A Proven Funding Model for Economic Development Organizations By Michael Davis

A Proven Funding Model for Economic Development Organizations By Michael Davis

The importance of economic development organizations (EDOs) for the development, growth, and vitality of our communities cannot be underscored enough nor questioned. In a time of shifting norms, federal and local government EDO funding mechanisms are shrinking and becoming unpredictable in nature. This paradigm shift has raised funder expectations, funding scrutiny, and accountability for quick wins while making fast quality of life impact almost impossible. EDOs are forced to invest increasing amounts of time and resources to secure funding in order to maintain their current level of service and community impact or in some instances just to stay in business.

 

Historically, a large percentage of the EDO funding has been from the public sector.  EDOs faced with the new reality in annual public funding are actively exploring all the ways to improve their bottom line. The table below shows the funding sources for EDO by type.

 

EDO Funding Sources

 

Type Examples Funding
Public Local Governments, Regional Planning Organizations, State Economic Development Organizations Funding through city, federal, state, and county sources
Private A majority are nonprofit corporations
such as a Chamber of Commerce or Community Development Corporation
Funding through government, foundations, individuals, and corporation sources in the form of membership dues or contracts
Public-Private An unincorporated committee or incorporated nonprofit tax-exempt Funding through local government by contract, budget line item, or grants that are renewed annually

 

The funding solution chosen by more and more EDOs across the United States is an Investment-Driven ModelTM, as described in author Tom Ralser’s Asking Rights: Why Some Nonprofits Get Funded (and some don’t). This is not a new funding model, but its popularity has increased in response to the mercurial nature of public funding.

 

 

 

 

How does Investment-Driven Model fundraising work?

  • A multi-year strategic action plan is developed for focusing on growing the economy, addressing workforce development challenges, proving more jobs, or solving major community issues.
  • Engage local stakeholders for strategic action plan input and/or validation of the strategic action plan.
  • Launch fundraising campaign to secure multi-year (i.e. 3 year or 5 year) pledge commitments from local stakeholders.
  • Execute the strategic action plan, achieve the measurable goals, and provide the return-on-investment (ROI) to the investors as well as positive impact for the community.
  • Provide regular stakeholder communication updates during the multi-year period.

 

What are the key benefits of this type of capital campaign?

  • The multi-year annual pledges eliminate the uncertainty of annual EDO fundraising.
  • The multi-year investment commitments reduce the amount of time organization resources are engaged in annual fundraising.
  • The EDO can invest more resource time for implementing programs and services to make a positive impact.
  • The predictable topline investment provides for the ability for long-term EDO planning.

 

What are the keys for a successful Investment-Driven Model capital campaign?

  • The higher degree to which your organization has Asking RightsTM (a track record of delivering outcomes that are valuable to investors), the better positioned the campaign is for success.
  • A strategic action plan based on stakeholder priorities and a clear return on investment for the investors, the municipalities, and the community.
  • Strong indicators and results from the Feasibility Study conducted on the EDO strategic action plan.
  • An outside firm who wakes up every day solely focused on the leading the charge to achieve the campaign fundraising goal.

 

Suggested Reading

  • Asking Rights: Why Some Nonprofits Get Funded (and some don’t)
  • ROI for Nonprofits: The New Key to Sustainability

 

Convergent Nonprofit Solutions is a national nonprofit consulting and fundraising campaign management firm. Our team has worked with several hundred nonprofit organizations across all 50 states and internationally. The Investment-Driven Model utilized by Convergent has been implemented successfully for two decades, helping all types of nonprofit organizations achieve significantly greater fundraising results. Our innovative tools have consistently maximized the dollars raised from individual funding sources by effectively translating specific outcomes into specific benefits for existing stakeholders and potential investors while minimizing the burden on both staff and volunteers. Our experts focus on providing hands-on, outcome-driven solutions customized to fit each unique situation, timeline, and budget

 

If you want to learn more about the Investment-Driven Model for your EDO or nonprofit entity, please contact Michael Davis, Project Director, Convergent Nonprofit Solutions at mdavis@convergentnonprofit.com or 800.886.0280.

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