Funding For Non-Profit Startups: Navigating Grants And Investment Sources

Securing funding for non-profit startups is not exactly a cakewalk. But if you’re thinking of building a new not-for-profit venture from the bottom up, you’ll target the right sources. Start by compiling a list of potential investors by researching their websites for mission statements aligning with the startup’s objectives.

As of 2023, there are 1.5 million nonprofit organizations in the US. The estimated total annual revenue these organizations earn is an incredible $2.62 trillion, contributing $1.5 trillion to the economy.

Statistics indicate that not-for-profit startups get funding from different government grants, impact investors, and philanthropic entities. Donations to non-profits are also popular among people of all generations. The average donation amount people donate is $737.

Food banks, churches and religious groups, animal welfare, pandemic-driven issues, and racial justice are the top causes attracting funding. If this is your intended business vertical, getting funding can be more streamlined.

Read ahead to learn more about the most viable investors and funding sources you should approach.

Estimate the Seed Funding You’ll Need

When applying for funding for non-profit startups, you’ll start by estimating the seed funding you’ll need. Getting a non-profit business off the ground needs money to cover the initial costs. While you can bootstrap and get money from family and friends, you’ll also reach out to other agencies.

Use the funding to cover different costs that vary according to the state. Some of the basic expenses you’ll incur are:

• Incorporation costs can be a minimum of $8 to a maximum of $125
• 501c3 fees of $400 or $850 IRS fee, which is standard across all the states
• Charitable registration or business registration costs applicable in some states
• Expedite fees, organizational fees, capital fees, and any other charges as applicable
• Tax application charges as applicable
• Building a digital presence, branding, logo, and tagline costs
• Insurance premiums
• Organizing events and fundraising campaigns
• Renting office premises and equipment
• Hiring employees

Non-profit businesses can get tax-exempt status, but until they get this status, they can partner with another tax-exempt organization. This partnership is a fiscal sponsorship, and you can get the partner to receive donations and allocate them as needed.

Any donations the partner receives are tax deductible for the donors. Such collaborations can be for a short term or extended term and last until your startup is mature enough. Or, you acquire 501c3 status, which makes your company exempt from taxes.

Sources for Securing Grants and Investment for Funding for Non-Profit Startups

Corporate Funding Programs

Large corporations are open to funding non-profit organizations to demonstrate their commitment to community upliftment. They offer volunteer grant programs where they make donations to match any volunteer hours their employees devote.

Some corporates prefer to fund older, mature, non-profit startups, while others may prefer to back new and upcoming companies. A great starting point to explore their policies is to check their websites.

Search for their corporate responsibility or corporate social responsibility web pages for more details about the programs they have. You’ll not only get information about their grants but also the volunteer initiatives they support. Reach out to them to build relationships through the volunteer programs, and take it from there.

You’ll target corporates who share your mission and vision and are likely to support your company with monetary contributions. On their part, corporations benefit from tax deductions they can claim and get visibility and advertising by participating in the causes.

Gaining customer support points is also an objective since more than 60% of consumers purchase brands that are sustainable. Or demonstrate their dedication to environment and social causes (ESG). Corporations can do this by talking about their support for non-profits who work for these causes.

Private Foundations

Private foundations are typically focused on working for the betterment of local communities. Or, communities within your specific geographical area. When you start researching funding for non-profit startups, you’ll come across several smaller and larger concerns that fund new ventures.

These foundations are set up with the primary objective to fund not-for-profit companies. A good place to start is the local city council or Chamber of Commerce. Use their directories to search for and target the main grant-giving organizations.

You can also scour your main competitors’ websites and databases for information about the key sources of funding they have tapped successfully.

In addition to money, you can count on private foundations for administrative and fundraising advice and mentoring. However, prepare to comply with their screening criteria. You’ll provide detailed information like a business plan or structure and the mission, vision, and core objectives.

The foundation also needs to look at your financial projections and other data. Attach the documents and dispatch them with a robust cover letter introducing the startup, its founder, and the ask.

Grants Sponsored by the Federal Government

The federal government offers funding for non-profit startups that register at Grants.gov. The government has a budget available to support certain programs, and anyone can submit applications for funding.

Founders can start their search using keywords or categories. Also, research organizations like the Department of Defense, The National Endowment for the Arts (NEA), and The National Endowment for the Humanities (NEH).

• The National Endowment for the Arts (NEA) is a non-affiliated agency that supports Americans wanting to develop their creative abilities. Any individual wishing to study the arts and explore their imagination to develop contemporary artwork or creative works can apply. The grants or matching costs are available to regional art agencies, 62 state/jurisdictional arts programs and projects, and literature fellowships.
• The National Endowment for the Humanities (NEH) is also a non-affiliated agency that focuses on nurturing the republic by sponsoring excellence in the humanities. It supports programs and startups working to raise awareness for American history. Radio stations, public television broadcasting companies, universities, libraries, museums, archives, colleges, and any other cultural institutions can acquire this funding.
• Grants dedicated to sponsoring telemedicine, youth education, urban agriculture, and any other community betterment projects are also available.

Application Procedures

The application, screening, and approval procedures for acquiring government grants are complex and time-consuming. You can expect to dedicate lots of time and sweat equity to get the paperwork in place. But, if you’re successful, substantial funding can be made available to you.

You’ll want to start by studying the policies and requirements of the different agencies. And choose the one that best aligns with your goals. Next, prepare the materials and information they require, including company identification and registration details.

Submit biographies, LinkedIn profiles, and professional resumes of the board members and other people working in the startup. Explain your startup’s USP and what sets it apart from the competition, along with major milestones the company has accomplished.

Prospective investors will also want to see the company’s mission statement, its history, and a business plan. You’ll outline how the company intends to achieve its objectives, potential hurdles, and the failsafe measures you have in place.

If you intend to apply to multiple agencies, you’ll prepare customized applications per their criteria. Expect to go through rigorous screening procedures before you get approval. Also, remember that competition is fierce, so you’ll work harder to develop a business idea that has a unique edge.

State Government Grants

State governments offer open and rolling grants to small businesses and startups through their various departments. These grants support specific missions and topics with funding for non-profit startups, so you’ll apply to the appropriate organization.

Start your search by scouring their websites for information about the grants and programs they have. If you don’t find the relevant details, don’t hesitate to email them with requests. Government websites may not be updated regularly, and an email could get the funding you need.

• Department of Transportation
• Department of Education
• Department of Human Services
• Department of Jobs and Family Services
• Department of Development
• Department of Small Business Development
• Department of Health
• Department of Commerce & Economic Opportunity
• City Councils

Keep in mind that in fundraising, storytelling is everything. In this regard, for a winning pitch deck to help you here, take a look at the template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.

Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.

Local Government Grants

Municipal and city grants are available to non-profit startups working within a particular location Or part of a larger organization that operates in the local community or city. If your startup has a business model designed to support or enhance any local projects, you can acquire the grant.

To gather information about the available funding, you’ll check the local councils and commissions’ website for details.

Crowdfunding Campaigns

Crowdfunding and peer-to-peer campaigns are possibly one of the most cost-effective ways to raise funding for non-profit startups. The entire fundraising is done online by signing up on the appropriate platform that supports your mission. You can start a new campaign to raise seed funding for a specific goal, program, or event.

You can appeal to friends, family members, colleagues, and volunteers to help you secure funding by way of peer-to-peer campaigns. Rely on them to create request pages on social media and other digital channels to reach out to people in their network.

Tips for Securing Grants for Your Not-For-Profit Project

Securing funding for non-profit startups is similar to new businesses in any vertical with some basic differences. Check out these tips that can improve your chances of getting the money you need.

Prepping for Fundraising

• Build a robust board of directors by connecting with entities that have connections and are well-known in the community. You can leverage their influence and reputation to acquire funding.
• Creating compelling grant applications is similar to designing pitch decks. You’ll start by researching the approval criteria for your targeted organization and work accordingly. Putting together a grant template is a great first step. You can always customize as you go along.
• Compile all the required paperwork and submit it with the application form to maximize your chances of approval.
• Acquiring the 501(c)(3) status from the IRS can be a long and time-consuming process. This status awards you the tax exemption status.  However, you need not wait for this approval to start fundraising for the project. You can avail of their special tax policies or enter into fiscal sponsorships to begin business operations.
• Networking is a critical fundraising skill all entrepreneurs should learn. Reach out to people and communities that share your vision and attend events and conferences where you can talk about your startup.

Do you need more information about how to identify sources of funding for your startup? Check out this video I have created explaining how that’s done.

Running Fundraising Campaigns

• Ensure success for your fundraising by reaching out to organizations and foundations that share your mission statement and objectives. You could check your competitors’ websites for information about how they’re operating in the space. Also, check local directories for causes similar to yours.
• Building a social media presence will help you get ahead with your fundraising. Publish posts regularly on the top social media platforms like Facebook, Twitter, LinkedIn, and more. Talk about the causes you’re working for and how you hope to achieve them. You’ll also upload pictures about the activities your company is doing and its achievements. Don’t forget to provide updates to followers about how their donations have been implemented. Add requests for continued support.
• Don’t restrict your funding outreach to typical sources like government grants, corporations, and private foundations. Also, reach out to individual donors and philanthropic agencies. Organize campaigns and events to attract revenue and offer services for a fee to raise money.
• Many people start small family foundations to support causes they feel strongly about or continue their legacy. High-net-worth or high-income individuals and families may start such foundations and invite founders who are building startups. Reach out to them for money and support.

In Conclusion

Funding for non-profit startups is undoubtedly challenging. But you can tap into several funding sources to get the money and support you need. You could also target organizations that offer advice and mentoring that can prove to be invaluable in launching the company.

Start by doing the necessary research and gather all the relevant information as soon as you develop the business idea. Also, remember that the chances of having your application rejected is a real possibility. Make sure to stay motivated and persist in the outreach until you achieve your goals.

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