Inside Philanthropy

Go beyond 990s.

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Philanthropy: A Primer

Inside Philanthropy offers a series of brief “explainers” to increase your knowledge about the basics of philanthropy, defining key terms and elucidating important debates to help you navigate the jargon and become a more informed, more effective philanthropy or fundraising professional.   

Different Types of Philanthropists 

Who gives philanthropically? A wide range of individuals and organizations make gifts and grants for nonprofits. Professional fundraisers and development departments often distinguish between two main categories: institutional funders and individual donors.  

Institutional Funders  

Institutional giving refers to philanthropy conducted by private as well as public organizations including foundations, corporations and the government. Foundations are nonprofit organizations that give money, usually in the form of grants. There are a few different types:

  • A private foundation is usually funded by a single individual or family. This includes legacy institutions you may have heard of, like the Ford Foundation and the Rockefeller Foundation; massive entities funded by living donors like the Bill and Melinda Gates Foundation and Bloomberg Philanthropies; and lots of small and mid-size foundations that may or may not have a public profile. 
  • A community foundation, on the other hand, is funded by many donors and governed by a board of directors that reflects the community. The classic community foundation is geographically based, like the Brooklyn Community Foundation or the Grand Rapids Community Foundation. There are also identity- or issue-based community foundations, such as the Stonewall Community Foundation, which was founded by and for the LGBTQ community. Some community foundations have relatively small amounts to give, and others, like the Silicon Valley Community Foundation, have assets in the billions. 
  • A corporate foundation, also known as a company-sponsored foundation, gets its money from a for-profit business — for example, the Walmart Foundation or the Wells Fargo Foundation. 

At the core of every foundation is an endowment, or a pot of money that has been set aside for charitable giving. Every year, a private foundation has to spend at least 5% of the value of its assets on grants and core operating expenses. The rest is invested.   

Many foundations are set up to exist in perpetuity (basically: forever), but they can alternately be designed to give away money at such a pace that they are spent down within a specific period of time.  

Individual Donors

Individual giving refers to philanthropic gifts made directly by an individual, couple or group of individuals. Instead of establishing a foundation, some individual donors simply make donations to nonprofits they want to support.

  • The term “major donor” is often used to describe someone whose gifts make a substantial impact on the budget of the receiving nonprofit, while “small donor” refers to the many funders whose gifts of various smaller amounts collectively have a huge impact. You might hear the term “mega-donor” used to describe billionaire individual philanthropists like David Geffen or MacKenzie Scott. 
  • Individual donors give in several ways, including through direct check or credit-card donations, LLCs, crowdfunding campaigns, giving circles and donor-advised funds.

What are intermediaries and philanthropy-serving organizations?  

The philanthrosphere is also populated by a number of entities that help funders and nonprofits come together to network, maximize their impact, learn best practices and refine their processes:

What are the basics of grantmaking?

Charitable contributions occur in two basic forms: gifts and grants. Gifts are pretty simple, with few (or no) strings attached. A grant, on the other hand, is a form of giving used by the government and most foundations, and is often more complex. Most grants come with a contract, or grant agreement, that specifies how and when funds can be used, and what the funder expects to see in terms of outcomes and impact.

How to apply for a grant from a foundation

Every foundation is different, and their grant decision-making processes can vary widely, based on their grantmaking strategies.

  • Some organizations review grant applications from any nonprofit that wants to apply, while others only accept applications from those they invite through a proactive approach to grantmaking. This is often referred to as the difference between unsolicited or solicited applications processes.
  • Grant applications may be accepted on a rolling basis or at dedicated times of the year, often on a quarterly or biannual schedule related to when board members meet and make funding decisions.
  • Some funders have dedicated program staff with expertise in the areas they fund who are tasked with proactively reaching out to nonprofits based on the foundation’s mission and grant strategy.
  • Other foundations may decide that they want to fund a certain type of project and put out a request for proposals (RFP) from nonprofits.
  • You’ll want to identify funders who support your organization’s community, issue area or type of work, and research how they make grant decisions. Some funders prefer you contact them before you send a full grant application. This might happen in the form of an LOI. A funder may even work with you on developing the application to give you the best chance of success. Other funders avoid this kind of contact from grantseekers, whether because they don’t have enough staff to field interest, they prefer to keep a lower profile or they simply prefer a less interactive process.

What are the different types of grants? 

Several types of grant opportunities exist in philanthropy. The more accessible, higher-profile funders will often indicate what types of grants they offer via grant guidelines, FAQs and grant databases on their websites. In the absence of a website, it can be difficult to tell which types of grants a given funder offers, but 990s can offer some clues, as can Inside Philanthropy’s IP Takes, located at the top of Grant Finder funder profiles, which offer an inside scoop on how to get your funding foot through the door and in-depth research on grantmakers.

  • Some grants are unrestricted or intended to generally support all of what a nonprofit does.
  • Most grant opportunities are restricted to a particular program or project. Grant guidelines and agreements will clarify what the funding can be used for. More often than not, this type of grant may come with active grant management.
  • Grants can be one-offs, multi-year or intended for ongoing renewal.

What is grant management?

Grant management typically refers to how a funder actively manages the grant process or how a grantee reports to the funder on grant expenditures, progress and outcomes. Active grant management involves site visits or periodic check-ins with funders to track a grantee’s progress, as well as to offer support along the way. There are several ways funders choose to track grantee progress and grant outcomes:

  • Foundations often require grant reports, through which nonprofits report back to funders about what they have done with their grant. Reports usually include financial elements such as spreadsheets showing how the money has been spent, as well as narratives about the funded project and its impact.
  • Funders also sometimes conduct or fund evaluations to assess whether a project is successful or how a nonprofit could improve. 
  • Knowing what a funder expects, meeting report deadlines and fulfilling all grant requirements is an important part of maintaining and cultivating the grantee-funder relationship.

Important Discussions in Philanthropy Today 

Philanthropy is dynamic. Even as a sector largely defined by exclusivity and tradition, there is a considerable amount of difference and (potential for) change in the philanthrosphere. There are funders all over the map in terms of ideology, vision, size and areas of interest. Today, longstanding traditions are being questioned, as the conversations happening in the wider society about diversity and equity are playing out in philanthropy too. As you deepen your knowledge of philanthropy, these are a few of the key questions and debates you’ll find enlivening the discourse and in some cases changing the landscape of philanthropy today: