Using Online Fundraising To Reach Major Donors

Charles Feeney is an 81-year-old billionaire who’s given $6 billion and plans to give away his remaining $1.5 billion by 2016.

“I want the last check I write to bounce,” he said in an interview with The New York Times.

You may wonder how Feeney’s story fits in a guide about nonprofit online fundraising, which, on average, yields gifts of $94, and resonates more with Millenials (or Generation Y, “Gen Y”).

Online fundraising campaigns have successfully aggregated the small donations ($25-$100) made by masses of individuals. Such campaigns have been effective because they amplify the kind of marketing that cuts across generations: word-of-mouth.

Online fundraising will continue to be a crucial channel for connecting with today’s Millenial donors, which will be key as they become tomorrow’s billionaires. Online fundraising will be a significant means of finding, connecting with and cultivating up-and-coming major donors like Feeney.

This guide will cover:

• Optimizing your web presence for major donors
• Benchmarking online donation size
• Raising funds with the help of the IRS
• Creating a pipeline of major donors

Let’s get started with using online fundraising to reach major donors!

Optimizing your web presence for major donors

What is a major donor?

In this guide, a major donor is defined as someone who makes a one-time gift of $1,000 or more.

What are major donors looking for?

Online business vs. online charity
Ninety-percent of online donors shop online, and 78% do their banking & bill-paying online.

Online donors are likely to compare and contrast their online giving and online purchasing experiences. They’re comparing their interface experience with your website and giving portal to sites or tools like Amazon, iTunes, NetFlix, and other retailers which have made buying easy.

These retailers learned to eliminate what is called “excessive disruption,” the visual or other barriers that block the decision-making process.

Consider a typical brick & mortar retail shopping experience: Long lines at cash registers; poor lighting; messy displays; placing higher-priced merchandise up front would intimidate the cautious buyer. Putting inexpensive fobs and trinkets where people tend to look allows the consumer to browse and take in some of the “brand experience” with little commitment.

Likewise, many organizations offer free content (white papers, video, etc.) that allows users to understand a cause or issue more clearly before engaging a meaningful amount of time and money. Suppose I download a white paper from a company and find real value in it; I’m now more open to participating in a webinar demonstrating their newest product.

The best online businesses model the in-store retail experience. Most of us have shopped at an Apple retail store: an associate may approach you, offering to find your desired product. Then, with an iPhone and credit card scanner, she processes the sale – even if you’re thirty feet away from the nearest register.

Does your organization’s website make giving this easy?

Why don’t major donors donate?

While giving can be made as easy as shopping at an Apple Store, there are reasons that major donors avoid it nonetheless.

1. Fear of exploitation
Wealthy donors are afraid that people are after their money. Ponzi schemes are named after Charles Ponzi, who used them in 1920 and lost $20 million of his investors’ money, which today would be worth over $200 million. Bernie Madoff surpassed Ponzi in financial infamy by losing $18 billion.

For some, greater wealth is accompanied with “mo’ problems” as the late rapper Notorious B.I.G. put it. Here’s what happened to a woman after she won her state’s lottery in 2010:

And then came the phone calls: promises, marriage proposals, accusations, threats. People who used to volunteer to help her do things wanted money for their trouble. Family members, she says, tried to run her life, and control her money.

“Sometimes I wish I could change my name and go somewhere and hide,” said the woman, who asked not to be identified to prevent further attention.

Such stories are enough to make wealthy donors wary of any request for money – even to sound, worthy causes.

2. Fear of financial loss
Wealthy donors are also vulnerable to financial losses; when faced with a shortfall, it’s difficult for them to honor large pledges they’ve made. For example, shortly after the 2008 recession, a major donor reneged on a one million dollar pledge in order to make several large real estate transactions in his business.

One million dollars is a large sum of money regardless of one’s net worth. A financial loss of any size affects disposable income, which will shift a donor’s financial priorities – most likely pushing charitable giving to the backburner.

3. Fear of generational loss of values
Certain foundations, schools, and institutions, were founded by donors who held specific values. When these founding donors died, they entrusted their institutions that, in the hands of trustees and over time, evolved into something different than intended.

Generations later, we might say, “Mrs. Smith would be rolling over in her grave if she saw how…”. Donors want to ensure that in ten or twenty years, you will still be the institution you are now.

How to optimize your website for online fundraising

Optimizing your organization’s web presence can preemptively alleviate any fears, like the aforementioned ones, or concerns they may have.

Another reason to spruce up your website: 85% of potential major donors, whether they give online or offline, check your website before giving.

Here are some ways to do this:

1. Craft an “About Us” page
Donors aren’t just contributing to a cause; donors are people giving to people. They want to know about the people who will steward their financial gifts.

The “About Us” section is the first impression anyone will receive about the people comprising the organization, so include a 2-3 sentence biography – photos, if possible – for each key staff person, board member and volunteer leader.

Instill confidence in an organization’s leadership and you’ll increase the likelihood of receiving larger gifts from major donors.

2. Display your vision, mission, and values
As clearly and concisely as possible, explain who you are, what you care about, and your approach to solving a particular social problem.

3. Tell stories
People resonate with stories, so feature stories that exemplify your organization’s impact throughout your website, especially the donation page. Ideally, you would highlight a video on the homepage above the fold.

4. Link Form 990s from the last three years 
Major donors go to charity watchdog sites, but a nonprofit that offers these tax reports, even their most recent audit, on their own site demonstrates transparency, which then builds trust.

They’ll be examining your expenses and revenues, so if your organization has finished the fiscal year in the red for two or more consecutive years, you will have some tough questions to answer.

5. Provide multiple ways to engage
While it’s true that among donors born before 1945 (“Matures”), 77% prefer to mail a check to you, it’s also true that the same percentage of donors born between 1981 and 1991 (Gen Y) agree that it’s acceptable to receive mail from a nonprofit they know. That is to say while direct mail is not the recommended way to recruit younger donors, it can be an excellent stewardship tool.

Opening multiple online channels to involvement is key in engaging the next generation of donors and in finding a Charles Feeney; for example, let donors share a link, sign a petition, make a gift, watch a video.

Conversely, organizations report having email addresses for only 25% of donors who give gifts of $1,000 or more offline. This means that 75% of an organization’s major donors can only be reached offline, which limits interaction and giving opportunities.

Increasing your email list to include those who give offline may lower fundraising costs, in addition to creating additional donation and interaction channels.

A note on asking for email addresses: once they do give their email addresses, make sure not to overstep any boundaries in communicating with them, and thus give an impression of “being in it only for the money.”

Benchmarking online donation size

Even now, there are potential Charles Feeneys making large online gifts. Jennifer and Chris Brown of Houston were profiled in the Chronicle of Philanthropy in May 2011 for donating 10% of their income online – most in $100,000 gifts – to charities they’ve researched online.

A few takeaways from the Browns’ experience for us are:

• They were “embarrassed” when they had to break up their gifts as $90,000 and $10,000 in order for the online system to accept them.
• Only about “half” of the organizations they tried giving to could accept their online gifts.
• They use the same card for all online gifts and pay off the balance the next month, thereby accruing airline miles.
• Jennifer carefully peruses a charity’s website to understand their culture. If the website or contact information isn’t current, what other aspects of the organization are being neglected?

Yet the Browns’ proclivity to make gifts online because they like making them “with a few clicks” presents a few challenges for the nonprofit.

Overcoming obstacles to giving large online gifts

Encourage monthly giving
As an alternative giving large one-time gifts online, encourage donors to consider monthly checking account withdrawals through automatic clearing house (ACH) transfers or electronic fund transfers (EFT) on your site.

Provide alternate giving options
There should be a subpage devoted to giving instructions on stock gifts on the donations section of your site because larger gifts come in the form of appreciated assets (not cash). So if a donor can find this information online and convey it to her broker, it saves her time. Be sure to inform donors to instruct their brokers to put the donor name on the stock transfer, which can come to the nonprofit without identifying information.

Raise the limit
In a recent study of 1800 nonprofits, 88% of the charities received at least one $1,000 gift online in the previous year. So, do your donation tiers on your giving page include the $1,000 and even $2,000 options? If not, you might be missing out on these donations for that reason alone. One nonprofit was advised to raise its top online donation from $2,000 to $5,000. The next week, they received their first $5,000 donation online.

Illustrate how the money will be used
Include descriptions of what each gift amount can accomplish and place them in your donation form. For example, a soup kitchen and food pantry might include the following to show how unrestricted gifts could be directed:

• Your donation of $25 can feed five people each Saturday morning.
• Your donation of $50 can purchase enough food to feed three families for all of next week.
• Your donation of $250 can provide enough “gas on the grill” to cook for two weeks.
• Your donation of $5,000 will sponsor an entire Saturday morning meal for 700 people, including equipment for volunteers and materials for clean-up.

Donations tiers can go a long way in illustrating the intended social impact of their donation.

Raising funds with the help of the IRS

Let’s explore how your website can reach major donors in a very practical way. And would it help to know that the IRS would be working for you this time?

Take a look at your organization’s Form 990, the IRS document that most tax-exempt institutions are required to file annually. On page 2, Part III/1 of the Form 990, there is a section that asks the filer to “briefly state the organization’s mission.”

A comptroller or accountant won’t readily think like a marketer when completing this form; they don’t write to major donors and private foundation officers who evaluate your Form 990 to see if you fit their areas of giving.

So how should you complete this section? Let’s look at a few examples.

Case Study: American Red Cross

The American Red Cross writes:

The American National Red Cross, a humanitarian organization led by volunteers and guided by its Congressional charter and the fundamental principles of the International Red Cross Movement, will provide relief to victims of disaster and help people prevent, prepare for, and respond to emergencies.

What works well:

• Sounds august and official.
• Sounds far-ranging and vital.

What can be improved:

• Lengthy. Aren’t you tired after reading as far as “…guided by its Congressional charter…”?
• Potentially misleading; namely, the “led by volunteers” phrase. While the organization recruits 650,000 volunteers, the American Red Cross employed 34,821 staff members in 2010. A somewhat savvy donor would be able to detect such inconsistencies, which may create dissonance and distrust.

This section could have highlighted something people were unaware of. For example, did you know that:

• The Red Cross responds to approximately 70,000 disasters in the United States every year?
• They help an average of 150,000 military families and veterans annually?
• Nearly 4 million people donate blood through the Red Cross, helping to provide more than 40% of America’s blood supply?
• More than 9 million Americans participate in programs like CPR, First Aid, and Lifeguard training?

If I’m a prospective donor of the Red Cross, these examples may give reasons to donate in fresh way.

So then, what should you write?

Case Study: charity: water

Here’s what the clean water organization that has pioneered several funding models and techniques wrote:

[We are] a non-profit organization bringing clean and safe drinking water to people in developing nations (continued on Schedule O).

When you go to Schedule O, there’s a compelling description of how 100% of public donations to go program expenses (the board and other major donors provide for operating expenses) and how GPS tracking proves to donors that the wells were dug where claimed.

If I’m a donor, I am interested.

In Conclusion…

• If you are a new or less well-known organization, use this section to present a 2 or 3 sentence summary of your vision and values, the way you would want to read it.
• If you are a more storied organization, tell the reader something she doesn’t know.

Great! Now you have the basics — let’s move on to building demand.

Creating a pipeline of major donors

When I worked as chief development officer for a graduate school and was hiring development officers who would be meeting donors face-to-face, I would first interview them over the phone.

I’d ask, “Without giving me the person’s name, tell me what your favorite donor was like, a bit about their family, and what connected them to your institution.”

If they didn’t paint a clear picture for me of that donor, I knew they might be good at other areas of development but probably not as a major donor officer.

Major donors are people, too

We often forget there are people on the other end of our emails, videos, and online efforts. Since we’re dealing with scaled efforts, we fall into a trap of viewing “online donors” like donors receiving direct mail. There are two problems inherent in either approach:

1. It can make the prospective donor into a commodity.
2. We ignore online sharing. Social sharing and informal social “asking” among peers is a huge opportunity that leads to online giving.

With that said, let’s posit two things, both of which are cliché but true, and important:

1. We’re dealing with people, not numbers; and
2. These people are often tied into networks of communities, which can be leveraged for their own sake and for the sake of our causes.

We’re giving people a chance to engage in something that will benefit them as well as your charity. It’s been said, “It is more blessed to give than to receive,” or in other words, “You’ll be happier giving than getting.”

This begs the question, “How does this person like to give?” Perhaps the best we can do at present is to segment people into general demographic groups who share some attributes and habits.

Older Americans like to give by mail; so send them mail. Gen Y-ers and Gen X-ers (those born between 1960 and 1980) like to give through a variety of channels; likewise, approach them through a variety of channels.

Gen X-ers and Gen Y-ers are tied into communities (real or virtual) that they often build and maintain online. Nearly 9 out of 10 Gen X-ers and 87% of Gen Y-ers agree that friends asking friends to donate to a charity is “acceptable”, underscoring the importance of including social media in online fundraising.

Boomers, however, are slightly less open to receiving such suggestions at 82%; Matures are less so at 76%. Yet across multiple generations, we see that community amplifies influence.

If communities are important and your nonprofit lacks one, what then?

How do you form community online?

Let’s look at this through the lens of alumni giving rates at some top business schools.

NYU’s Stern School of Business sent their alumni a comparison of peer institutions’ alumni giving to the annual fund. Harvard had more than 25% of its alumni giving to the annual fund; Darden School of Business (University of Virginia), more than 40%; Yale topped the list at 45%+.

Stern was at 10% and ranked last on their own list. Interestingly, Stern omitted its Manhattan neighbor to the north, Columbia, whose alumni giving is 15%.

Columbia Business School has the following on its website: “During the 2010–11 fiscal year, the Office of Alumni Relations and its 60 volunteer-led alumni clubs hosted 332 events worldwide. This included Reunion 2011, which boasted a record-breaking attendance of nearly 2,200 alumni and guests. The fifth annual Worldwide Alumni Club Event took place in 58 cities around the world and was attended by more than 2,000 alumni, current students, and admitted students.”

If I were an alumnus who read this, I would be encouraged to give by my peers’ robust activity. And if I didn’t attend one of those gatherings, I’d be more eager to set aside time for it next year. Whether I make my gift online or offline, the community at Columbia has made itself readily available for connections throughout the year and wherever I’m working.

Alumni of large universities are obviously key major donor prospects for these schools’ long-term efforts and are the ones who are visited for legacy gifts. Their affinity—their sense of community online and offline —is directly proportional to their giving.

The key to forming community is to create community space: the pattern emerging from the statistics above is roughly that the closer and more inviting the physical space, the higher the rate of giving by those who shared that space.  To form online community, then, create an attractive space online where constituents may gather.

How to increase engagement

My class from New York’s Trinity School (rated the top prep school in the nation by Forbes magazine) has an alumni-giving rate of 5%. I asked the headmaster of the top fundraising prep school in the same network of Episcopal Schools how she would increase the rate of alumni giving:

“Get the alumni together in different groups around the country and have them tell their stories of why the school is important.”

We aren’t talking special events here; we’re talking community. There are at least three things your site can offer an existing or still-forming community, in order to increase cohesion and future giving:

1. “Share.” When you ask users to share a video, “Like” a page, etc., you allow them to take a step toward building affinity with your organization.
2. “Do.” Studies show that donors under the age of 35 value volunteering more than giving money, and that younger donors have often first volunteered time before giving their first financial gift. Asking your donors to DO something for you first, besides giving, can be a very effective way to engage them. The Global Poverty Project has an annual “Live Below The Line” week-long modified fast, where participants live on $1.50 per day and raise money from friends. While they raise a lot of money ($3 million from 14,000 personal fundraisers for poverty-fighting charities), their main goal is awareness and advocacy.
3. “Give.” Just because you’re doing the above two doesn’t mean you shouldn’t ask for people to give; many will want to give after visiting your site. You may want to offer three options, GIVE being one of them, without having a single one dominate.

Competing for donors

Is it possible to have a great school experience yet have waning affinity just after graduating? Yes, and the reasons for it—the “competing interests”—apply to nonprofits that are not schools. In fact, these competing interests affect all charitable giving.

Consider the following analogy as you think about your online presence:

We in the nonprofit field often consider other nonprofits—whether in our sector or more broadly in the philanthropic world—the “competition.” Granted, donors do contrast one organization against another within sectors, and many donors have a certain amount they feel they can or want to donate each year. But the reality of what happens on an individual budget level is like what happens when we go out to a restaurant for a nice dinner. We look at the menu and then we tell the server our choice of one appetizer from among many and one entrée among many. Pretend you, the nonprofit, are one of those appetizers on the menu. You might start worrying about a different appetizer being chosen by the diner, when it’s the entrée you need to worry about. Because what the patron is really there for is the entrée, not the appetizer, and if he’s feeling a bit full, he’s going to skip the appetizer altogether.

So, who’s the entrée?

Your donors certainly decide among nonprofits which are most worthy of their charitable giving (as we saw with the Houston couple that scours Charity Navigator and others who look at the Form 990). But when I was seeking a grant for the school I was working for, the head of a foundation said this about wealthy donors:

Your competition is not other schools. Your competition is Rolex, Mercedes, the local country club.

And he’s right. Remember my donor who spent his cash on a real estate transaction instead of fulfilling a pledge? He had pledged this money in Fall 2008 and, to my knowledge, has still not sent the first pledge payment five years later. He won’t. He skipped the appetizer in favor of the entrée.

A friend of mine who graduated from NYU’s Stern School of Business and was a class representative found that many of his classmates drifted quickly and had little loyalty when it came to giving to the school. And why should they?

Stern lacks a campus presence that would encourage affinity (see above section on creating community), which in turn encourages giving. Within blocks of the school, there are world-famous jazz clubs, top-shelf retailers, and restaurants & coffee shops rewarding customers for multiple check-ins and securing long-term relationships within eleven visits.

Captivating donors through community

The challenge then for nonprofits raising money online is not to play on the same field as consumer products and services. Going toe-to-toe with online consumer value propositions won’t serve your organization. Instead, as a nonprofit, you can offer potential donors what customers can’t get from a business: a vision and community.

Effective online fundraising will require vision-casting and inviting others to join that vision by sharing stories via media (a video, for example) with friends, volunteering, or giving.

Here’s the best example I’ve come across recently.

Wikipedia: the world’s encyclopedia
Wikipedia’s vision is to be a “free encyclopedia” for the world. On the homepage is a globe comprised of puzzle pieces inscribed with different languages’ characters or pictographs. The missing pieces signify that its vision is incomplete without contributors (“editors”) and financial partners who give to the Wikimedia Foundation.

Several years ago, Wikipedia did perhaps what no other nonprofit had done, at least not on a global scale: their donors and internal audiences wrote end-of-year appeals that were featured on their site. In early December 2009, founder Jimmy Wales posted an appeal that raised $430,000 from 13,000 people on the first day.

Then, Wikipedia featured letters written by current donors, editors, and even staff; by month’s end, they reached their $7.5 million goal.

“We continue to talk to foundations, but… we’ve moved to having everybody fund this,” said Jay Walsh, head of communications of the Wikimedia Foundation.

In short, Wikipedia:

• Appealed to the idea of community (“this is a product for all of us”).
• Asked the community itself to create their own appeals (“since all of you use it, you know best what to say about it”).
• Appealed directly to that community (“this requires all of us to keep this vision moving forward”).

In 2008, Wikimedia had less than 200,000 donors; now, they have over a million. They remove banner solicitations once they each their annual goal each December. If you do donate, you receive this message:

Your donation will help keep Wikipedia free for the whole world.

Wouldn’t that give you a rush?

While Wikipedia is almost the poster child for annual crowd-funding through smaller donations (their average gift in 2011 was $20), there are major donor ramifications. They still receive major gifts from these efforts and can cultivate other major donor relationships by showing how successful their online efforts have been, which also underscore the support of the “crowd.”

What about a more local effort and its use of the Internet to increase major donor support?

Major donors can join the crowd, too
Let’s consider crowdfunding. There are two types of crowdfunding projects: those that are essentially pre-sales of a prototype, of which the good ones get overfunded; and those that are asking primarily family and friends to fund a vision, which can be oversubscribed, but usually not by much.

A nonprofit used crowdfunding to fund an arts-related element of its overall plan. It was successful and in the process identified several major donors by offering top rewards.

One of these donors went on to offer a $50,000 matching gift, which became a “capacity-building grant” that helped double the nonprofit’s donation revenue and build its email list.

As of this writing, this nonprofit is hosting a dinner for supporters where tickets start at $2,000 per person. A number of their invitees were found during their crowdfunding campaign. All their community-building and communication happened online.

In sum, imagine your donors self-identifying with one of several concentric circles, with the center being for those who have the greatest ownership of your mission.  In there you’ll find your Board members and most faithful donors.  Your task is to find ways—programs and different fundraising methods—to draw toward the center those who sit in one of the outer circles.

Conclusion

So how do you find a Charles Feeney online?

You don’t.

He finds you, most likely, so keep your website comprehensive and updated. Engage younger donors through multiple channels. Steward gifts with excellence.

Grizzard Communications has shown that retention rates from direct mail drop quickly, with many clients experiencing only 40% in Year 2 after acquisition, and 30% in Year 5. However, they found that the 30% of donors who were retained might be giving upwards of 30% of total revenue. In other words, they were stewarded well and deeply engaged to the point of making larger gifts.

It’s said that “The best donor is a current donor,” so put effort into excellent stewardship and renewal without ignoring acquisition.

In addition to his $350 million gift to Cornell University in New York, Feeney also gave $270 million to establish a medical campus in San Francisco. Who was the fundraiser who had cultivated that relationship over the years?

“If only I could remember who hooked me up with it,” Feeney said. “He said, ‘You’re out here a lot anyway, it won’t take much of your time.’ ”

I’m sure that fundraiser can live with the omission of his name in The New York Times.

His boss knows who he is.