Why the “Run to Foundations” Strategy Was a Red Herring
Your healthiest revenue portfolio should reflect your mission, your operating model, and your market. By balancing government (federal, state, local), foundations, corporations, individuals, and earned income where appropriate, you reduce concentration risk and increase resilience.
For years, the refrain was familiar: “Federal grants are too hard.” It sounded pragmatic. It also led many organizations into a bottleneck. As more nonprofits crowded into the same foundation pools, competitiveness spiked, not because foundations stopped caring, but because the volume of submissions outpaced any modest growth in payouts.
1) Foundation giving held steady…
In 2023, U.S. charitable giving totaled about $557.16 billion, with foundations contributing roughly $103.53 billion. There’s been meaningful growth, but it’s not explosive, especially relative to the number of organizations trying to tap it. And adjusted for inflation, foundation giving was essentially flat. Philanthropy is resilient, but it’s not bottomless. (Giving USA)
2) …while applicants multiplied.
There are now well over a million charitable nonprofits operating in the U.S., and broader counts of registered nonprofits exceed 1.9 million when you include other tax-exempt types. More organizations chasing a relatively stable pot of foundation dollars equals… tougher odds. (Independent Sector)
At the same time, over the last decade or so, we slowly saw more small and mid-sized organizations competing for federal grants and winning. A larger percentage of nonprofits were receiving some form of federal funding.
Then, January 2025 happened, and we saw a loud chorus of “run to foundations” led by consultants and development directors. And, I would argue, they have largely been wrong.
I get the allure of a quick fix. A need to control. To take action.
But we have to face the facts.
There is no scenario where foundations match the loss in federal funding. Could they? Possibly. Would they close as a result? Likely. Will they do that? Absolutely not. This isn’t conjecture. The data is out there. Foundations (as a group) are not raising their payouts from previous years. There are outliers, but even the vast majority of outliers are not even doubling their giving.
As a result, we are seeing foundations report between four and ten times as many applications this year as they have seen in the recent past. Of course, we have a confounding variable, AI, so it’s not exactly clear that the drive to foundations is entirely the result of nonprofits' frantic applications following the loss of federal funding.
Myth vs. Truth
Myth 1: Federal money dried up, so your best bet is private philanthropy.
The truth: Federal funding continues to flow, yes, the flows have shifted, and there is less, but the answer for every nonprofit shouldn’t be to abandon a federal grants strategy. Federal funding is likely to remain a cornerstone of durable, multi-year revenue. The headline noise obscures that reality.
Myth 2: Foundations are faster and friendlier, so it is “easier” money.
The truth: Sometimes faster, yes; often invite-only, narrower, or one-year. As submission counts rise, “friendlier” does not translate to “more likely.”
Myth 3: If you just write a stronger proposal, you will break through.
The truth: Strong writing matters, but even more so do relationships, fit, timing, and structural constraints like portfolio limits. This is where to focus your strategy.
You need a real strategy, not just a call to apply to more foundations.
What’s a Grant Writer To Do?
Strengthen the Relationships You Already Have
You know this; this has long been a best practice. And, yet, it may be the thing that you’ve avoided or under-emphasized.
Your existing funders know your work, your leadership, and your track record. Invite them into problem-solving with you. Be honest about what has changed. Name what stability would make possible for your community.
Make specific asks (pick the ones that fit your situation):
As for a no- or low-interest loan to smooth reimbursement or a delayed renewal.
Ask your longest committed funders to commit to a multi-year grant (if they typically fund one year) to stabilize core delivery and free you up for other work.
Ask your longest committed funders to move from programmatic funding to general operating funding. Explain why this matters in this moment.
Ask for introductions to peer funders or a hosted roundtable to widen your circle.
Ask for flexible or bridge funding to cover cash flow while a public award ramps back up (explain why you believe this will happen).
Ask for strategic support from your funders for business planning, program right-sizing, or scenario planning.
Ask for capacity building for finance, data, evaluation, fundraising, legal, or compliance infrastructure.
Ask for matching dollars to unlock a government opportunity you are competitively positioned to win; we are predicting an increase in match requirements.
How to start the conversation (use and adapt):
“We’ve been impacted by the shifts in federal funding [in these ways]. Here is where we are: [two honest bullets]. Here is what would stabilize delivery for the next 12–24 months: [specific support]. If that is not feasible, an introduction to [X funder/agency contact] or a time-bound no-interest loan would make a meaningful difference.”
We need to treat funders like partners. They often have ample resources, not just program funding, but they do not know what is happening within nonprofits. We have been led to believe (and are reinforced through our personal learning about power dynamics) that we cannot let foundation funders know that we are struggling, so we shield them from the reality.
But I can guarantee you this: no funder wants to learn that your organization is shutting down when they receive your question, “What do we do with the funding we haven’t spent?”
Let them know the pain points you are experiencing now and give them specific ways they could be of help. Have a meeting, in person, if possible. Talk all this through.
Treat them like a partner.
Do Not Abandon Federal Without a Thoughtful Conversation
Are there organizations for whom federal funding is gone? Absolutely. You already know who you are. Your constituents have been named in Executive Orders and Memos. The administration could not be more clear. You will not be receiving funding. (And it’s unfair, dehumanizing, and shitty).
For many organizations, however, there is more wiggle room. But here are the questions you need to ask of leadership and the board:
Are we willing to sanitize our language? If we work with Black women entrepreneurs, are we willing to say we work with entrepreneurs? If we work with homeless LGBT youth, are we willing to say we work with youth finding their feet to adulthood?
Are we willing to sanitize our website and public-facing materials? There are threats that if you engage in “illegal” DEI work, your grants could be cancelled, and there could be additional repercussions.
If the federal agency asks you if you do “illegal” DEI, do you know how you will respond? Does the organization’s leadership and board fully understand what that would mean?
Does your organization have the resources (time, energy, focus, and funding) to engage a lawyer to help with appeals? I’m hearing more and more stories of applicants who need to appeal decisions in the application process. Most are winning, but their first appeal is rejected without legal representation, then a second is approved once they bring a lawyer into the action. Identify who you would engage now, if you plan to pursue a federal strategy.
Instead of firing off 15 new applications to probably-not-the-best-fit foundation funders before the end of the year, I recommend building your funding through relationships. Here’s a quick plan for you to edit as you like.
A One-Page Relationship Plan
Quarterly goals (choose 1 or try all 4, but choose based on capacity and org need, not fear):
Convert one annual funder to a multi-year commitment.
Secure one no-/low-interest loan or a formal bridge line.
Land two introductions to aligned funders or public program officers.
Add one capacity-building grant tied to finance, data, or whatever you need right now.
Through the end of the year:
Week 1: Identify the top 5-8 funder prospects that are prime for a request
Indicators you might consider
They have funded you for 3+ years
They have multiple ways they give to grantees
They have staff to respond to your request
You have a personal connection to them (or a board member does)
Week 2: Send a concise impact/status email to the top funders (wins, risks, needs). Personalize each one with a specific request.
Week 3: Reach back out to those funders by phone and ask for a meeting to discuss your email in more detail. In those meetings, share both the dire needs of both the organization and your service population, but also share why you are hopeful and how the funder can build that hope with you.
Week 4: Ask the board or advisory champion to make one warm intro to someone new.
Week 5: Engage in collaborative outreach with a nonprofit partner to a shared funder, to demonstrate ecosystem alignment and share a broader vision for your collective work.
Week 6: Breathe. Note if things have changed. Note if things are moving. Note where you want to spend more time. Breathe.
When it comes to foundation funders, relationships matter most, and this importance is only growing.