Finance and Funding

Who will fund it?

Adequate funding will ultimately enable the success of your think tank.^{+ Section draws from Mendizabal, E. (2015c), The future of think tanks in Africa: Trends to look out for. Learn more}

Most think tanks would agree that landing core funding is a once in a lifetime opportunity ^{+For more on how to manage core funding (for the first time) see Vurmo, G. (2014), Developing a think tank: First-hand experience with core funding. Learn more}. There are now only a handful of funders willing to provide it. Also, foreign funders are under more pressure to tone down the support for civil society, especially organisations trying to influence policy. In many African countries, for example, international agencies are being increasingly monitored and managed by stronger governments, turning already risk-averse funders even more conservative. This scenario is a risk for any organisation that aims to be creative, and provide alternative policy suggestions (Mendizabal, 2015c).

But there are many other options available for think tanks to consider:

• Short- or medium-term project funding.
• Research consultancy work.
• Paid-for training and capacity development services.
• Sponsorship of reports, events or capacity development initiatives.

Although global and regional funders are decreasing in number or reducing their support, there is a diversity of other funders at national level, such as domestic governments, INGOs, and research networks. Overall, it could be said that the funding environment and incentives are challenges for a think tank. However, there are other fundraising methods you can pursue (Lah, 2021).

Here are some other income-generating ideas that you could consider (Mendizabal, 2015c):

• Paid membership that provides access to member-only events, report launches and advice: Membership programmes can provide a source of income,  as well as a good platform for other more profitable ideas, or even generate relationships that can turn into more important supporters. See how Bruegel and the Atlantic Council have set this up.
• Renting out capacity: for example, the Busara Center for Behavioral Economics rents out its behavioural insights lab to organisations interested in research of this kind.
• Renting out space: this is useful for organisations that have free office space, including space for events.
• Hard copies of reports and books.
• Paid-for courses.

A new think tank may have to be creative and seek out in-kind support. You could, for instance, benefit from free office space by requesting support from a university or a foundation. Some of your central costs, such as utilities, administrative, and accounting support, could also be covered by a host.

Therefore, while core funding is now less common, there are many ways to generate income. Do not limit yourself by thinking that you need to constantly search for core and long-term funding. This kind of funding is important, and you need to find it, but there are other ways. On the other hand, it is key to start building your network and your name before you can start approaching funders.

Funding models

A funding model goes beyond the funding streams described above^{+This section draws from Ralphs, G. (2016a),Think tank business models: The business of academia and politics; Learn more+Garzón de la Roza, T. and Weyrauch, V. (2016), What does a successful funding model look like? Learn more}. This is the approach that an organisation has for raising, receiving, accounting for, and reporting on funds: ‘A funding model tells the story of the different sources of funding of an organisation and how this funding pool is maintained, expanded, or diversified’ (Ralphs, 2016a).

You could aim for a mix of funders, explore funding from the private sector ^{+For more on fundraising read the following series: Funding for think tanks part one: Domestic funding Learn more+and Funding for think tanks part two: The private sector Learn more} , approach foundations, work for contracts or grants, or charge for content (Garzón de la Rosa and Weyrauch, 2016).

The funding mix that you aim for (or have access to) will have implications on the way that your organisation is managed and functions. Successful funding models take many forms, but most importantly they create ‘sustainable revenue in a way that enables the organisation to best pursue its mission’ (Garzón de la Roza, & Weyrauch, 2016). Here are some aspects you should aim for:

• Reliable funding that does not come and go randomly.
• A diversification of funding sources, not only of donors but of type as well. Strike a balance. If you are stretched too thin it can become difficult to manage different projects and research objectives.
• Acceptable conditions that enable the organisation to do their policy work to the best of its abilities.
• Intellectual independence from donors.
• Transparency. Always be clear about where the funding comes from (this will also help to ensure and protect your credibility).

It is also important that your think tank has reserves that can cover expenses in times of unforeseen crisis, such as a shortfall in revenue or a worldwide crisis like COVID-19 ^{+Based on Resilience and relevance: The role of reserves in managing think tanks by Simon Maxwell (2021). Learn more}. In order to be resilient when your cash flow is under pressure, and to remain relevant when policymakers need your work, you should have around four to six months’ worth of cash reserves. This, of course, is difficult, as donors do not often provide funds that can be saved, so this surplus may have to come from other sources or from investments.

Who will do the fundraising?

This is an issue that concerns many mature think tanks facing funding challenges. Who will be responsible for funding?

In the beginning, it is useful to encourage all the leadership to assume responsibility for seeking and securing funds for the think tank. This includes the executive director, senior members of the team and even some board members.

It is always worth considering involving a fundraising or business development expert in your team. While some may see this as a luxury expense, the contribution of an expert to a think tank’s sustainability should not be underestimated.

You can make sure that you raise enough funds in different ways. Some from think tank directors recommend starting with contacts you and your team already have (e.g. from a university, from donors already known to you in previous positions), applying to calls from international donors and, especially, being open to combining different sources of funding. The below are some strategies based on the experiences of STIPRO, a think tank in Tanzania who received core funding for almost a decade and then had to find new and sustainable funding sources ^{+ Based on Six strategies for sustainable think tank funding, by Sulamba Shaban (2019). Learn more}:

• Involve all staff by creating an organisational fundraising culture and training all staff in the basics of fundraising.
• Scan the donor environment to understand which donors may be interested in your work. After mapping them, you can approach them, let them know about your work, and develop a relationship with them.
• Offer capacity development services to donors in the areas you specialise in. Providing training can be a good way to become known and to earn an income.
• Maintain a good relationship with existing donors even when you are looking for new ones. Make sure that your reports are submitted on time and that you keep in touch.
• Engage your board members, who may help in different ways, such as reaching out to their contacts or providing seminars to your staff on issues such as proposal writing or project management.
• Increase your visibility through communications such as your website, blogs, news outlets, seminars, public debates, etc. This will help potential donors know who you are, what you do and what impact your work has.

Below we provide some examples of how think tank directors approached accessing funds when their think tanks started. One way is to start by reaching out to existing contacts and capitalising on any standing affiliations (e.g. to a university). Another way is to identify international organisations and foundations interested in your region or priority areas so that you can target them when you apply for grants. Another is to rely on funding from the funding sector. Although some think tanks prefer to avoid these funds, if the corporations that are willing to fund your work allow you to remain independent, it is a good way to increase your financial resources.

Budgeting

Budgeting is more than an administrative task.^{+Read more about budgeting in Jones (2017), How to create a smart project budget for think tanks Learn more+and in Cardoso (2015), Managing budgets in a think tank. Learn more+You can also watch the webinar Smart project budgeting for think tanks. Learn more} Effective budgeting can make a huge difference to a think tank’s financial health, and sound financial management will allow the organisation to achieve its goals. Therefore, you need someone in your team with budgeting and financial skills. However, it is important that other members of the organisation who do not have training or experience in admin, can also understand or engage with it when needed. 

A project’s life cycle could help to manage the project budget at department level in a think tank, following stages such as designing and submitting a research proposal, project initiation, project implementation, management and monitoring, and closure. Do not underestimate the importance of budgeting when preparing the following:

• Proposals for funders: it is important that the budget reflects the real costs of the project, including a share of the costs that are not directly attributable to specific research projects, such as staff costs, office rent, electricity, and others. You can add them as an overhead, under separate budget lines, or do both. You also need to separate out what is income and what are the expenses.  
• Project budgets: transfer the proposal budget to a project budget template approved by the finance department. Keep the budget up to date and maintain an invoicing tracker.
• Budget monitoring: both the finance department and other project departments need to keep their own records of income and expenditure to provide an additional layer of quality control. Every financial movement should be recorded (plus supporting documentation).  Also, a quarterly budget review process needs to be established to update all project finances.
• Project closure: projects that have finished in the current financial year need to be closed (balanced between incomes and expenditures, invoices sent to donors, expenditures completed, and fee information updated and finalised), but those that continue into the next financial year need to be reconciled (incomes, expenses and fee allocations updated). (Cardoso, 2015). 

Financial management

Financial management entails strategic planning, organising, and managing the generation and use of funds in an organisations. And it is a key factor in ensuring the overall think tank sustainability. You should aim to find the right mix of actions and income sources for your organisation, bearing the following in mind ( Stojanovic, 2022):

• The activities fit your mission
• Ensure a combination of sources and types of funding (not putting all your eggs in one basket)
• The choices made allow the organisation to do its core work