How Does a Board of Directors Assist in Startup Funding?
Getting a board of directors together and submitting all the forms and fees to start up an organization is a good place to begin. Soon after, boards need to work full steam ahead to round up the necessary funding to give the organization a solid financial start. This is often where discouragement sets in, as the board faces one “no” after another.
The reality is that national foundations and larger foundations prefer to donate their funds to nonprofit organizations that are already well-established and that have proven that they can raise funds on their own. That doesn’t mean that it’s impossible to get startup funds — it just means that new boards need to be a little more creative when it comes to fundraising.
A high-functioning board, along with a strong board chair and a highly qualified CEO or executive director, can get the job done when they’re on the same page on how to establish startup funding. The team will need to identify potential donors and other funding sources, establish metrics to track their progress and start building their cash reserves from the first day.
Finding Viable Sources for Getting Money for Startups
Every community offers numerous opportunities to look for donors. It’s just a matter of locating the most receptive resources. Certain donors will already be heavily supporting other organizations. You’ll probably have better luck pursuing donors who haven’t made major commitments to other charities.
One of the best tools that board directors can have is a good pitch. Board directors can best assist in securing startup funding by working together to create a case statement. A case statement is much like an information-packed elevator speech. It’s a short speech that tells about the organization’s mission and motivates the donor to support it.
Once they’ve memorized the pitch, board directors can search out business and community leaders who are well-connected. The case statement should open the door for conversations about how community leaders can either donate or help raise funds in preparation for the startup’s formal launch.
Who Else May Be Able to Offer Financial Assistance for a Startup?
Your family and friends have been there for you all your life. When you take the lead in starting a helpful new organization that brings needed services into the community, it’s the prime time to ask them to contribute some amount that they’re comfortable with. In addition to adding to the organization’s reserves, the people closest to you have their own slate of friends, family members and colleagues. Don’t be shy about asking them who they know who might be interested in the organization and willing to support the cause.
Sometimes, similar programs are happy to help new startups get off the ground. For example, a new sports team for children may find funding support from the city or town government, the parks and recreation department, schools, community centers or churches.
Local Foundations
Many communities have local foundations that are happy to assist board directors with startups. Their assistance often includes some sort of funding. They may also offer additional types of assistance, like training them in good governance practices and helping them get intrinsically involved in the community. Local foundations may be more likely to fund local nonprofit startups than larger national foundations.
Tips for Pursuing Startup Funding
Nonprofit organizations fall under the umbrella of corporations. While they exist for charitable or certain other purposes, nonprofits operate in much the same way as businesses. Board directors should form a business plan, design a funding plan and continue to develop a high-functioning board.
The business plan helps board directors to outline the financial needs of the organization for the current period and for the future. As part of strategic planning, the board directors can evaluate the competitive environment for charitable giving, do a needs assessment and target the most viable sources of funding.
Designing a Funding Plan
It’s much easier for boards to reach their goals when they have a designated plan for startup expenses, as well as short- and long-term goals for fundraising. Funding plans will help boards decide whether they need to charge for their services, which is allowable for nonprofits as long as they reinvest any earnings back into the organization.
Board directors can help their organizations get a good start by ensuring a robust fundraising plan. Weak funding plans won’t allow nonprofits to sustain themselves long enough to get more vigorous fundraising programs off the ground.
The board needs to work together with the Treasurer to set up a proper financial records system to aid the board in decision-making and to follow through with any local, state or federal compliance issues.
Boards can assist their fundraising efforts by being prepared to do all that’s required to set up a legal nonprofit corporation, including registering the proper forms, paying the required fees, and setting up a qualified and passionate board of directors. They need to be realistic and be prepared for the process to take time.
As funds come in, it’s wise to invest in a tailored software solution, like equity management software for board business, which streamlines many of the manual processes of board activities, so boards can focus more heavily on fundraising.
Significance of the Founding Board
The first board members play a significant role in getting nonprofits off to a good start. Typically, they’re chosen because they have strong circles of influence and no shortage of resources, influences and contacts. They should be people who can sell the organization’s mission with confidence and actively use their reputations and influence to raise the necessary startup funds.
Strong founding boards will also ensure that they vet the organization’s management staff thoroughly and hire the best staff, even if it costs them more than they anticipated. Startups require strong leadership from the board and the executive director or CEO. Boards will ensure that board directors and managers pursue opportunities for professional growth and development in governance practices.
Final Tips for Boards Pursuing Startup Funding
Every state has an association of nonprofits. Startup boards will gain much by joining their state association right from the start.
Grants are a good way to get funding because nonprofits don’t have to pay the funds back. Boards may find sources of grants at Grants.gov, USA.gov, at the local library, at area chambers of commerce and by doing internet searches.
