Kinds of Funders and What Each Looks For

When It Matters

Before you write to anyone, you need to know what sort of funder you are writing to. A private family foundation, a community foundation, a government body and a crowd of online donors each work in a different way. They hold money differently, answer to different people, set different limits on where the money goes and expect different things from you. A proposal that suits one can fall flat with another.

Even the labels can shift between countries. In the United States, tax law sorts charities into private foundations and public charities. A private foundation usually relies on one main source of money, often one family or company. A public charity draws support from many sources, the general public included. If you work across borders, check how the local rules define the kind of funder in front of you before you decide how to approach it.

How It Works

Private foundations usually rely on one main source of money, and for most of them the core activity is giving grants to charities and individuals, not running programs. In the United States they face several rules, including limits on dealings with their own donors and insiders, a yearly payout for charitable purposes, and caps on how much of a private business they may hold. Their annual return (Form 990-PF) lists the grants they actually paid, which is a better guide to what a foundation funds than its size. Do not assume a foundation has deep pockets.
Community foundations give within a set area, such as a city, county or state, and gather money from several kinds of givers: individuals, families and businesses. Donors can set up funds inside them, including endowment funds. An endowment is a permanent pot that stays invested, and its returns pay for grants.
Government grantmakers. A grant is money given for a specific purpose. Most of the funding opportunities on Grants.gov, the U.S. federal listing, are for organizations rather than individuals. How long grants last and what they require varies by funder, so read each call. A sample foundation grant letter says the funds must be used specifically for the designated purpose, and that the funder will ask for a report on spending after six months and a final report after one year. Government programs set their own rules, so read each notice.
Crowdfunding raises money for a project from many people, typically online and often through a platform that sits between you and your supporters.

Key Components

Private foundation: usually backed by one family or company; subject to more rules.
Community foundation: a defined area, many local donors, funds that donors can set up inside it.
Public body: grants for set purposes, with agreements and reporting.
Corporate giving: companies may give through their own foundations or giving programs. Read the company's own giving page to see how it chooses, and check whether national rules shape what it gives.
Diaspora philanthropy: giving by people who have left a country, directed back to it. These donors may know local issues well, so a personal link and a clear local picture help.
Trust-based approach: funders position themselves as collaborators working alongside nonprofits, using practices such as multiyear unrestricted funding and streamlined paperwork.
Online crowdfunding supporters: they respond to a short public pitch rather than a funder's guidelines, and many may have no direct link to you, so say plainly who you are and what the money will do.
Venture philanthropy: a funder that works more like an investor, often asking for clear targets and giving advice as well as money. Ask what it will expect from you before you apply.

Best Practices

Match your request to the funder's kind. Read what the funder says about itself, then fit your proposal to it.
Check the local definition of foundation and charity where you apply.
For community foundations, start local. They look to their own community and draw donors from it, so your local record counts.
For public funders, expect rules and reporting. Plan the staff time to meet the agreement. Funders pay for a stated purpose, so ask whether a project that has already started is eligible.
Treat diaspora donors as partners. Their ties to home and local awareness are the draw, so keep them informed.
Where a funder follows trust-based practices, say what you need in plain terms. With paperwork kept light, a clear account of how you will use the money does more work.
Keep your books ready. Funders may ask for a report on spending, so keep a record of receipts and spending from the first day.

Common Mistakes

Assuming a foundation is big. Do not guess from the name. Check what it gives, not what it holds.

Asking a community foundation to go beyond its area. It serves a defined territory and raises money locally.

Treating crowdfunding supporters as institutional funders. They respond to a short public pitch, not to guidelines and a review process.

Chasing a funder's metrics at the cost of lasting change. Do not let a funder's targets replace your own judgment about what the work needs.

Keeping money you cannot use. A written grant commitment can require you to repay any amount not used for the purposes of the grant.

Example

An illustration. A small group runs a youth program in one county. It first looks at a private foundation, and its annual return shows grants paid only in other regions, so the group moves on. It then looks at the community foundation for its county, which serves a defined area and draws its funding from local donors. The group lists its own local donors and volunteers and shows how the program fits local needs. Reading the return before writing saved it a weak application.