Snowballing Your Endowment


 

Feldsteinco LLC has created a new programme organized around helping you snowball the growth of new endowments - A common sense approach to raising significantly more endowment money.

 

Institutions can greatly enhance their impact by continuously increasing their endowments in a perpetual solicitation programme. We know how to help institutions efficiently and cost effectively secure new endowment gifts. Fresh, 21st century fundraising thinking is needed if you want to see your endowment snowball.

 

 

Your institutional vision prospectus needs to set forth with emotive language what endowment growth will mean to your institution and its mission and unique impact on society (We are not talking about basic operating needs. This is not about the electric bill. The compelling endowment rational(es) must be ferreted out and eloquently expressed. Donors establishing or augmenting endowment funds want their gifts to make something important happen that would not occur otherwise).

 

As Warren Buffett has observed, “Life is like a snowball. The important thing is finding wet snow and a really long hill.”Because of the time value of money and the dramatic power of compounding, endowment growth should not bedelayed. It is helpful to take a long-term perspective and, like Buffett, think of every million dollars, pounds, or Euros as ten million someday.

 

 

 

Biases and fallacies

 

In over 40 years in the field of fund-raising, I have come across a number of biases and fallacies concerning the raising of endowment funds. Here are a few:

 

  • Endowment is the hardest money to raise”. This bias may have some (relative) basis in reality, but the important point is that even if true, it is really meaningless. The relevant first questions for any institution are:
    1)  How much does it need more endowment to advance its mission
    2)  Who are its best prospects? 

The ease or difficulty of raising endowment is really beside the point. Even if only a few good prospects can be immediately identified, they may well be candidates for large endowment gifts.

 

  • Endowments are vitally important because they provide a predictable income stream”. While endowments do in fact provide a predictable income stream, their true importance lies in the fact that they provide the resources for institutions to do new and unpredictable things.  Such new and unpredictable things can range from establishing major new programs or initiatives, to recruiting new top talent to new or existing positions, to mounting extraordinary productions or exhibitions, to providing new access to underserved groups, etc.

 

  • Only large endowments matter”. Obviously, where money is concerned, more is preferred to less. But the main point is that endowments by their very nature grow in two ways:

1)  Through additional gifts to established endowment funds

2)  Via investment performance. 

 

Institutions need to motivate constituents to establish endowment funds so they can be augmented in the future through both outright and planned gifts. The key is to get the endowment ball rolling and engage donors so they are motivated to keep increasing their funds.

 

 

 

Endowment Gifts VS Building Fund Gifts

 

Nailing endowment gifts should not be thought about in the same way as securing capital gifts for buildings.

 

In building and programmatic growth campaigns, Feldsteinco is a great believer in focusing on large gifts—what we call “grand slams." Our mantra is “swing at the best pitches if you want to hit grand slams”. When it comes to endowment fund-raising, as suggested above, one should think about things differently. Yes, it’s true the primary focus still must be “grand slams.” But there are very good reasons to focus simultaneously on smaller endowment gifts as well, contributions in six and sometimes even mid-five figures. There may well be more good endowment prospects than you think there are.

 

 

Capital gifts are finite. A contribution to a building fund is made and the institution utilizes the money. The donor may go on to make a second or third gift to the same building project, but, in the donor's mind, those funds are also expended - they are used to build the building.

 

 

Endowment gifts on the other hand are infinite. The gift is made and the principal is invested. The funds grow. A $50,000 endowment gift can one day be worth $500,000 (or more). In a building campaign, an institution has to think short-term to get the building paid for. With an endowment fund, the institution needs to think long-term. Obviously, you want the initial endowment to be as large as possible and endowed positions and programmes, of course, have specific price tags. But because an endowment will grow, the financial ROI on an endowment gift is greater than the comparable ROI on a building gift of the same amount.

 

 

Financial services firms understand this, which is why they get even more excited about seeing new investment accounts than new checking accounts.

 

Engaging Donors

There are other very good reasons why smaller endowment gifts should be sought and endowment solicitations not be left to approaching just the very rich:

 

 

There is also the oft misunderstood matter of “cultivation.” The reality is that it is much easier for an institution to cultivate donors than prospects. The best way to engage someone is to first get that person to make an initial gift. Once people have given, they feel ownership in an institution. Once they feel ownership, they are more likely to want to get engaged, in part to get their money’s worth.

 

Major institutions must be bold and imaginative in raising new endowment capital. Since the 1980s, significant growth in endowment values has been fueled at times much more by investment gains than by new gifts. The process of recapitalization should obviously not be primarily left to the asset management side alone. Too often there are too few endowment donors and institutions make the mistake of thinking endowments are just for the ultra rich.

 

I invite you to talk with us about whether your institution is in the position to enter in to our Endowment Growth Programme. Many institutions wanting to raise new endowment gifts need to expand their professional resources and talent and outsource much of this work so they can administer and create change. Feldsteinco may well be able to help you grow your endowment by simultaneously securing large endowment gifts and at the same time increasing the number of endowment donors above a minimum gift threshold set by you.

 

 

 

We Can Help You

  • Be even more action oriented and assure that more new endowments are secured on an ongoing basis

 

  • Implement executive and volunteer processes to cultivate and solicit new endowments with snowballing momentum

 

  • Establish consensus on priority endowment prospects and develop solicitation and engagement strategies

 

  • Creatively communicate endowment opportunities to excite donors and develop and price the “donor products” to attract and recognize major new endowment gifts

 

  • Set up new and distinctive recognition clubs for endowment donors

 

  • Establish your endowment growth horizons, setting forth benchmarks for new endowment gifts over the next 18 months, 5 years, and 10 years

 

  • Guide your engagement with donors who have previously established endowments and measure the effectiveness of your interactions going forward

 

  • Develop protocols and reports to donors on returns and expenditures and impact from the annual draw on their endowments

 

 

 

Now is the time for bold thinking. These times call for innovation and a discriminating, distinctive ongoing programme, by no means always requiring a formal endowment campaign. Success will hinge on creativity, urgency and action: what you communicate, whom you solicit, when and how you ask for the gifts. The result can be highly cost effective major new endowment growth for your institution, a programme that snowballs and pays for itself right away.