The Nonprofit’s Complete Guide to Foundations

Foundations provide a “foundation” (excuse the pun) for a countless number of nonprofits in every sector imaginable to obtain funding. This has been the way for well over a millennium. In fact, the earliest recorded history of organization foundations dating back to the 7th century CE were known as waqf in Islamic tradition. It involved the management and distribution of resources for charitable causes such as supporting the poor, maintaining religious sites, and other social welfare purposes. Since then, foundations have continued to provide funding for charitable organizations in the social, educational, environmental, health sectors, and much more.

But understanding foundations entails more than digging into their history. Learning how they function can help you identify which foundations will best serve your funding needs. More importantly, this knowledge will help you approach them with resonant proposals and teach you how to maintain strong relationships with them. This guide is designed to help your organization solidify and capitalize on this knowledge. 

What Are Foundations?

Like nonprofit organizations, foundations are entities with tax-exempt status whose main purpose is to fund charitable activities and initiatives through donations and grants. However, they differ from nonprofits in the sense that they support other organizations that deliver charitable services by providing them with financial support and sometimes, strategic direction—they don’t engage directly with communities.

Foundations must also comply with IRS mandates and regulations for matters such as charitable giving and reporting. The purpose of this is to ensure transparency and accountability. 

Types of Foundations 

Foundations tend to fall under one of four categories. Each class has its own unique characteristics and approaches to fundraising. 

Private Foundations

Your average private foundation is usually funded by a single source, the most common being an individual, family members (family foundations), or corporation. They provide donors with substantial control over their charitable giving, allowing them to customize the initiatives they support (or launch). Typically, they involve family members in philanthropy, have more operational flexibility, and can be more selective when it comes to providing grants. Some notable examples of private foundations include the Gates Foundation and the Ford Foundation. The former is known for their global health and development initiatives, while the latter prioritizes social justice and human rights advocacy. 

Corporate Foundations 

Corporate foundations are launched and funded by businesses and often have adjacent values and priorities of the company or its workforce. The foundations may incorporate sponsorship programs or employee matching initiatives to bolster their impact. Well-known corporate foundations include the Walmart Foundation and Coca-Cola Foundation, the former of which is committed to sustainability and economic opportunity, and the latter of which engages in community recycling and disaster response. 

Community Foundations

Community foundations target specific geographical locations, managing numerous funds donated by a large swath of contributors. They fund a broad spectrum of local initiatives and use their in-depth knowledge of the community needs to direct resources thoroughly and effectively. They’re the opposite of private foundations since they’re governed by local leaders and prioritize donor-driven grantmaking. Notable examples of community foundations include the Cleveland Foundation and the Silicon Valley Community Foundation—known for neighborhood revitalization and equity-building initiatives respectfully. 

Operating Foundations

Operating foundations use their resources to operate their own charitable purpose instead of funding other organizations. They provide external grants on occasion, but their primary focus is direct service delivery. Operating foundations must meet particular IRS income and activity eligibility to be classified as such. Ultimately, this category includes foundations that work deeply with programmatic efforts, differentiating them from non-operative private foundations that focus on distributing funds. 

How Foundations Decide What to Fund

Foundations usually make funding decisions based on mission alignment, geographic priority, main impact areas, and budgeting cycles. Many of them need approval by their board members for grants and may invite organizations to submit applications, instead of accepting unsolicited proposals. 

When evaluating the potential of a grantee, the foundation will assess nonprofit capacity, clarity of a program’s goals, sustainability planning, and impact potential. Having a grasp of these criteria helps nonprofit staff members—like yourself—tailor proposals to meet the expectations of funders to increase their chances of receiving a grant. 

Where to Find Foundation Opportunities

Nonprofit organizations can discover fundraising opportunities via a foundation through some established channels. They include:

• Foundation Websites and Annual Reports—These publications offer details regarding finding priorities, application guidelines and deadlines, as well as past grants.
• Grant Databases and Tools—Platforms like our very own GrantStation host searchable databases containing foundation profiles and grant opportunities, allowing nonprofit organizations to conduct target searches.
• State and Local Databases—Numerous states curate and maintain lists of foundations and grant programs that are relevant to local nonprofits.
• Community Networks—Regional nonprofit coalitions and community foundations often reveal funding leads and foster connections with potential funders.

Tips for Working With Foundations

Securing opportunities with foundations isn't a happenstance. It takes effort and strategic planning to form genuine connections, which can ultimately lead to funding. That said, there are few “best practices” that can help your nonprofit find a foundation to back your charitable activities. 

• Conduct Thorough Research—Familiarize yourself with your foundation’s priorities, their previous grant recipients, and application processes before contacting them.
• Build Relationships—Introduce yourself (and board members) warmly. Also, arrange on-site, in-person visits, and regularly update the foundation to establish a good rapport and trust.
• Tailor Your Proposals for the Foundation—Customize your grant applications to align your desired outcomes, and community benefits with the foundation’s mission.
• Maintain Open Communication—When program results come in, report them as soon as possible. Make sure to follow up with thank-you notes and keep funders in the loop even when grant cycles have ended. You can give them shout outs on social media, either publicly or privately. 

Common Mistakes to Avoid When Working With Foundations

When working with foundations, it’s important to avoid some common mistakes that could strain or outright sour your relationship with them. It’s crucial to remember that relationships can strengthen or tarnish a good rapport, so you need to avoid some missteps that could create tension. 

• Sending generic or mass proposals lacking focus.
• Missing deadlines or ignoring reporting duties.
• Overpromising your potential impact without actually delivering. 

Avoiding these blunders keeps your nonprofit in a positive standing with any foundations you may collaborate with. Additionally, cementing yourself as a reliable nonprofit boosts funder confidence, which can lead to recurrent funding. 

Build a Solid Understanding and Relationship With Foundations

Foundations are instrumental allies to organizations in the nonprofit sector. They provide both financial support and resources (i.e. such as strategic planning) that allow nonprofits to create lasting impact and change in their communities (and abroad). 

If you work at a nonprofit, do your utmost to understand and capitalize on opportunities to work with foundations. By understanding how particular foundations accept applications and offer resources, you can effectively target the right organizations that can help bolster your social initiatives and the potential impact they may create.

Frequently Asked Questions (FAQs) 

Q: Can foundations fund nonprofits outside their geographic focus? 

A: Typically, foundations service specific geographic areas. However, some foundations, usually private and corporate foundations, may provide funding for national or international projects if aligned with their mission. 

Q: What should be included in a strong foundation grant proposal?

A: Strong grant proposals contain a clear and concise executive summary, demonstrating your nonprofits alignment with the foundation’s goals, measurable objectives and a realistic budget. 

Q: How important is relationship-building with foundations?

A: Foundations prefer funding organizations with whom they have a prior and strong partnership with, making relationship building paramount. Maintaining regular communication and transparency ensure that these relationships stay strong.