A Discussion Between Paul Shoemaker and Mario Morino... The Bridgespan Group consistently does a great job building knowledge in the social sector, and they've come out with some excellent articles lately.

How Nonprofits Get Really Big, by William Foster and Gail Fine (originally in the Spring 2007 Stanford Social Innovation Review) analyzes the funding of 144 high growth nonprofits that went from founding to at least $50 million in annual revenue within the last 35 years. I was struck by what the authors call "The Myth of Diversification" which found that most of the organizations got big not by diversifying across several funding sources as one might expect, but rather by largely concentrating on one type of funding.

I think their findings are clearly accurate when it comes to organizations that are $3-10 million+ and on their way up. But I think the diversification argument is valid for organizations up to $3 million. For a nonprofit to get to a size where they are then capable of truly scaling, I think they often have to practice diversification. I would bet that many of the organizations profiled were quite diversified when they were 6- and low 7-figure nonprofits before they were ready and able to take on one major funding source.

I asked Jeff Bradach, co-founder of Bridgespan, about this. He shared some comments from William Foster, one of the authors of the piece, in response:

The SSIR piece (as it was titled) is about how nonprofits get really big. The piece coming out in Nonprofit Quarterly [In Search of Sustainable Funding: Is Diversity of Sources Really the Answer?] ...explores the continuum of organizations from $1M in size to significantly larger. What we've found from this data is that there is actually a higher concentration of funding at both ends of the size spectrum. Many small organizations have a high% of foundation funding. Many organizations around $3M in size tend to be diversified. Then at some break point concentration reappears as organizations achieve very large size.

Jeff said that issues of scale and how nonprofits create capital structures to support their greater size are central questions with which they, along with many of us in the social sector, are grappling. Kudos to Bridgespan for, among other achievements, advancing our knowledge about patterns in nonprofit funding.

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Note: the preceding was drawn from a private exchange between Paul Shoemaker and Mario Morino. Although not originally intended for a public audience, the idea of posting this exchange was suggested by an interested party who was "listening in."

Part I: Scaling and Growing Nonprofits
By Paul Shoemaker

Part II: Rethinking Nonprofit Scaling: Should Our Focus Be On Growth?
By Mario Morino

Part III: Calling on Funders to Lead Change
By Paul Shoemaker

Part IV: Should the People With the "Power and the Bucks" Lead Nonprofit Change?
By Mario Morino