Why Nonprofit Fundraising is Broken

I recently sat down with my friend Rhea Wong to discuss the future of fundraising on her excellent podcast, Nonprofit Lowdown. We dug into how and why the current system of fundraising is broken and where we go from here. Go ahead and take a listen to our full conversation here.

Here are a few highlights of our discussion.

The Problem with Transactional Fundraising
For decades the nonprofit sector has been devoted to a transactional model of fundraising. You know exactly what this system looks and feels like: the constant barrage of email and direct mail requests that make donors feel unseen and unheard. And you can also feel the results: high donor fatigue and even higher staff burnout. A system created aiming for a 3% response rate is fundamentally broken.

The system was created decades ago to sell magazines and catalogs. It morphed into direct mail fundraising and later email fundraising. It’s a constant, spinning hamster wheel that orgs jump on because, well, everyone else is on it.

But that’s just the beginning of the problem.

The Leaky Bucket
Lots and lots of new donors need to be added to the donation hamster wheel because very few of them make a second donation (even though the system was created to live off of those renewals.) The reality is that orgs lose money on acquisition, and then lose over 75% of those new donors before Year 2. So, what's the response? Do it all over again. Orgs are caught in this cycle of very expensive acquisition with no longevity of these donors. This is the leaky bucket.

The leaky bucket, and resulting internal panic, is exhausting for development staff who have extraordinarily high burnout rates.

Embracing AI to Humanize Fundraising
Rhea says on the podcast, “Let the robots be robots. Let the humans be humans.” I couldn’t agree more! I am inspired every day here at Every.org by the ways advanced technology is transforming fundraising and engagement with donors.

AI should take over the administrative heavy lifting, giving us the chance to focus on what's truly important, connecting with our supporters. By automating the mundane, we can dedicate more time to understanding our donors' needs and values, which is crucial for long-lasting relationships. Can you imagine freeing up 10-20 hours a week? This new time, the dividend of time, can now be spent picking up the phone, going out to lunch, talking to donors, and getting to know them. Hearing them tell their stories. Now we’re talking! Literally. That gives us a much better chance of increasing donor retention rates.

How to Experiment With Relational Fundraising
It’s hard to pivot from being transactional to relational in your fundraising. And it won’t happen overnight. So start small. Here are three ways to begin:

Community-Building Events: These are small-scale, informal gatherings like coffee meetups for donors within the same zip code. These are not fundraising events but rather opportunities for donors to connect over shared interests, strengthening community ties and fostering a sense of belonging.
Storytelling and Feedback Sessions: We all need to leverage our digital platforms to share more personal, impact-focused stories from our community and invite donors to share their feedback. This two-way communication not only informs our strategies but also makes our donors feel valued and heard.
Donor Empowerment Projects: By inviting donors to engage directly in problem-solving sessions, organizations can transform them from passive contributors to active participants. Why not ask donors to offer insights and solutions, deepening their investment in our work and our mission?

A Vision for the Future of Fundraising
Speaking with Rhea reaffirmed my belief that the future of nonprofit fundraising lies in our ability to be more human-centered. By leveraging technology wisely and prioritizing ethical practices, we can transform the way we engage with our supporters and, ultimately, how we achieve our missions.

It’s time to get off the hamster wheel! Let me know what you think of the podcast.