Capacity capital is the money that nonprofits so desperately need to build strong, effective, sustainable organizations. It is a one-time investment of money to add new technology, an evaluation system, a new revenue function-ultimately money to grow or strengthen the organization. And it is infinitely more effective at achieving social impact than a traditional bricks and mortar capital campaign.
Let me give you an example. Before Social Velocity, I ran the fundraising and marketing department at KLRU, Austin's PBS television station. When I took the helm in 2005 membership and fundraising dollars were in deep decline. We developed a new development plan and raised $350,000 from a handful of donors to implement it.
The $350,000 of capacity capital funded a new donor database, a revamped website, marketing materials, and staff training. After three years of implementing the plan, we were raising $1.6 million more per year and enjoying double or triple percent increases in the number of individual, foundation and corporate donors.
The $350,000 investment our donors made in us was a capacity capital investment that allowed us to dramatically improve our fundraising function.
A capacity capital campaign is like a mini capital campaign, but with a much bigger payoff. Nonprofits could use capacity capital in many ways, for example to:
- Plan and execute a program evaluation
- Launch a new earned income business
- Create a strategic financing plan
- Hire a seasoned Development Director, or other revenue-generating staff
- Purchase a new donor database
- Improve program service delivery
- Upgrade website, email marketing, and/or social media efforts
- Launch a major gifts campaign
If those organization-building elements were in place, a nonprofit could provide more services to their community, create a more financially sustainable organization, secure more external support, and ultimately create more sustainable social change.
But raising capacity capital is not like traditional fundraising. Since most donors don't know about this new kind of money it is up to nonprofits to help their donors understand its power. You have to know what you will use the capacity capital for and project what results you will see.
The steps in a capacity capital campaign are to:
- Create a Capacity Building Plan
What part of your nonprofit organization is holding you back? What could you purchase (development staff, donor database, other technology, consulting, etc.) to improve those elements of your organization?
- Determine a Capacity Capital Dollar Goal
How much do each of these elements cost? Add them together to get your overall capacity capital dollar goal. And remember, you don't have to buy everything at once. You may want to stage your purchases according to how you will implement your capacity capital plan above.
- Break the Goal into Investment Levels
You will want to approach different prospective funders who can give at different levels. Therefore you want to break the overall dollar goal into different levels that donors can invest in. Make sure you start with your beginning major donor level. A capacity capital campaign is really only right for major donor fundraising, which is done in a one-on-one way. You need to explain in person the unique opportunity that capacity capital offers.
- Develop a Capacity Capital Ask
In a capacity capital campaign you are asking for a unique kind of donation, therefore it takes a unique ask. You want to develop a logical argument including the opportunity, your capacity plan, a budget and your projected return on investment. How do you think this capacity capital will transform your nonprofit and why should a donor care about that?
- Create a Prospect List
Work with your board, staff, friends of the organization to brainstorm individuals and foundations who already know and love your organization and would have the capacity to fit somewhere in your investment level chart in #3 above.
- Demonstrate the Return On Investment
Remember capacity capital is about transforming your organization so you need to show your capacity capital donors what their investment has allowed you to do. How has your organization grown stronger because of their capacity capital investment? And how does that translate into more change in your community?
Capacity capital is an enormous opportunity for the nonprofit sector. It has the power to break nonprofits free of the vicious cycle of never having enough money to do their critical work. If nonprofits could raise and employ the capital necessary to build effective, sustainable organizations, the sector could emerge poised to deliver even more social change.
- From Starvation to Sustainability: Report Reveals Worth of Philanthropic Equity
- Rethinking the Traditional Capital Campaign
- What Philanthropic Equity Means for Nonprofits
- How Nonprofits Can Attract Social Investment
Photo Credit: theurchiness