Fundraisers Bet on Creativity, Private Investors, and Young Donors After Mixed Results in 2013

As charities plan their 2014 fundraising approaches, the lessons from a mixed year-end giving season are exerting a big influence: Creativity can help overcome a still-sluggish economy, and the search for new and younger donors is more urgent than ever.

Interviews with more than 70 groups found that a significant share raised more in the last quarter of 2013 than they had in year-end campaigns run in 2007, before the financial crisis erupted and sank holiday drives in 2008 and afterward.

But even the groups with robust results continue to worry that the year ahead could be tricky.

Organizations that did well raising money from the affluent fear that the stock-market surge propelling many donations last year will fall off.

And new government cutbacks put pressure on a growing number of groups to expand private donations.

Adding to the challenge for many social-service groups: More people are seeking food, shelter, and other aid after Congress ended benefits for the long-term unemployed last month. While lawmakers may reinstate those benefits for another few months, charities fear that growing demand for services in 2014 will outstrip any increases in giving during recent months.

North Carolina, which eliminated its long-term unemployment benefits last summer, offers a glimpse of what may be in store for many social-service groups this year, says Alan Briggs, executive director of the North Carolina Association of Feeding America Food Banks.

He says that from July, when the benefits were cut, through September, the demand for assistance at food pantries, soup kitchens, and other groups that feed the needy in the state rose by 10 percent, with another 10 percent increase on top of that by December.

“It is becoming a geometric increase in demand. We are ground zero,” Mr. Briggs says. Even with some big gifts to meet the new needs, such as $500,000 from the Food Lion grocery chain, he says, “there is the feeling we may be losing ground.”

In describing his concerns, Mr. Briggs cites a worry that many other social-service leaders also voiced: The uneven recovery is hiding the strain many organizations feel from a surge in need among the poor.

“North Carolina is a snapshot of the haves and have-nots,” says Mr. Briggs. “We have big banking, the Research Triangle, and a lot of tourism. We see ourselves as a great, booming state, but we have food insecurity among the highest in the nation. This is a jarring image of what’s happening: good news on some fronts, and grim news in others.”

Feed Our Vets, which provides meals to former military members and their families in upstate New York, also worries that things could grow worse after seeing a small uptick in giving at the year’s end. Bill Morgan, the charity’s development director, says demand for help is higher than in years past. “We even have active-duty military members who need food assistance,” he says.

Haves and Have-Nots

Perhaps nowhere is the contrast between the haves and have-nots more apparent than in the strong donations to donor-advised funds offered by investment companies. After a nearly 80-percent increase in donated stock and other contributions to its donor-advised funds from January through November, Schwab Charitable saw a slowdown in December but the total was still up by more than 30 percent for the year.

Among the other signs that 2013 produced healthy year-end contributions:

• Charities of all sizes reported another year of double-digit growth in online giving. The fundraising-software company Blackbaud found that online donations to 6,000 charities grew by 12 percent in December alone. Meanwhile, Network for Good, which processes online donations for more than 14,000 charities, reported a 16-percent increase in online gifts in November and December over the same two-month period in 2012. The average gift also rose from $157 to $172.

• GlobalGiving, an online site that enables donors to write a check or make an online gift to nonprofit groups and grassroots projects around the world, raised $7.2-million in November and December, up from $5.1-million in the last two months of 2012.

New Approaches

Some organizations experimenting with new approaches to getting money are also celebrating year-end success.

The Center for Employment Opportunities, which provides jobs to men leaving New York prisons, ended December with an infusion of $13.5-million in private investment funds. Raised over six weeks in November and December, the money will be used to expand the charity’s work, helping 2,000 more men over the next five and a half years while also earning a return for investors.

The deal is the latest example of the growing popularity of “pay for success” bonds that attract private investors to work with government and nonprofits on projects that over the long term help needy people thrive and reduce the burden on state and federal agencies.

Social Finance, a Boston charity now pursuing such deals in a dozen states, approached the center to help it work on the deal. Tracy Palandjian, Social Finance’s chief executive, says the approach is a good way to channel money that neither philanthropy nor the government has.

The program, which will repay donors if the center meets specific goals for helping former inmates get jobs and stay out of prison, attracted money from several foundations, including the Pershing Square Foundation, financed by William and Karen Ackman, and the Laura and John Arnold Foundation. The better the results the charity achieves, the more investors stand to earn, up to 12 percent.

To sweeten the deal, the Rockefeller Foundation is offering a $1.3-million guarantee: If the center fails in meeting its goals, supporters will get back 10 percent of their investment.

If the program succeeds, Social Finance estimates that New York will save $7.8-million, largely in reduced prison costs, after paying the investors back.

Donors as Fundraisers

Most other nonprofits aren’t attracting such high-profile money from government or donors.

Mouse, a New York nonprofit that teaches elementary and secondary students leadership skills by getting them involved in technology projects, expects to lose about $200,000 this year from its $2.2-million budget. The cuts, coming before Mouse’s fiscal year ends on June 30, are the result of shrinking support from the city and corporations.

“The institutional fundraising climate is very difficult,” says Mike Capobianco, Mouse’s director of development. “This is my 10th year, and it becomes harder and harder to get money.”

Anticipating the cuts, Mouse replaced a traditional year-end fundraising appeal, which drew donations mostly from board members, with an online “My Mouse” campaign. First, it recruited 15 “Mouse Champions,” who agreed to contact people in their online networks with customized solicitations, and then sent them weekly communications they could tailor to email, Facebook, Twitter, Instagram, or Vine.

The drive, which ends this month, “has been hugely successful,” says Mr. Capobianco. While he declines to say exactly how much “My Mouse” has raised, he says it’s already collected more than 1,000 times as much as the old appeal.

Thinking Long-Term

A growing number of charities are focusing on the long term, rather than worrying so much about annual goals, in efforts to attract young donors.

At the Jewish Community Alliance of Southern Maine, the economic downturn was “particularly disastrous because our longer-term, older donors lost significant wealth, and they do not have the same capacity,” says Emily Chaleff, executive director. “Those that have regained the capacity are looking around and saying, ‘Who else is giving like I gave? Shouldn’t someone else be doing this now?’”

“We will eventually find donors who can reach the levels we had previously,” she says.

To get people in their 30s and early 40s involved, the Jewish Community Alliance started a monthly lecture series it hoped would appeal to them. While the charity did receive $3,500 by asking for donations when people signed up for the series, it hopes to attract much more when donors can eventually afford bigger gifts.

“We may not see the financial fruits for quite some time,” Ms. Chaleff says. “It’s a long-vision project.”

The Jewish Federation of San Diego County, which expects annual gifts to be flat this year, has doubled attendance at some recent events aimed at young donors by featuring famous speakers and getting foundations to underwrite the costs, allowing it to eliminate entry fees of up $100 per person.

For example, its “Men’s Event” with the basketball legend Magic Johnson was sponsored by a family foundation and drew 850 people, up from 250 at similar past events. In November, Michael Oren, former ambassador to Israel and a best-selling author, drew more than 900 people. More than 40 percent of those attending both events were under 40.

“The monies lost in 2007 may never come back, so we’ve invested in the next generation,” says Aaron Truax, the federation’s communications director. “The dividends will be in years to come.”

Tangible Results

Attracting young people—as well as many other donors—also depends a great deal on showing potential supporters results, charities say. The Oregon Humane Society, still tallying year-end fundraising returns, expects 2013 donations to be up by 8 percent, to $750,000, after efforts to make both its mission and fundraising efforts more tangible.

One holiday display in its office building, for example, added an ornament for each gift the charity received in November and December. The larger the donation, the bigger the ornament, including two commemorating gifts of $10,000.

Another display, the “Donation Station,” encouraged visitors to the charity’s animal shelter, which can draw several hundred people on holiday weekends, to make a gift on the spot by check or credit card.

And for the first time last year, the charity offered an appeal aimed at companies called “Snuggle Express.” Companies that made a gift to the charity, or employees who made a joint donation, got a reward: The charity brought animals that were up for adoption to their offices to play. Gifts of $100 bought a 15-minute visit, while $1,000 earned an hour.

The last-minute effort, which replaced a fundraising event that fell through, raised $10,000 from 49 businesses, says Gary Kish, director of development. A bonus: Several of the puppies and kittens were adopted the weekend after the visits, when participating employees showed up at the charity’s shelter.

Greater Understanding

Other year-end appeals provided a fundraising boost by broadening donors’ understanding of issues at the center of a charity’s mission.

The Los Angeles chapter of the Alzheimer’s Association focused its 2013 year-end appeal on the diversity of people with the disease, featuring people who are relatively young as well as black and gay couples. That came after strong success with a 2012 year-end appeal detailing how young children are affected when their parents or grandparents have Alzheimer’s.

“Most people equate this disease with an aging population, but we thought it would be compelling to tell true stories from a child’s perspective,” says Susan Galeas, the Los Angeles chapter’s chief executive. “We got feedback that this was the best campaign we’d ever done.”

Gifts to the 2012 direct-mail appeal jumped 62 percent over the previous year, and some donors said the print appeals motivated them to give online.

“We are trying to increase awareness and revenue,” says Ms. Galeas. “This disease is a family disease, and it has no socioeconomic, age-specific, gender-specific, or political boundaries. Moving forward, we want our fundraising to reflect its wide-ranging impact.”

Debra E. Blum and Raymund Flandez contributed to this article.