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.
Box. The philanthropic sector in Africa
It is a challenge to tap into local philanthropists in countries in the global south. As economies are strengthened, the number of people that could become philanthropists should increase. But their number has not followed economic growth. Nonetheless, philanthropy is emerging as a force. For example, African philanthropist Mo Ibrahim has a foundation that has launched several initiatives. There is also the African Grant Makers Network. These institutions, and others that might develop, are a promising opportunity for think tanks to diversify their funding. But the road is long, and developing an active philanthropic sector requires patience and a concerted effort from different actors (Yeo, 2013).
With the reduced availability of accessing flexible and core funding, think tanks are devising new funding strategies, and engagement between think tanks and the private sector is growing across the world. Engaging with the private sector is one way to access new funds but it can be difficult to convince those actors of the value of funding research.
Other challenges of establishing relationships with businesses and corporations include maintaining a think tank’s self-determination and safeguarding its credibility. To overcome these challenges and take advantage of the opportunities these engagements offer, think tanks should research potential partners and identify how and why they can be attractive to them. For instance, they may offer public relations and legitimacy, strategic philanthropy, or advice and expertise (Baertl 2019).
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.
Box. Key sources of funding at the beginning: The experience of CIPPEC in Argentina
‘We wanted to obtain funds from individuals, and we didn’t think in the thousands but in the hundreds. That way we identified a niche of individuals who we would ask for considerable amounts, dealing with them in a personalised manner. During the first year we held around 100 or 150 meetings to ask individuals to work with us, and some of those individuals became contacts who couldn’t give us money but who could open the door to those people who could give us resources or who got other institutions to support us. At least in Argentina, although I imagine that the same thing happens in many countries, there’s a lot of overlap between people who could donate a lot of resources and companies, which is why in many cases the initial search for funding turned into financing from the corporate sector: when I sat down with someone to ask them for their support, they would channel it through a company, which is why the necessity to take care of the company’s needs materialised.
We created a fundraising area within CIPPEC that went from dealing just with individuals to dealing with individuals and companies. Afterwards, with the crisis at the end of 2001/beginning of 2002…we invested part of CIPPEC’s resources to assign someone to search for funding from the international cooperation sector: we invested 12,000 to 13,000 pesos and we got 80,000 in the first year, with which we opened up a whole portfolio of international projects. We learned a lot about how to finance ourselves internationally, having discussions with other actors that were doing that long before us.
When the institution grew stronger, in 2004, we began a search for funding among state actors, which at that time was marginal (5 or 10% of the budget, which in general was more a cost recovery from some projects), because we found that state financing came with a larger capacity for impact: establishing links with the ministries of the provinces to provide them with a project ended up giving us more leeway to convince ministers of things, and we also noted that when the state paid for something it gave more attention to it. We created that mix, and I had the idea of reaching a point in which at least 30% would be financed by public national sources, and 50 or 60% would come from individuals and corporations. What was true is that, taking into account devaluation, the international cooperation sector acquired a more important role and through the years we became better at collecting corporate funds. I would say that there were four sources, 25% each, with a preference for increasing state funding and depending less on few big donors, trying to broaden our financial sources.’
Box. Starting with established contacts: The experience of GPTT in Iran
Seyed Sadegh Emamian is the founder and former director of the Governance and Policy Think Tank (GPTT), established in Iran in 2012.
‘First, we worked with our university affiliation because we were established as a university affiliated think tank, and it is a very well-respected university in Tehran. We capitalised on this reputation and we defined ourselves as a new institution that was an extension to the university.
We have had different stages of fundraising. In the beginning we capitalised from the reputation of the university. We gathered a group of talented graduates from the best universities and some young, talented policy researchers and the idea was interesting for some funders that had already funded universities and university institutions. We also were able to use the facilities that the university already had, like the building or staff who were already working there.
Once we started to function and the think tank itself had a basis of trust and respect, it was time to approach some funders and show them that this wasn’t just an idea but a real institution. We showed some interesting impact. In another stage of fundraising, we built up on the recognition that GPTT itself had.
At the moment, some of our funds come from the university, directly or indirectly, some come from policy projects and some come from funders and donors that are willing to fund.
Projects are usually from the public sector to work on policy issues. The government, the parliament, and some research institutions have funded us for several projects. And some grants that have come from private foundations.’
Box. From supply-driven to demand-driven funding: The experience of CADEP in Paraguay
Fernando Masi is the director and co-founder of CADEP. Read the full interview here.
‘All funding came from international foundations and organisations. In the beginning, it was more supply driven: identifying foundations with interest in Latin America and their priority areas in coincidence with ours, elaborating and presenting proposals.
It became more demand driven from 2000 onwards: donors started launching calls for papers and setting the research agenda. In addition, getting private or public local funding for research in Paraguay was not a possibility in the 90s. Only very recently public funds for research have become available.’
Box. Combining different sources of funding: The case of CAPRI in Jamaica
Diana Thoburn is the director of research at CAPRI, a public policy think tank in Jamaica. Read the full interview here.
‘Funding affects our very existence and everything we do – from the research that we conduct, to our staffing. As an independent think tank, we do not have a parent organisation that we rely on. The majority of our core funding is from large Jamaican corporations and a couple of non-Jamaican private businesses. That core funding primarily pays most of the organisation’s 12 employees. The university supports us with office space, overheads and two salaried positions.
Most of our research funding comes from international development partners. The main ones we’ve worked with in the past few years are the UK Foreign, Commonwealth and Development Office (FCDO, formerly DFID,) UNICEF, the European Union, the Inter-American Development Bank and USAID, in response to themed calls for proposals. This means that, for the most part, our research agenda is not solely determined by us. While we are fortunate to be in a stable financial situation, our salaries are well below market rates which makes it difficult to hire and retain quality talent.’
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 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
‘A think tank’s reserves exist to cover expenditure in times of unforeseen crisis, either to deal with a shortfall in revenue, or to fund unexpected demands for additional work… they are crucial to both resilience and relevance. And, for this reason, the reserves policy is not an arcane topic to be left to the accountants on the finance committee, but rather a key management tool’, Maxwell (2021) Read more about reserves in this article.