New startup (minimally funded) nonprofits cannot solve systemic issues. They can raise awareness around these issues. They can pilot new and innovative ways to address them. But longevity is nearly impossible without a committed capacity-building fund and/or a capital engine.

Philanthropy creates harm to these new nonprofits by funding them without also creating strong pathways to sustainability. Especially for founders of these non-profits who are people from undercapitalized networks, these people are often those with the greatest passion and are taking the greatest financial risk.

At this point, philanthropy is an industry mature enough—and one that has been through enough cycles—to understand what’s happening. Instead, it cheerleads and funds the insanity merry-go-round of launching new grant cycles, seeking new grantees, and outfitting them with minimal funding. In this way, the philanthropy industry benefits from cheap and exploitative labor.

They stop short of seeing the full picture and congratulate themselves for providing seed funding, but then wonder why things don’t become sustainable when they cut off the fuel mid-flight.

I do think seed funding and funding for new and innovative approaches are necessary. But what’s often missing is the infrastructure to help these nonprofits go from startups to institutions.

There is no guidance—and often no explicit warning—that grant funding is temporary, and as foundation priorities change every 3–5 years, so do their funding priorities.

Large foundations should not launch these programs unless they are committed to helping these nonprofits move from seed funding to building their first capital engine or capacity-building fund.

They often convene nonprofits to help them collaborate with each other but do not provide funding to help nonprofits truly create a collaboration plan.

It is even rarer that they convene these nonprofits with other anchor funders—or, better yet, with other nonprofits that have successfully reached the institutional stage (and have a capacity-building fund or capital engine).

The most honest advice I received as a nonprofit founder came in year three of our operations. I asked a mentor who was also a donor for advice on becoming a sustainable organization.

His advice was that we had to build an endowment fund. He suggested that we raise $30M to establish our permanence. He even connected me with another nonprofit where he served on the board and had watched their transition from a startup nonprofit to one with a $30M endowment.

I remember thinking this was good advice, but it felt impossible to me.

As a three-year-old organization, we were still in survival mode. We did have access to well-intentioned mentors like him, but we didn’t have a financial governance board (we were under a fiscal sponsor). We had barely raised $500K, so the thought of raising $30M was daunting. And if I’m being completely honest, I struggled (and still struggle a little) with the hangover of growing up without a lot of financial resources.

At that time, I had just learned what an endowment was—and it meant raising a large sum of money just to store it away, with the interest on $30M financially supporting the organization. This seemed foolish to me (and still does, to some extent): that I would have access to that much money and simply store it away. I had family members who couldn’t pay their rent. I didn’t want to be that person (although I was) sitting in rooms networking, drinking wine, talking about millions—only to later have conversations with a family member about $200 to cover a rent gap. These dual (and contrasting) realities can take a toll on one’s mental health.

Six years later, I still ponder this advice—just with less naïveté about capital markets and better disassociation skills. But I’ve digressed. Re-reading my first paragraph to re-anchor the point of this post… okay, so yes:

How do we help young nonprofits practically cross the chasm to sustainability, instead of just waving it over their heads in grant applications—asking them how they plan to continue programming after the grant period ends?