What Is a Capital Campaign for Nonprofits?
What Is a Capital Campaign for Nonprofits?
A capital campaign is a dedicated fundraising effort to pay for a capital project, a long-term investment in an organization’s assets intended to increase or improve capacity. For example, a capital project might be a building expansion that enables a nonprofit to serve more people, or new equipment that allows the nonprofit to improve service delivery.
- A capital campaign is an intensive fundraising effort to raise funds for a specific capital project in a defined period of time.
- A capital project is a long-term investment in a nonprofit’s assets such as facilities or major equipment.
- Capital projects increase a nonprofit’s capacity to execute its mission.
What are capital projects for nonprofits?
In the business world, capital refers to assets that contribute to a company’s long-term net worth. Nonprofits have capital, too. Nonprofit capital projects include things like:
- Land and buildings. Many nonprofits rent the facilities they use. When a nonprofit has an opportunity to purchase land or a facility, a capital campaign can be used to raise funds for the purchase.
- New facilities. Construction of a new building, theater, lab, or other facility is another type of capital project for nonprofits.
- Renovation or improvements to existing facilities. Capital projects also include improvements to existing facilities. This could be anything from adding ADA-compliant features to a new floor for a dance studio or a roof repair. Sustainability improvements like the installation of solar panels are increasingly appealing to funders.
- Equipment and technology. Another type of capital project is a large equipment purchase. An office printer would not be considered a capital project, but rather an operating expense. But the purchase of new computers and printers for every classroom in a nonprofit school could be considered a capital project. Other examples include replacing outdated equipment with the latest technology to substantially improve a nonprofit’s services – for example, a museum purchasing state-of-the-art scanners to increase the speed and quality of archival digitization.
While capital campaigns are specific fundraising efforts dedicated to a particular capital project, they are also a form of capacity-building support, as they increase a nonprofit’s capacity to execute its mission.
How to fundraise for a capital project
A capital campaign is one type of fundraising effort. While the fundraising basics still apply, there are some unique aspects of capital-project fundraising to be aware of:
- Define a specific project and timeline for completion. A capital campaign raises funds for a specific capital project – such as a new building or a specific type of equipment – within a defined timeline. The objectives and timelines of capital projects should be clearly laid out.
- Be prepared to conduct a capital campaign alongside, but separate from, other fundraising. Capital campaigns are separate from a nonprofit’s other fundraising efforts, and do not fund general operating expenses or regular programs.
- Expect to spend years on a capital campaign. Capital campaigns – and the capital projects they raise funds for – often span multiple years. This requires careful planning in advance, as well as ongoing campaign and project tracking.
- Nonprofits need a track record of good management and fiscal responsibility. Donors are reluctant to make large investments in an untested organization. Capital projects are usually initiated by established nonprofits with an existing funder base, proven fiscal responsibility, and a track record of successfully completing complex projects.
- Create a plan. Assess the nonprofit’s needs as well as its resources – such as staff and board capacity to execute a capital campaign – and create a capital campaign plan appropriate to these needs and capacities.
- You’ll want specific, measurable, and achievable goals; clarity about who will do what; and an outline of all the steps, from a feasibility study about the capital project itself, to prospect research, to setting milestones, and eventually donor stewardship.
- Inside Philanthropy’s Explainers on how to find grants for your nonprofit and how to secure major gifts can help.
- Some nonprofits hire a consultant to help with capital campaigns.
- Offer naming opportunities. Naming – where a lead funder’s name appears on a building, room, or other space – is a hallmark of capital campaigns. Major donors and foundations that make large contributions to capital projects are often recognized with a named facility. A menu of naming opportunities at different gift or grant sizes can be part of a capital campaign fundraising plan.
Who gives to nonprofit capital campaigns?
Every funder has their own philanthropic preferences and priorities. Some funders prioritize general operating support, while others prefer to make project grants. Many funders give multiple types of support. Before applying for a capital grant, check the funder’s guidelines and make sure they are open to funding capital projects.
Fundraisers conducting a capital campaign should know:
Major gifts for capital projects
Gifts from individual donors usually make up the bulk of funding for a capital campaign.
- Major donors are often drawn to the visibility and tangible impact of giving to capital projects.
- Lead donors for a capital campaign will often be existing supporters of a nonprofit, such as board trustees or other longtime major donors.
- Lead capital gifts are often secured before a capital campaign is publicly launched, as donors who already know and trust the nonprofit make the first commitments to inspire others to give.
- See also: Inside Philanthropy’s guide to securing major gifts for your nonprofit.
Grants for capital projects
Foundation grants for capital projects are less common than project or program grants, but many foundations do support capital projects. Look to the foundation’s grant guidelines or IP’s funder profiles to learn whether a funder makes grants for capital projects. Inside Philanthropy offers many resources for how to find grants for your nonprofit with funding analysis that goes beyond 990 data.
What is the role of capital support in philanthropy?
Most nonprofits have a need for capital support at some time. It may be a homeless shelter that needs a new roof or a community center that could better serve the community with new furniture and equipment.
In some philanthropic spaces, capital projects are high-profile opportunities to attract major donor support. For example, a substantial amount of philanthropic giving to museums and universities happens in the form of major gifts for new buildings that are often named after lead donors.
What are the pros and cons of capital campaigns?
Capital projects are a special and unique type of project for nonprofits. Fundraising for capital projects via a capital campaign has its own set of opportunities and challenges. Read below for some of the pros and cons of capital campaigns for nonprofits.
Pros of capital campaigns for nonprofits:
- Capital projects increase or expand a nonprofit’s capacity. A capital project should increase a nonprofit’s capacity to serve its mission. A capital project may allow a nonprofit to scale up – for example, in the case of a new or expanded building that allows a nonprofit to serve more people. Or a capital project can increase a nonprofit’s capacity by allowing it to improve the quality of services, such as with the purchase of new medical equipment for a health clinic.
- Capital campaigns are an opportunity for donor stewardship and cultivation of new donors. Some donors are especially drawn to opportunities to see the tangible results of their giving and be recognized for it. New buildings and naming opportunities are a great way to connect with such donors. Longtime supporters of a nonprofit often appreciate an opportunity to participate in a capital campaign that will benefit the nonprofit and recognize their support for many years to come.
Cons of capital campaigns for nonprofits:
- Capital projects can confuse a nonprofit’s priorities. If a nonprofit truly needs to make the capital improvement in order to execute its mission, a capital project is the right priority. Sometimes nonprofits focus on flashy capital projects at the expense of other priorities because big donors want to see their name on a building. Before getting involved in a capital campaign, nonprofits and funders should ask, is this what the nonprofit – and the community it serves – needs? Or is this more about giving donors something sexy to fund?
- Capital campaigns are time-consuming. Capital campaigns – and the projects they fund – are usually multiyear endeavors. Capital campaigns happen in addition to a nonprofit’s regular fundraising, and they require a lot of time and work. Even if a nonprofit contracts with a consultant to help run a capital campaign, the nonprofit will still spend time and money on the campaign. Then, the capital project itself will be time-consuming.
- It can be hard to find funding for ongoing maintenance and care of buildings. Donors who are attracted to the flashy new building are not always the same types of donors who support ongoing maintenance and care of a facility. It’s smart to include ongoing maintenance costs as part of capital campaign fundraising to ensure that once the new building is built, the nonprofit can afford to maintain and operate it for the long term.
- Capital projects are risky. Construction is challenging and usually involves a lot of uncertainty. Weather, supply costs, and other factors outside a nonprofit’s control can change unpredictably, affecting the timeline and budget of a capital project while it is underway. Capital campaigns can include fundraising for some contingencies to account for unexpected costs, but it’s important to understand that multiyear capital projects are not without risks. Sometimes capital projects become more expensive as they go. And sometimes they fail.
