Giving 2.0™ Guide: Defining Criteria for Your Giving Decisions 

Understanding an issue area ecosystem is an essential component of the due diligence process. It provides critical insights to consider when developing your investment criteria. Common investment criteria at the ecosystem level include, but are not limited to:

• Issue area crowdedness: Which sub-issues within this issue area ecosystem are overfunded and underfunded?

• Required capital: What types of assets or capital are required to make progress (e.g., financial, beyond-the-dollar, political, etc.) to achieve your social change goals?

• Target population: Are there specific populations within this ecosystem that are overlooked/neglected/underserved?

• Political context: What is the current political climate around your particular social issue? Is it aligned or opposed to your social change goals? Will your goals require public support and/or policy change, and if so, at the local, state or federal level?

• Players/Support and opposition: Are your social change goals well-established or do they require a significant change in the status quo? Are there people and organizations with whom you can partner and/or leaders and institutions that might actively work against your efforts?

Common investment criteria at the nonprofit level include, but are not limited to:

• Budget size: What is the nonprofit’s annual operating budget? Is there a budgetary level under or over which you prefer to fund?

• Funding base: What is the breakdown between different types of funders (e.g., corporate, foundation, individual, board, government, etc.)? How much of the organization’s funding is restricted? Is the organization dependent on a single large funder over multiple years? How reliable is that source of funding? Does the organization have a successful earned revenue model or plan for financial sustainability?

• Signaling effect: Will you be one of the nonprofit’s first individual or institutional funders? Will your investment give the nonprofit credibility that will potentially attract other funders? Will your investment, based on its size and your reputation, discourage other funders from participating?

• Lifecycle stage: Do you prefer to fund organizations at a particular stage of development and evidence-based track record? Are you interested in scaling nonprofits with proven impact to new geographic areas? Would funding the merger of two nonprofits appeal to you?

• Reputation: Are you willing to attach your name to the values, rhetoric and political positions of the nonprofit? Has the nonprofit received harsh criticism for any reason? How has the nonprofit handled any controversial situations or leadership challenges in the past?

• Scalability: Is the nonprofit’s service/program model one that could scale to other populations/geographies/contexts? Is the model region- or population-specific in how its programs consider and align with local social/cultural/sociological norms, or could it easily be applied in a different context with a different population? Is the fundraising model dependent on a local leader/founder, and might it not be as successful with different leadership?

• Type of service: Does the nonprofit provide direct services to beneficiaries, or does it engage in higher-level systems or policy change work? What type of service or outcomes do you want to prioritize, given your social change goals?

• Board diversity: Do its members provide a wide, diverse array of skills, experiences, backgrounds, intersectional identities and/or leadership? How often does the board meet and how engaged is the board? Does the board have 100 percent participation in annual funding? Does the board include beneficiary voices? Is the board evaluated, and if so, is that information shared?

• Geography/Location: Where are the nonprofit’s headquarters located? This is particularly important for gifts of financial, intellectual and human capital. Does it serve beneficiaries in a specific geographical location or across multiple communities, cities or regions?

• Leadership: Is the executive director and/or nonprofit leadership receptive to/representative of beneficiary voice and/or the community it serves? How experienced are the executive director and leadership team? Is leadership able to attract and retain talented staff? Is there a succession plan in place for leadership and key staff? Does leadership provide staff the training and support needed to execute their work at a high level?

• Beneficiary voice: Does the nonprofit have processes that integrate beneficiary voice into program design and evaluation? Are beneficiaries represented in the board or staff? Does the nonprofit successfully measure the intermediate- and long-term outcomes its programs/services have on beneficiaries?

• Strategy: Can the nonprofit’s leadership clearly articulate their vision, specific social change goals and strategic plan to achieve impact? Does the nonprofit have a clear theory of change with specific short-, intermediate- and long-term goals and indicators of success? Is the theory of change rooted in evidence or an empirically sound hypothesis? Do the organization’s activities and work align with this theory of change?

• Efficacy: How effective are the nonprofit’s programs? What data do they collect to evaluate their impact among beneficiaries? Does the nonprofit achieve short-, intermediate-, and long-term outcomes it sets?

There are myriad types of gifts/grants to consider beyond funding programs, including physical infrastructure, capital campaigns, evaluations, infrastructure needs, salaries and scholarships. Four common types of gifts allocate funding to nonprofit endowments, programs and services, general operating support and organizational capacity-building.

• Nonprofit endowments: These investment funds give the nonprofit the ability to make consistent withdrawals from invested capital. Donating to an endowment helps ensure the sustainability and longevity of the nonprofit’s programs and operations. In addition, it helps equalize the often unequal power dynamic between donor and nonprofit. Often, endowment funds primarily cover operating costs, as those funds are more difficult to raise than program funds. Typically, nonprofits with endowments have an investment policy that informs how endowed assets are invested.

• Programs and services: A majority of grants/gifts are designated for programs/services sometimes known as Program Related Investment (PRI). This type of grant gives funders a feeling of greater control over how their donation is spent, because they can associate a number of people served/land protected/animals rescued/etc. with a specific investment amount. Donors also might assume that the potential impact of a program grant is easier to track and measure, based on the reported impact of the service provided. However, these program-specific donations often do not coincide with the needs of the nonprofit at that moment in time. Importantly, program outputs do not necessarily translate into outcomes and impact, so funding an evaluation can prove more valuable to understanding what is and is not working and if nonprofit intentions align with measurable impact.

• General Operating Support: GOS offers nonprofits the freedom to spend the grant/gift however they determine will best create impact. These funds can be used for internal support or operations, such as rent, salaries, energy bills, human resources, communications, phone bills, office supplies, transportation costs, internet service, etc. Many nonprofits report the difficulty of securing grants for GOS, despite their importance.

• Capacity-building grants: These entail anything that helps advance or enhance the infrastructure and/or operations of a nonprofit, with the goal of helping it run as effectively as a business. These gifts may entail items such as developing a new marketing strategy and corresponding materials, new financial systems and training, a new website and social media plan, a capital campaign planning process and consultant, a formal strategic planning process led by an outside facilitator or formal evaluations of programs and services.