1© FSG |

WA Community Foundation Convening –

Business Model Conversation

NOVEMBER 2, 2015

2© FSG |

What Motivates You?

Write down your aspirations for your community foundation.

What do you hope that your community foundation becomes in your community over the next 20 years?

3© FSG |

What is a BUSINESS MODEL?

CREATE value Product Portfolio

DELIVER value Resource Allocation

CAPTURE value Revenue Generation

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CFs are continually adapting to changing needs and aspiring to greater growth and impact

Source: “Align, Adapt, Aspire”

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How does data show us different business model choices?

• Donor Advised Funds – Beyond WA Examples

• Leadership Choices – Beyond WA Examples

• Overall Profiles – WA Network Members

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The DAF market represents the largest area of gifts, grants, and growth for CFs nationally

DAF Asset Growth for Community Foundations and National Providers ($ Billion)

$5B

$22B

Community Founda-tions

2000 2014

$3B

$24B

National Providers

2000 2014

Sources: National Provider DAF Assets: Information provided by Fidelity, Schwab, and VanguardCF DAF Assets 2000: “A Flexible and Growing Service to Donors: Donor-Advised Funds in Community Foundations,” Luck & Feurt, 2002 CF DAF Assets 2014: Columbus Survey

Annual growth

11%

Annual growth

16%

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But what motivates CFs to offer and grow DAFs?

Source: “Do More than Grow” 2012 publication

Grow assets and grantmaking through DAFs

Grow grantmaking through DAFs and assets through

funds other than DAFs

Increase grantmaking today

Increase grantmaking for the future

Promote grantmaking to organizations anywhere

Promote grantmaking to local organizations

DAFs are a “loss-leader” to bring in other fund types

DAFs should generate a surplus to support other areas

of our operations

2

3

5

6

Support DAF grantmaking that meets donors’ priorities

Align DAF grantmaking with priorities identified by the CF 4

1 Position DAFs as a stand-alone offering

Position DAFs as an entry-point to grow more flexible

assets

The aspiration across participantsSelf-assessment by CFs

community foundations share various aspirations

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“FOR GOOD FOREVER” COMMUNITY FOUNDATION

“Do More than Grow”

Our Message:

“This is not at all a transactional relationship – we are your long-term partners in giving”

Our Approach:

Talk with donors when they come through the door about their long-term legacy. Emphasize endowment building, with policies to encourage measured spending

Question We Face:

How can we balance our emphasis on legacy with current giving and leadership?

cares about building long-term philanthropic resources to benefit the community

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“FOR GOOD FOREVER” COMMUNITY FOUNDATION

“Do More than Grow”

Support DAF grantmaking that meets donors’ priorities

Align DAF grantmaking

with priorities identified by the

CF

4

Position DAFs as a stand-alone offering

Position DAFs as an entry point

to grow more flexible assets

1

DAFs are a “loss-leader” to bring in other fund types

DAFs should generate a

surplus to support other areas of our

operations

6

Promote grantmaking to organizations anywhere

Promote grantmaking to

local organizations

5

Pledge planned gifts34% vs13% average

Contribute to flexible funds

23% vs 21% average

Local grant dollars

60% vs 63% average

For Good Forever – High Levels of Planned Giving

Effective Fee: Relatively low – subsidizing DAFs

2012

2012

2012

2012

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“FUEL FOR CHANGE” COMMUNITY FOUNDATION

“Do More than Grow”

cares about cultivating a strong leadership role in the community with DAFs supporting economics

Our Message:

“We are a leader in the community but support your specific priorities through DAFs”

Our Approach:

Focus attention on the donors with the greatest philanthropic capacity. Engage donors personally, focusing on donor priorities

Question We Face:

Should we be aligning our programmatic work more with our donors? Or engaging donors more in our programmatic and leadership work?

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“FUEL FOR CHANGE” COMMUNITY FOUNDATION

“Do More than Grow”

Pledge planned gifts13% vs13% average

Contribute to flexible funds

24% vs 21% average

Local grant dollars

60% vs 63% average

Fuel for Change – High Effective Fee and Low Alignment

Effective Fee: Relatively high – generating a surplus

Support DAF grantmaking that meets donors’ priorities

Align DAF grantmaking

with priorities identified by the

CF

4

Position DAFs as a stand-alone offering

Position DAFs as an entry point

to grow more flexible assets

1

DAFs are a “loss-leader” to bring in other fund types

DAFs should generate a

surplus to support other areas of our

operations

6

Promote grantmaking to organizations anywhere

Promote grantmaking to

local organizations

5

2012

2012

2012

2012

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“LEADER-TO-LEADER” COMMUNITY FOUNDATION

“Do More than Grow”

cares about mobilizing resources and engaging with donors to address priority local needs

Our Message:

“Leadership and local impact”

Our Approach:

Focus on developing ideas that matter in our community, to our board, and to the donors engaged with us. Invest more than others in maintaining donor relationships and alignment across all of our staff, no matter what the function

Question We Face:

How do we pursue our growing ambitions with very active grantmaking but lower asset growth rates?

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“LEADER-TO-LEADER” COMMUNITY FOUNDATION

“Do More than Grow”

Pledge planned gifts15% vs 13% average

Contribute to flexible funds

71% vs 21% average

Local grant dollars

87% vs 63% average

Leader-to-Leader: High Effective Fees and High Alignment

Staff Intensity: Relatively high

Effective Fee: Relatively high

Support DAF grantmaking that

meets donors’ priorities

Align DAF grantmaking

with priorities identified by the

CF

4

Position DAFs as a stand-alone

offering

Position DAFs as an entry point

to grow more flexible assets

1

DAFs are a “loss-leader” to bring in other

fund types

DAFs should generate a

surplus to support other areas of our

operations

6

Promote grantmaking to organizations

anywhere

Promote grantmaking to

local organizations

5

2012

2012

2012

2012

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“DIVERSE, GLOBAL, COMPREHENSIVE” COMMUNITY FOUNDATION

“Do More than Grow”

cares about supporting local donors’ philanthropy anywhere in the world

Our Message:

“We are a comprehensive resource for philanthropy promoting our DAFs as a strong but distinct choice”

Our Approach:

Our work extends into many realms and we have built scale to support a diverse set of needs. We learning about our donors and then support them in reaching their goals. Where our interests align, we talk with our donors about our priorities.

Question We Face:

We are trying many things – will there be a need for greater focus in the future?

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“DIVERSE, GLOBAL, COMPREHENSIVE” COMMUNITY FOUNDATION

“Do More than Grow”

Pledge planned gifts16% vs 13% average

Coinvest

22% vs 23% average

Local grant dollars

34% vs63% average

Diverse, Global and Comprehensive – Low Alignment and Low Local Giving

Effective Fee: Differentiated fees by tier – breaking even

Support DAF grantmaking that meets donors’ priorities

Align DAF grantmaking

with priorities identified by the

CF

4

Position DAFs as a stand-alone offering

Position DAFs as an entry point

to grow more flexible assets

1

DAFs are a “loss-leader” to bring in other fund types

DAFs should generate a

surplus to support other areas of our

operations

6

Promote grantmaking to organizations anywhere

Promote grantmaking to

local organizations

5

2012

2012

2012

2012

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Over the last decade, many CFs have more than doubled their efforts in community leadership

The sample of community foundations included in FSG’s 2003 analysis spent 13% of their total operating budget on leadership efforts

Now community foundations are defining community leadership as a core role and dedicating 20% to 50% of their capacity to such efforts

2003

2010 and beyond

Source: “Align, Adapt, Aspire”

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The business model challenge is fitting together past, present, and future choices

ValuesEngage on issues & be an active partner

StrategyServe as an anchor institution& agent of change

Business ModelGrow capacity for leadership and initiatives

CultureEntrepreneurial, connector, activist mindset

Key Figures

• 46% of assets in DAFs; 30% in Discretionary• 50% of revenue from external gifts/grants• 41% of costs in leadership roles• Operating costs at 3.9% of assets

© CF Insights 201418

CFs Have Different Models to Support Leadership

New BritainConnects donors who care with the causes that matter.

Rely on substantial unrestricted assets for flexibility in the business model which supports current leadership efforts.

BoulderCommitted to transformational community leadership—the practice of foreseeing emerging community needs and leveraging resources and strategic partnerships to make a real difference.

Build programs to support leadership goals and generate considerable revenue for operations through fundraising.

Santa FeAn anchor institution for values-driven donors, foundations and visionary nonprofits that want to work collectively to achieve measurable positive change.

Narrow to a focused portfolio of fee-based products that can generate a surplus and engage in fundraising to support leadership capacity.

Berkshire TaconicYou can make a difference. We can help.

Grow community philanthropy through diverse product offerings but in a disciplined way, having criteria for which donor relationships and initiative opportunities warrant an investment.

VermontThe Community Foundation plus you. Better together.

Utilize partnerships with supporting organizations and donors to lead on critical issues in the state.

© CF Insights 201419

Each Community Foundation Relies on a Different Base of Revenues to Support Operations, Particularly Expanded Leadership Roles

Foundation A Foundation B Foundation C Foundation D Foundation E

58%

36% 39%

90% 93%

27%

5%

9%

5%6%

25%

52%

2% 4%<1%

7%

26%

1%

$ Other Income

$ Fee for Service Revenue

$ Interest Income

$ External Gifts/Grants for Operations

$ Disbursements from Operating Endowment/Reserve

$ Admin Fee Revenue

% of Total Revenue by Source

Other income for Foundation B is revenue from programs

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What can you see about your own CF through by learning across the network and beyond?

• What are your unique assets, community characteristics, or choices?

• How do you make choices about products, allocating costs/organizational capacity, and revenues to fund your work?

• What values and goals are driving your business model choices?

• Who might you learn from within the network?

SHARING KNOWLEDGE. GROWING IMPACT.

cfinsights.org

© CF Insights 2015

Washington State Community FoundationsBased on FY 2014 CF Insights data

Prepared for:

November 2nd & 3rd, 2015

WA NETWORK: DIFFERENCES IN ASSET COMPOSITION LEAD TO DIFFERENCES IN STRATEGY AND BUSINESS MODEL CHOICES

© CF Insights 201222

24% 28% 10%

8%

38%

8% 6%

9% 5%

9%

17%

22%

7%

19%

5%

3%20%

7% 47%

7%

14% 26%

22%

5%

7%

11%

10%

34%

29% 17%

34%30%

6% 31%28%

4%9% 11%

18%21%

8% 7%

9%5%

4%

4%

0.0833564683935016

0.506081118066006

0.0953955839919768

0.0999594032981574

Agency

Designated

Donor Advised

Deferred

Scholarships

Supporting Organizations

Field Of Interest

Unrestricted

Fiscal Sponsorship

Fundraising for Operations

Other

2012 PRESENTATION, ~2011 DATA

© CF Insights 2015

FoundationYear

FoundedPopulation of Area Served

Total Gross Assets per Audit(s)

Assets per Capita

Total Foundation Gifts

($)

Total Foundation Grants ($)

Grants per Capita

Distribution Rate

DAF Assets% of

Assets in DAFs

Blue Mountain 1984

68,000 $38,580,092 $567 $1,471,146 $1,942,265 $29 5% $705,546 2%

Columbia Basin 1996

135,000 $7,439,469 $55 $175,127 $550,141 $4 7% $178,453 2%

Everett 2001

746,000 $14,168,799 $19 $1,453,026 $1,027,820 $1 7% $2,793,349 20%

Kitsap 1993

250,000 $4,815,482 $19 $362,132 $388,828 $2 8% $2,397,954 50%

North Central WA 1986

125,000 $58,986,551 $472 $4,528,074 $3,105,385 $25 5% $6,830,620 12%

Orcas Island 1995

5,000 $6,975,298 $1,395 $1,380,866 $1,177,724 $236 17% $924,668 13%

Seattle 1946

2,007,440 $816,800,924 $407 $76,519,801 $87,184,152 $43 11%$264,128,59

7 39%

Skagit 1992

125,000 $4,800,000 $38 $170,000 $253,500 $2 5% $850,000 18%

South Puget Sound 1989

397,966 $17,293,002 $43 $691,355 $850,229 $2 5% $1,608,403 9%

Southwest WA 1984

560,000 $83,614,999 $149 $9,784,371 $7,830,419 $14 9% $24,195,991 29%

Tacoma 1981

832,000 $112,730,597 $135 $15,965,560 $5,219,242 $6 5% $17,941,493 17%

Whatcom 1996

208,351 $20,377,960 $98 $4,507,878 $4,288,469 $21 21% $4,559,480 22%

Yakima Valley 2004

243,231 $62,460,200 $257 $753,635 $2,359,335 $10 4% $10,235,325 16%

23

© CF Insights 2015

Grantmaking

DAF Grants

$71k $390k $320k $658k $391k $56M $129k $229k $4.5M $1.0M $2.0M $857k

Non-DAF

Grants

$1.9M $638k $69k $2.4M $787k $31.2M $125k $621k $3.3M $4.2M $2.3M $1.5M

Total $1.9M $1.0M $388k $3.1M $1.2M $87.2M $254k $850k $7.8M $5.2M $4.3M $2.4M

*DAF grantmaking information not available on Columbia Basin

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38%

82%

21%33%

64%51%

27%

57%

20%

47%36%

96%

62%

18%

79%67%

36%49%

73%

43%

80%

53%64%

DAF Grants % Non-DAF Grants %

24

© CF Insights 2015

LeadershipHow many community foundations in Washington

participate in…

Convening and facilitating?

Educating legislators/advocating policy?

Philanthropic advising/research on nonprofits?

Research on community needs?

91%

Community foundation field building?

45%

27%

Non-profit capacity development?

82%

64%

82%

25

© CF Insights 201526

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$-

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$35,000,000

$10,716,692.2

$7,439,469.0

$3,633,025.4$2,407,741.0

$12,288,864.8

$3,487,649.0

$29,594,236.4

$4,800,000.0$4,803,611.7

$9,290,555.4$10,248,236.1

$3,705,083.6

$15,615,050.0

Assets per FTE, 2014

Total FTEs

3.6 1 3.9 2 4.8 2 27.6

1 3.6 9 11 5.5 4

© CF Insights 2015

Gifts per Capita

Grants per Capita

$21.63 $1.30 $1.95 $1.45

$36.22

$276.17

$38.12

$1.36 $1.74 $17.47 $19.19 $21.49

$3.10

$28.56 $4.08 $1.38 $1.56

$24.84

$235.54

$43.43

$2.03 $2.14 $13.98 $6.27 $20.44 $9.70

27