproducts over the nonsustainable alternatives.20

Corporations. Business is coming to realize that social changeisn’t just about compliance; it’s about value creation. The socialcapital market is also generating new business opportunities for



companies to solve social and environmental problems. SiemensAG drives almost 25 percent of its revenues with environment-related products, and GE’s ecomagination strategy generated morethan $17 billion in 2008 from eco-innovations in wind turbines,water desalination, and other areas.21 In many ways, the futureof business depends on social change. Companies across sectorscannot grow without tapping into underserved ‘‘social’’ markets likethe uninsured, urban ‘‘food deserts,’’ or giant developing economieslike India’s. Companies cannot take advantage of these new marketswithout developing ‘‘social’’ products and services designed to meetunderserved needs. Companies cannot hire the talent they need,especially in developing countries, without improving educationalopportunities for young people. And companies cannot build brandloyalty without a social or emotional bond to the customer.

Investors. The socially responsible investment industry is alsobooming. There are 260 socially screened mutual fund products inthe United States, with assets of $201.8 billion. A total of $2.71trillion in the United States (and about $6.8 trillion globally22) isinvested more broadly in various funds, pensions, trusts, and othervehicles that use one or more of the three core socially responsibleinvesting (SRI) strategies—screening, shareholder advocacy, andcommunity investing.23 What is most interesting, though, is thatthe fastest-growing area of SRI is ‘‘community investing.’’ Over thepast decade, community investing—putting money into under-served communities as an investment strategy—has grown anastounding 540 percent, from $4 billion to $25.8 billion in assets.24

The investments earn competitive returns but also produce anattractive social return by providing lower-income people accessto capital, credit, and training in communities that lack affordablehousing, child care, health care, and jobs that pay a living wage.25

Where is all this money coming from, and why? According to theEuropean Social Investment Forum, there are four key drivers: anincreasing demand from institutional investors, for which responsi-ble investment becomes a matter of risk management, particularly

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