The Funding Infrastructure Trends to Watch in 2020

2020 presents the opportunity for a new infrastructure build for the nonprofit sector. After all, it is the beginning of a new decade. To that end, I wanted to share my thoughts about the funding infrastructure trends to watch in 2020, informed by both my experiences with and observations of the sector.

Yes, there are such things as infrastructure trends. They tend to indicate how the sector is building itself internally, organization by organization and ecosystem by ecosystem to advance its programmatic work.

As I have explained previously, infrastructure is not just processes and systems. It also takes into account the frameworks in which individuals act and engage within the sector; how organizations provide services and awards within the sector; and, of course, how these same individuals and organizations work together to effect change.

We should pay close attention to these trends because they inform the way we should build infrastructure in the sector; they highlight areas of strength and challenge and indicate areas of improvement, which provide critical information in creating a much stronger and resilient sector.

I also think trendspotting is exciting. It is the equivalent of taking a scan of the sector, if you will, from stories shared by different actors in the sector, both individuals and organizations; from their independent and collective actions in different environments; and from analyzing the effects of all of those things. It is then identifying patterns from each of those pieces that, when put together, tell a compelling story about the strengths and challenges of the sector’s infrastructure.

It is intriguing to know where we can go next by simply paying attention to what is and is not happening and listening to what is and is not said within the sector.

The trends I highlight in this article are gleaned from my engagements and work in the sector; observations of the work occurring in the sector, including the work of social impact organizations and for-profit companies engaged in social impact projects; and conversations with diverse clients who are philanthropists, leaders of philanthropies and fundraising nonprofit organizations, and operations, grants management, legal, and programmatic leaders within the sector.

These trends are based on analyzing patterns of a diverse set of individuals and organizations operating within the sector, and thus, I believe, truly represent the direction of infrastructure in 2020 and beyond.

I have identified the top trends that have caught my attention, are directly impactful to infrastructure, are sector wide, and I think will be disruptive for the sector. I also identify what these trends mean for the sector at large and the questions and implications they raise for the sector.

Below are the first five infrastructure trends that we think you should watch in 2020:

Donor collaboratives. We have noticed that many donors increasingly do not want to invest or contribute individually and instead would like to pool their resources to effect change and scale their impact. In previous years, there seemed to be a larger push around individual efforts and contributions. More recently, however, donor contributions are being made collaboratively, and the “bet” is being placed on the joint impact that donors can have collectively. Interestingly, in the past, we saw funders urging their grantees doing similar work to work collaboratively; encouraging them to work together on projects and in key funding areas after noticing duplication of efforts. This sometimes forced encouragement often had varied results and seldom resulted in lasting partnerships. On the contrary, these donor collaboratives are enduring and are attracting donors that otherwise do not have prior relationships with each other. And the recipients of these collaboratives benefit with increased, sustainable funding and strategic alignment with multiple donors funding their work. This increase in donor collaboration indicates to us that donors are (i) understanding the need for strategic alignment and are acting on that need; and (ii) realizing that scaling impact for many progressive issues requires formal collaboration and sharing of ideas.

This trend raises sector-wide questions about innovation. Specifically, what is the impact on grantees’ innovation when engaging with a bloc of donors instead of individual donors that may provide more flexibility and space for creative problem solving? And is there an incentive to innovate at all for donors or grantees when the formal collaborative is created with predefined funding criteria? Finally, what impact does this collaborative infrastructure have on diverse organizations that were not initially on the radar of the various donors who joined the collaborative and are now moving together and creating greater influence in the field about decisions around issues, projects, and potential grantees?

Ecosystems. Almost gone are the days of impact being primarily seen or curated through singular, independent vehicles or entities. We have noticed that when nonprofits and philanthropies form or as they assess their ongoing operations, they are realizing that a singular vehicle does not, by itself, accomplish their often multi-dimensional missions and goals. Accordingly, we have seen a significant increase in U.S. public charities and private foundations becoming part of social-impact ecosystems that consist of other charities and advocacy-focused organizations and even for-profit companies. This ecosystem approach indicates to us that many individuals and organizations are embracing ecosystem infrastructure as a sophisticated means to achieving their overarching vision of social impact and their goals instead of fearing that infrastructure can only create unnecessary bureaucracy.

This ecosystem approach raises questions for the sector about accountability. For example, how will these ecosystems impact the transparency that the sector has grown to expect as part of a nonprofit organization’s accountability? What does it mean for ecosystems to act collectively in approach and brand, particularly when each of those entities may have its own mission, goals, and approach? Can or should each entity be able to maintain an independent identity while being part of an ecosystem?

Corporate partnerships. We have seen an increase in partnerships between corporate funders and nonprofit organizations, both in terms of resource partnerships and funding relationships. Accordingly, the gap between private and nonprofit sector interaction is gradually diminishing and collaboration is on the rise. The space between the sectors’ interactions and communication still exists, but we have noticed a concerted effort to create relationships between for-profit companies and nonprofit organizations. This increase in partnerships indicates to us that nonprofit organizations and for-profit companies are increasing their alignment to better address social issues with wide-ranging impacts for global communities and thus for both the for-profit and nonprofit spheres. As a result, many nonprofit organizations are seeking or receiving funding from corporations in addition to their traditional non-corporate foundation funding. Many of these corporations have not previously engaged with the nonprofit sector and thus have different expectations than many nonprofit organizations are used to. These differences in approach and expectations then surface in the funding application process, reporting, and evaluation.

This uptick in corporate partnerships raises questions for the sector that are focused on funding frameworks. For example, will this increase in corporate partnerships and funding impact the push towards general support funding as many of these relationships will be new and the corporate partners and funders may come to the sector with expectations that may not initially align with the general support framework? Specifically, will corporate partnerships and funding result in a reduction or increase in these and other types of flexible funding awards? Will these funders and partners create new funding hybrids that the sector has not yet seen?

Risk management. Both “risk” and “risk management” are earning different reputations in the sector. Over the years, the definition of risk has evolved from a fear to consideration of a factor that impacts overall success; and the definition of risk management has evolved from restriction to supporting activity based on a dynamic understanding of the actor’s operating environment. The concepts of risk and risk management are being reframed from avoidance to become more about ensuring that key decision makers have all of the information they need to make informed decisions. We are seeing risk management surface in funders’ thinking about the ways in which the grant application and process can share information between grantee and funder; and funders’ approaches to the underlying relationships they have with grantees to ensure that information is being shared between them in a sound, consistent way to, again, inform decisions within the funding relationship. Therefore, this evolution in risk management indicates to us that risk has become much more multi-dimensional for the sector and thus the considerations involved in traditional risk management have certainly become more sophisticated. Risk management in 2020 thus requires an innovative infrastructure to incorporate different perspectives into funding decisions and create a way for diverse stakeholders to effectively receive and share those perspectives to be informed about all aspects of a funding decision.

This trend raises sector-wide questions about alignment. Specifically, how do we align the different approaches to risk management across the sector to ensure that grantees and funders are clear on how to effectively define and manage risk, particularly when the very concept of risk varies across countries, regions, and cultures?

General support. I know you are likely expecting me to say that we are seeing an increase in general support in 2020. Although that statement is true, that part of this trend is not what I want to share with you. Although the general support tide is rising, so to speak, it is not rising nearly as quickly as the conversations themselves about general support and the need for flexible funding. Now, you may see the fact that general support funding is not rising as quickly as the conversations about funding as disappointing, but, on the contrary, I find this increase reassuring primarily because of the number and quality of the conversations. In previous years, conversations about general support were rarely raised, one-sided, and clumsy. Now, these conversations are occurring within foundations, with funders, and with grantees, both individually and collectively. They are also more sophisticated and thoughtful, and there is a mutual push between funders and grantees to better understand what general support means for an organization. And the focus is on ensuring flexibility. This increase in general support conversations indicates to us that an underlying appreciation for an organization’s sustainability is emerging in the sector and both funders and grantees are thinking about how to create better flexible funding awards that recognize organizational and other costs.

This trend raises questions for the sector that focus almost entirely on traction. Specifically, when will these conversations gain more traction and translate into a sustained increase in general support funding so that the organizations that need it can be supported? How does the shift to general support and more flexible funding impact smaller and leanly staffed funders that may want to provide additional flexibility to their grantees, but may not have the resources or staff to explore how they can successfully transition from solely project-based funding to more flexible funding, particularly to new grantees?

These trends are all exciting and meaningful. They speak to a sector that is not afraid of course correcting and of innovating. And we will see just how they each unfold and evolve in 2020.

In Part 2, I will share the remaining key trends we are seeing for 2020 and the near future, many of which focus on the people, who, as we know, are the core of all infrastructure.