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Challenge Grants

A challenge grant—funding that’s contingent on meeting a particular goal—is simply one of the best ways to expand and grow your organization’s annual giving program.

In case you’re not familiar, when a friend or foundation agrees to pledge $10,000 if you can raise an additional $10,000 elsewhere, that’s a challenge grant.

How does a challenge grant work?

In most cases, a challenge grant matches, dollar-for-dollar, gifts from new donors and increased gifts from current donors. You’ll want to invite your current constituency to participate through all the standard channels—email, snail mail and phone calls. The development office should market the campaign by emphasizing the opportunity presented by the challenge, and the importance of the annual fund to your nonprofit’s work. Many challenge grants come with a set of benchmarks for board, staff, and partners to meet. The development office tracks all new and increased gifts, reporting on a weekly basis to the board chair, development committee chair, and (naturally) your challenge donor.

How do you secure a challenge grant?

Typically, it takes anywhere from a few months to a year to secure a challenge grant. What you’re looking for is a friend of the institution who wants to help hypercharge your fundraising efforts by inviting others to join them in giving. Review your current list of largest donors and meet with them individually to discuss how instrumental a challenge grant could be in growing your annual giving program. The easiest place to begin looking is your board; in many cases, a board member who is also a big contributor will be highly receptive to the idea of instituting a challenge grant.

What size should a challenge grant be?

A board member who is also a big contributor will be highly receptive to the idea of instituting a challenge grant.

In order to inspire, you must first aspire. Since the overall goal of a challenge grant is to attract new donors and increase giving from current donors, set your goal high. A challenge grant should be at least 25 percent of the annual giving campaign goal; depending on the size of the organization, a challenge grant typically ranges from $100,000 to $1 million.

What role will the board of directors play?

Every board member should lead the way with an increased gift toward the challenge, in addition to their work with the rest of the team to meet the challenge using outside donors. For those board members who already have prospect lists, the number one task is encouraging those prospects to contribute to the challenge. Your development leader should meet individually with other board members to identify new prospects and review their approach to current donors. Every board member should solicit at least ten friends to meet the challenge.

Since the overall goal of a challenge grant is to attract new donors and increase giving from current donors, set your goal high.

What is the correct time of the year for a challenge grant?

Most challenge grants are issued at the beginning of the organization’s fiscal year, with a deadline of 6 to 12 months, depending on what the organization and donor want to accomplish with the challenge funds.

What’s important to remember as the campaign wraps up?

Remember to keep the challenge donor involved and thank them often. Established donors who chose to give more in response to the challenge require special thanks after the challenge grant is met. Most challenge grant campaigns end with a celebration promoting your organization’s hard work—be sure to invite all your major donors!

Cara Schroeder, founder of Schroeder Resources and a GCN Consulting Affiliate, is a 22-year sector veteran who provides fundraising consulting to Atlanta nonprofits.

 

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