Challenge Grants: A Win-Win-Win for Grant Makers, Donors, and Nonprofits
There are basically two ways for foundations and other grant-making entities to structure their funding of nonprofit organizations. They may give the money outright, or they may give it in the form of a challenge grant.
Most challenge grants are fiscally based — i.e., the granted funds are disbursed once the recipient organization has raised a stipulated amount of money on their own, usually within a certain time period. The grant may match fundraising dollar for dollar or at a specified ratio, such as $1 given for every $2 raised or vice-versa. Other requirements may be imposed as well.
Challenge grants are a win for grant makers, grant recipients, and donors alike. Why?
There’s an old saying that giving a man a fish will feed him for a day, while teaching him to fish will feed him for a lifetime. The benefits of a challenge grant are similar. Giving money in the form of challenge grant not only results in a nonprofit raising more funds overall, but it also helps that organization to become more proficient at doing so. In addition, it enables them to attract more donors.
Over the past 10 years, numerous studies have been done on the impact of challenge grants vs outright funding. Economists studying this empirical data have come up with some impressive statistics as to the ways in which a challenge grant multiplies every dollar received:
Fundraising campaigns related to a challenge grant attract 23% more donors and 18% more dollars than an identical fundraising campaign sans challenge grant.
Announcing the availability of matching funds in the form of a challenge grant boosts revenue per solicitation by 19% and increases the probability that an individual will donate by 22%.
A challenge grant serves as a powerful incentive for a nonprofit organization to get their fundraising act in gear and take it to the next level. It gives them a good reason to reach out to previous donors and encourages them to seek out new supporters.
As a result, they may be inspired to step up and diversify their fundraising strategies. The pressure of a deadline can push a nonprofit organization to move beyond its comfort level and flex fundraising muscles they never knew they had.
For donors, knowing that their contribution will be doubled or otherwise matched is very appealing. Challenge grants create a sense of urgency, too: Donors realize that they need to give within a limited time frame, stimulating FOMO (fear of missing out) and making them feel as if they are part of an exclusive opportunity. This can be a huge factor in bumping up donations.
As for the foundation or other entity who makes the grant, there are benefits for them as well. It can enhance their reputation to be known as philanthropic supporters of a worthy cause. They may even gain positive press thanks to a successful challenge grant. Furthermore, each and every challenge grant made represents an opportunity to develop and strengthen a relationship with the grantee.
For more detailed information about challenge grants and how best to utilize them, either as a grant maker or fundraiser, here are some useful resources:
Facts About Challenge Grants and Matching Gifts
https://www.philanthropyworks.org/facts-about-challenge-grants-and-matching-gifts
Best Practices in Matching Gift and Challenge Campaigns
https://4agoodcause.com/best-practices-in-matching-gift-and-challenge-campaigns/
The Definitive Guide to Challenge Grants for Nonprofits
https://doublethedonation.com/challenge-grants-2/
The Bolger Foundation’s founder, David F. Bolger, was a great believer in challenge grants as a useful device for encouraging and empowering nonprofit organizations to help themselves. Following his example and philosophy, The Bolger Foundation continues to frequently offer funding in the form of a challenge grant.