The Infrastructure Gap Series: Why Both Funding Models Leave Impact on the Table

Part 2: Picking up where we left off

In Part 1, we made the case that operational infrastructure is the single biggest variable determining whether nonprofit funding produces real impact – and that closing the infrastructure gap is a shared responsibility between funders and nonprofits. Now it’s time to look at how the two dominant funding models in the sector are actually working in practice, and where each one falls short.

There are two main approaches to institutional funding, and most funders lean heavily toward one or the other. Both have real strengths. Both also leave impact on the table – just in different ways. The goal of this section isn’t to declare a winner. It’s to understand what each model gets right, what each model gets wrong, and what we can learn from a sector that has spent decades figuring out how to make capital and operational support work together: venture capital.

IV. Two Models, Same Missed Returns

There are two dominant approaches to institutional funding, and most funders lean heavily toward one or the other: restricted grantmaking and trust-based philanthropy. Each one has real strengths. Each one also leaves impact on the table – just in different ways.

The important thing to understand is that the problems we’re about to describe aren’t unique to one model. Whether restricted or trust-based, if the funding relationship doesn’t invest in the organization itself – not just its programs – it’s limiting the return on impact for everyone involved.

The goal isn’t to pick a side. It’s to take the best of both and build something stronger.

Restricted Grantmaking

At its best, restricted grantmaking provides structure, accountability, and clear expectations. Metrics give both funders and nonprofits a shared language for evaluating progress. Reporting requirements, when done well, can actually help newer organizations develop discipline around tracking outcomes and managing finances. For early-stage nonprofits especially, some structure from funders can be a valuable learning tool – as long as funders are actually reading those reports and providing feedback, not just filing them.

Where it leaks returns:

The compliance burden consumes mission time. A single small nonprofit may juggle 20-30 applications and reporting requirements from 10-20 funders, each with its own format, timeline, and metrics. Research estimates that most nonprofits spend 40 or more hours per quarter assembling grant reports (Sopact). That’s staff time being spent on paperwork instead of programs.

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Missed Part 1? Read it here.

Tuesday, May 12th
12:00 PM – 12:30 PM EST

Many nonprofits operate without a formal budget process. They have numbers, but not a system. And without a system, it is difficult to plan for growth, respond to the unexpected, or demonstrate financial health to funders and board members.

Jay Barrett, CEO and People & Culture Lead at PEPR Public Benefit Corporation, will share practical approaches to building a budget that supports your mission, managing cash flow and runway, understanding restricted vs. unrestricted funds, and preparing your organization for financial scrutiny.

This session is focused on implementation. You will leave with tools you can apply right away, along with the opportunity to ask questions during live Q&A.

Register via the link below.

Thank you to our sponsor: Ramp