Venture Capitalists Are Changing the Capital-Campaign Rules, Fund Raisers Told

The growing number of newly wealthy entrepreneurs and venture capitalists who have made their fortunes from high-technology companies are forcing charities to change the way they run capital campaigns, said a speaker at last week’s annual conference of the National Society of Fund Raising Executives here.

Marianne G. Briscoe, a San Mateo, Calif., fund-raising consultant, said charities may need to discard traditional campaign customs, such as the usual approach of recruiting volunteers to chair the campaign and starting the drive by raising a small number of big gifts intended to inspire other donors. “The old and new ways are colliding,” she added.

Many new millionaires and billionaires, Ms. Briscoe said, have little experience in philanthropy and are frequently uncertain how much they can afford to give through stock in their companies and other means. That’s the reason they are often unwilling to provide the large initial gifts that fund raisers have come to rely on in capital campaigns, she said.

Instead, she said, such donors are more likely to support a campaign as a venture capitalist would finance a company: with a first round of support that may be followed by a second, if conditions look promising.

“They won’t start with a million dollars, and their gifts are going to be made in increments,” said Ms. Briscoe. “Resoliciting donors used to be a sign that a campaign had failed to meet its goal. Now we’re always working on add-on gifts.”

Entrepreneurs and venture capitalists, Ms. Briscoe said, are too busy to chair a campaign for the entire drive, especially now that capital campaigns have become several-year endeavors. To get such donors to participate at all, fund raisers are turning to alternatives: doing without a volunteer chair until late stages of a campaign, forming teams of people to share the responsibility, or allowing several people to serve as chair in sequence. Even though many fund raisers believe that a campaign cannot proceed without finding the perfect volunteer leader, she said, “you may have to back into getting a chair.”

Entrepreneurial donors also demand hard facts, financial data, and good statistics in deciding whether to support a campaign.

Ms. Briscoe recommends that charities change the name of their campaign case statement — in which a charity lays out a compelling reason why contributions are needed — to “campaign prospectus.”

She said such a document should include detailed financial data on the institution as well as the programs to be supported by the campaign. Entrepreneurs, she added, will look closely at such data, much the same way a venture capitalist scrutinizes new companies by looking hard at their finances. “Prepare to be dissected,” said Ms. Briscoe.

She offered other characteristics about entrepreneurs that affect campaign fund raising: They want few or no meetings and short-term involvement, and they do not respond well to lengthy presentations or efforts to train them in solicitation methods. And, although they have little time, she said, many entrepreneurs demand a hands-on role with any charity they support, and “they want to shake things up with energy and strategy.”

As a result, said Ms. Briscoe, they do not respond well to endowment-building campaigns.

“They want no banking of assets,” said Ms. Briscoe. “They’d rather put them to work.”

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Charities are beginning to raise respectable sums online, but few groups are doing an adequate job of thanking Internet donors or taking other steps to build relationships with them, said John Groman, cofounder of Epsilon, a Burlington, Mass., direct-marketing consulting company.

Mr. Groman described a survey conducted by Epsilon, in which the company visited the Web sites of 40 well-known charities, such as the American Cancer Society, and donated $25 to each of them in November of last year. The charities in the survey were given an online credit-card gift wherever possible.

Of the 40 organizations, 23 were able to accept such gifts, while the remaining 17 asked online visitors to give by another method, such as printing out a form and mailing it back to the charity with a check.

Of the 23 charities that used their Web sites to solicit credit-card gifts, 17 acknowledged the Epsilon donation online instantly, but six never responded at all, said Mr. Groman. And among the charities that were sent a check in the mail after a visit to the Web site, only six thanked the donors. The researchers have yet to hear from the remaining 11 non-profit organizations.

All told, only 11 of the 40 charities in the survey had both thanked the donors and sent them a subsequent solicitation or any other communication by e-mail or regular mail within 90 days of their gift.

“Right now, even though we might have the solicitation capability on the Internet, we have low customer-service levels,” said Mr. Groman. He said that, to make electronic fund raising work, charities must do a better job of immediately acknowledging online gifts, gaining donors’ permission to send them additional e-mail information, and promptly sending them follow-up communications and appeals via e-mail.

Many charities simply collect donors’ e-mail addresses and never use them, said Mr. Groman. He said that one of Epsilon’s clients, Covenant House, the New York-based shelter for runaway youth, has found effective ways to both capture e-mail addresses and use them to build relations with donors. For example, on direct-mail forms that accompany gifts, the charity has begun printing the e-mail address of Sister Mary Rose, a nun who serves as the charity’s leader, and inviting donors to e-mail her. In other cases, donors are asked to provide their e-mail address if they would like to receive a daily prayer online.

Charities need to concentrate on building such basics into their Internet operations, Mr. Groman said.

He also suggested that charities make information about giving more prominent on their Web sites.

In the survey of charities, Mr. Groman said, he found “there are too many clicks required to get to the giving page. It looks like the communications department is controlling the Web sites, not the development office. That needs to change.”

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The growing use of the Internet prompted the society to announce at its meeting here that it has set up a special committee to focus on the ways that online communications are changing fund raising.

Among the issues to be examined: how best to insure donor confidentiality and whether transaction fees charged by companies that help charities process online credit-card gifts and handle other aspects of fund raising are reasonable. Officials here said that such companies are starting to make big inroads into the fund-raising field; for example, 32 dot-com companies paid to exhibit their products and services at this year’s fund-raising conference, up from only one last year and zero the year before.

At the meeting, the society also announced that it would form a committee to recruit more members of minority groups into the fund-raising field.

The committee will be created jointly with the American Association of Fund-Raising Counsel. While the fund-raising society has had its own diversity committee since 1986, the new panel will give particular emphasis to the fund-raising consulting profession where officials said minorities are especially scarce. While no studies have been conducted about the number of minority consultants, less than 5 percent of fund raisers overall are from minority groups, according to the society’s most recent survey of its 22,000 members. The committee, which will begin holding monthly meetings in May, plans to consider a range of strategies to attract minorities into fund-raising consulting jobs, including new internship, mentor, and recruiting programs.

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The next time the society holds its annual meeting, it hopes to be operating under a new name. Conference participants were asked to submit written suggestions on which of three new names they would prefer: Association of Fund Raising Executives, Association of Fund Raising Professionals, or Society for Fund Raising Professionals. The society says it wants to drop “national” from its name to reflect the growing number of members it is attracting from outside the United States.