In 2021, the Johnson Center for Philanthropy posted an article, “So, you want to start a nonprofit?” by Senior Program Manager Tamela Spicer. The piece, their most-read blog post of 2021, covered reasons why someone might want to create a nonprofit and how to get started.
The purpose of the following article is to present an alternative to anyone who has read that post, as well as anyone who is considering starting their own nonprofit. Nonprofits are a popular way to give back. However, they are not the only option for Founders for Good -- people who want to create something new to make an impact — and many would say they may not be the best option. Giving circles are an excellent alternative that may provide greater impact with lower effort.
Practical problems with starting a nonprofit
When we look at the breakdown of nonprofits across the country, the vast majority are smaller organizations. Two-thirds of nonprofits, 66.6%, have an annual budget of less than $500,000, and nearly 30% have budgets of less than $100,000.
However, the legal structure applied to nonprofits with a $100,000 budget is the same as the legal structure used for nonprofits with annual budgets of hundreds of millions of dollars. In 2006, the IRS implemented a new 990-EZ form for those nonprofits with budgets of less than $50,000 per year to lessen the administrative burden. This was a significant step forward for these nonprofits, as it made it easier for them to file their annual reports to the IRS and continue their operations.
But the initial application process to even start your 501(c)(3), as well as the time it takes for that 501(c)(3) status to be approved by the IRS — once you’ve already spent several months putting together your application — is the same.
And the reality is, many of these nonprofit organizations struggle to survive amidst so many others. There is also a widely adopted belief in philanthropy and nonprofit circles that we don’t need more nonprofits, but rather more collaboration and consolidation of existing ones to be more effective as a sector.
Fiscal sponsorship as an alternative
An alternative for lighter-weight organizing for communities can be seen in the fiscal sponsorship model.
In this model, instead of starting a new nonprofit, a Founder for Good can set up an account with an existing nonprofit. They can solicit, accept, and receive gifts, benefit from the support structures and oversight of the sponsoring organization, and generally act as if they are merely a program under the umbrella of their sponsor and therefore fall under their tax ID status.
Why a giving circle is an impactful alternative
I would like to suggest that, in most cases, a giving circle is a much better way to make a difference in our communities than either of the other two options.
Giving circles provide a more cost-effective model that requires less administrative and overhead work. And in many cases, giving circles better leverage the real skills and assets of a potential Founder for Good while also encouraging community-based collaboration with existing organizations and programs that can lead to healthier communities, mission efficiency, and greater impact.
Just as you would need to start by organizing a board and getting core donors to believe in you and your mission if you were to start your own nonprofit, you would need to do the same when creating a giving circle. The difference is that you would be able to set up a giving circle much more quickly and start making an impact immediately.
In fact, you can set up a giving circle in just a couple of minutes. Modern tools like those we provide at Grapevine and Philanthropy Together’s Launchpad program provide all the features and support you need to build a community and run a giving circle in one place while automating away the administrative, legal, and accounting overhead.
The history and future of giving circles
Giving circles are a grassroots movement that started here in the United States in the early 1980s with deep roots going back centuries and spanning cultures around the world. This movement has already facilitated more than $1.3 billion in donations and engaged over 150,000 donors, and it’s just getting started. The swift rise of this model is increasing and its global reach continues to expand.
The rapid rise of the giving circle movement is exciting, but it’s not rapid enough. Imagine if just 5% of the Founders for Good that are starting the 100,000 new nonprofits every year started a giving circle instead? That’s 5,000 new giving circles per year, which would more than double the number of giving circles in the first year alone! If each circle had an average of 100 members who each donated just $50 per quarter ($200 per year), that would generate $100,000,000 more per year to be invested in communities!
I believe the energy, passion, and determination of Founders for Good are key to solving problems across this country and around the world. I believe it is up to us as a community to make a difference.
I founded Grapevine to power giving circles, so I understand what it means to be a Founder for Good. I understand what it means to feel that drive to create something with your direction, vision, and mission at the helm. For those reasons, I don’t want to tell any potential Founder for Good not to build something. On the contrary, I am sending out a call to Founders for Good everywhere to build.
We need you. We need your energy, your strategy, your dreams, your goals, your experience, your passion, your seeds of discontent, your communities, your stories, your brilliance, and your unique insights. We need all of it. And we need it now. Don’t say, “next year.” Be a Founder for Good and join the movement today.
This post was originally published by the Dorothy A. Johnson Center for Philanthropy on September 27, 2022. See the full post here.