Leverage Weekly #74 - Displaying actual need
tl;dr - Non-profits can benefit if potential funders get the real story
When fundraising, there are frequently pressures to distort one’s organization’s needs. In the for-profit world, the typical distortion is in the direction of strength. The less one needs, the more solid the project appears, the more attractive it is, all else equal, as an investment opportunity. Of course, if one is actually trying to raise money, one needs to indicate a willingness to accept money at some point. So there ends up being a balance.
In the non-profit world, the typical distortion is in the direction of weakness. If one has no needs, donors may feel no pressure to give. The more one needs, the more generous a donor may be compelled to be. As with for-profit, though, there is also a balance. If a project is too deeply in need, it may appear too shaky to be worth funding. Non-profit fundraisers will, therefore, end up striking a balance.
In reality, for-profit fundraisers typically start off by determining the minimum they need to raise and then designing a pitch of maximum strength that will get them that minimum. Non-profit fundraisers, on the other hand, start off by determining the maximum they think they can get and then create a explanation of addressable weakness that will help they raise that maximum amount.
The for-profit world is beset with costly scams. Apart from the scams, however, for-profit incentives are set up well. However much a startup misrepresents itself, it is still trying to raise as little money as possible, which requires a focus on what the actual needs of the project are. These needs are then displayed, at least to a first approximation, when the funding round closes. Non-profit fundraising compels less attention to the actual needs of the project, which is, of course, an unfortunate fact.
The fact that non-profit fundraising requires less attention to actual need does not, however, imply that the best way to do non-profit fundraising is without such attention. On the contrary, displaying the actual needs of the organization is a very powerful way to get honest signals from donors and cut through donor wariness. At the same time, it helps keep non-profits more responsive to the desires of their funders, which comes with a variety of benefits.
To be clear, the suggestion here should sound highly counterintuitive. The idea is that if a non-profit needs $1 million and has a donor willing to give $2 million, it should raise $1 million. The idea is also that if the non-profit believes it needs $1 million, but will only raise $500 thousand if it represents its needs accurately, then it should represent its needs accurately and, if that’s how things go, raise only $500 thousand. Taken to its logical extreme, this idea implies that non-profits should be ready to shut themselves down if a straightforward presentation of their project won’t net enough funds to continue.
From an ethical perspective, this may sound quite reasonable. Many non-profits, however, are founded by people so dedicated to the mission of their non-profit that shutting it down, at least for now, may seem completely unacceptable. This sort of utilitarian thinking then easily lends itself to justifying distorting presentations to donors in order to raise more money. Other organizations, of course, see this and assume they must do the same. The result is an escalation, that is sometimes perceived as inevitable.
In reality, though, donors are already quite aware of widespread misrepresentation in non-profit fundraising. The result is a defensive stance that benefits incumbents—the non-profits that have already raised money and already have relationships with donors. Newcomers, therefore, benefit from a more straightforward approach, which involves determining the actual needs of their project and displaying the needs to all relevant parties. This yields a true test of whether sufficient will exists to fund the project as is, and is sufficiently unusual that donors will be unlikely to second-guess it.
Non-profits can benefit if potential funders get the real story.
This week, the Leverage team continues its work on nucleonics and quantum biology. On nucleonics, the priority is fundraising. Here, the MIT LENR team has met with enough success to last into 2026. The big question is how to raise funds to complete enough basic science to make it through the valley of death to the point where VC funding becomes available. Our guess is that the “valley of death” in this case will be shorter than people think.
The long-awaited case study on Stephen Gray’s identification of electrical repulsion is finally complete! It, along with a summary containing research highlights, will be posted on the Leverage website soon. This case study taught a number of lessons about the nature of science, including that electrical repulsion was identified by a less theoretically inclined researchers (Gray), rather than his more theoretically inclined predecessors (Gilbert, Cabeo).
The Quantum Biology Institute is now performing a search for a permanent CEO, with Oliver leading the process and the board interviewing candidates and making the final selection. Finding someone who can lead fundraising while managing the team internally is a challenge, but we’re hopeful.
Finally, Leverage is now working on a paper in magnetobiology, focused on the possible causal mechanisms behind weak magnetic field effects in biological systems. With a well-documented set of possible causal mechanisms, it will be much easier to determine what experiments will rule in or rule out those mechanisms in different biological contexts. This is also the first time Leverage is producing a paper in the natural sciences; so far, so good.