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What’s in a Name? Defining Fundraising Models for Nonprofits

An article in the Stanford Social Innovation Review suggests that the language non-profits use to describe their operations fails to adequately and efficiently convey the complexity of their work.  For-profits rely on a large vocabulary to describe their business models.  They use terms like “low-cost provider” and “fast-follower” to quickly convey their strategic and operational goals to investors.  Without such phrases, however, non-profits are less able to convey their impact and goals to donors.  According to the authors of the piece, this lack of terminology “represents—and results in—a poverty of understanding and clear thinking.”

To solve this problem, the article offers a framework for describing various types of non-profits.  Their framework consists of ten funding models, categorized based upon the dominant type of funder  (e.g., a single donor, many individuals, the government, or corporate donors).  As an example, they present the Make-a-Wish Foundation, which grants wishes to terminally ill children, as a “heartfelt connector” which brings together a diverse donor pool by focusing on a cause that resonates widely.  Beneficiary builders, like hospitals and universities, are reimbursed for the services they provide, but also receive donations based upon lasting connections they have formed with their beneficiaries.

The article provides a compelling attempt to create a language unique to the non-profit sector which may help non-profits better characterize their activities to staff, beneficiaries, and donors.   In the long term, such frameworks may help non-profits carefully craft and advance their operational and fundraising strategies.