Grants Accelerator is a regular blog series about leveraging your grants strategy to enhance organizational sustainability. In this installment, Partner and Managing Director Ali Marcus explores the misconceptions of multi-year grants.
Multi-year funding is often treated like the holy grail of the fundraising world. Everyone wants it, but few organizations can include it in their budgets year after year. Like the lottery, the promise of significant sums of money breeds mythical expectations about how to win it, keep it, and rely on it for stability.
Through working with 70+ clients over the past ten years, I’ve seen these expectations cripple grant pursuits. I want to highlight some key myths, and reveal the hidden, true opportunities that a multi-year grants strategy brings to your fundraising and organizational goals.
Myth #1: Multi-year funding is the primary grants strategy that our organization should pursue.
Truth: Multi-year funding belongs within a bigger, more diverse grants strategy.
I speak to Executive Directors, Development Directors, and Board members all the time who say “we are only or primarily interested in multiyear funding.” This makes sense from the perspective of the organization’s need for stable funding for programs and operations, but it doesn’t reflect how funders operate. The reality is most foundations don’t make many multi-year grants. It’s worth pursuing multi-year opportunities, but they must be balanced with a larger focus on single-year grants that are more available.
Hidden Opportunity! Think of multi-year grants like you think of bequest gifts. They are a windfall to your budget in those years, but they should not be used to forecast future grants potential. Instead, use those years that you do have the funding to invest more time in cultivating other foundation relationships to help you accelerate out of your multi-year grant when it ends. It’s also a good time to set appropriate expectations with your Board about the role of current and future multi-year funding opportunities.
Myth #2: Multi-year funding represents a long-term commitment from the foundation.
Truth: Multi-year grants are rarely renewed (at least immediately).
Like everything in fundraising, multiyear grants are all about relationships. Often, a foundation will test a single year grant – sometimes for several years in a row, even – to gauge the potential of the organization. If the relationship and results are strong, it could lead to an invitation to apply for multi-year funding. This is where an organization can be lulled into a false sense of security after several consecutive years of consistent funding. Yet, despite the strength of the relationship, multi-year grants are rarely a renewable source of funding. In fact, I find that foundations are more likely to renew a single year gift, because they are usually smaller and lower risk. Foundations change their priorities often (most as frequently as every three-to-five years), which can complicate renewing multi-year funding if it doesn’t fit into the new strategy.
Hidden Opportunity! Even if you know multi-year funding is hard to secure and keep, there are good reasons to invest in these funder relationships. Through the multi-year application process, your organization becomes more visible to program officers and the foundation trustees. This opens up potential for single year or discretionary grants even if they decline the multi-year proposal. If your organization does secure a multi-year grant, the reporting and stewardship relationship is a good opportunity to educate the funder about your work. The program officer may have your organization in mind for future funding strategies, even if they decide not to immediately renew the funding relationship.
Myth #3: Every organization should pursue multi-year funding.
Truth: Multi-year grants often require more time, resources, and systems to apply for and manage.
Not every organization is prepared to pursue multi-year funding. Single year grants are usually easier to access than multi-year grants. Foundations see multi-year relationships as higher stakes in their overall funding portfolio, so they spend more time vetting the organization and project. This means longer applications, more in-depth project and evaluation plans, and longer decision-making cycles. Organizations spend more time and staff resources preparing the application and for site visits to win an opportunity that has a lower probability of success. Even after the grant is secured, multi-year funding often requires more sophisticated evaluation and reporting to the funder. This is risky for organizations that don’t already have stable sources of funding and well-defined evaluation and reporting processes.
Hidden Opportunity! If your organization has reached a point where you would like to access more sophisticated (and likely larger) funding sources, pursuing a multi-year grant is a great excuse to build your systems and experience. I suggest thinking of any multi-year grant application as a capacity investment rather than a funding source. It will push your board and staff leaders to project your staffing, programming, and growth several years out. This is useful not only for this single grant application, but also to strengthen your vision for other grant applications and conversations with individual and corporate donors. This exercise contributes to your long-term sustainability by connecting the dots between grant seeking, longer term fundraising strategy, and multi-year programming vision. You will be better prepared for all funding opportunities, even if you don’t secure that specific multi-year grant.