Starting a Foundation or Fund

June 20, 2007 5:29 AM

How do I start a fund or foundation?

I would like to start up a fund or foundation to give grants to projects by young people back home (Malaysia), an area currently in need but not served very well. Being a young person myself with plenty of enthusiasm but not enough knowledge, I'm not sure where to begin.

I understand that a lot of information will be location-specific (laws, regulations, etc), but what else do I need to take note of when starting a fund?

How do I get the money? (I can't just use my life savings...)
What sort of bank account would be best?
How do I get people to be interested in the fund, to support it and apply for grants?
How do I choose who do I give grants to, and what do I do with them afterwards?
How do I build credibility? (A big problem back home is that youth projects tend to start up with plenty of hype, then disappear soon after. I don't want that to happen.)
How do I find people to help me? What sort of people should I be after for this - businesses? Community people? Other youth?
What existing models can I follow or use as reference? I've seen the YouthBank UK website and it looks interesting, and I would like more examples.
What is the difference between a foundation and a fund? Will I have to redefine this project if I decide to do more than just give money?
What else am I missing?

Any and all help appreciated. Assume I know nothing. Thank you!

posted by divabat to grab bag (9 comments total)

Have you thought about getting involved with an already-existing organization? Kiva.org provides micro-loans to individual business owners in cash-poor countries (NYT video link).

They have an infrastructure of people on the ground that evaluate the ideas of potential loan receivers, and there are contributors all over the world that are already in place.
posted by answergrape at 7:08 AM on June 20, 2007

Kiva doesn't do what I want to do - I don't want to loan the money. I do contribute, but I don't think Kiva does any work in my part of the world.

I would like to team with an org, but there doesn't seem to be one in Malaysia that could help - either they're cash-strapped themselves or just don't run anymore. I've identified potential corporate sponsors, and there are foreign foundations that do the same thing whose idea I'd like to import, but I don't quite know the logistics.

Apparently I need to get the approval of a government minister for my fund to be legit. Anyone have experience with that?
posted by divabat at 8:16 AM on June 20, 2007

I'll throw my two cents in as a fund raiser. I work at a Catholic University soliciting gifts of $500 to $50,000. You would be amazed at how generous people are once you can share with them the story of the people you are going to help.

There are two fundamental approaches. The "Development" approach includes identifying and building a relationship with a potential donor hopefully to the point that the prospect gives money unsolicited. (Usually the biggest gifts.) Important to focus on once you get up and running.

The "Fundraising" approach is a beat the pavement numbers game. There is a rule of thumb for small gifts that says you have to ask 3 people to get 1 gift. At our University the greatest tool is information. We have a "Director of Prospect Research" who does nothing but build lists of people to solicit. Without this support I would suggest going to other non-profits and asking them if you can "borrow" their mailing lists. Other approaches are events (benefit concern, etc.) and good PR. Local papers are a great way to get small articles that raise awareness.

Finally my biggest suggest for starting out is find a local University to attach yourself to. Universities have teachers who "care about things" and students who are excited and energized by getting behind a good cause. In your early days this could be a great source of "cheap labor."

Good luck and keep us updated!
posted by meta x zen at 8:57 AM on June 20, 2007

You need a lawyer to help you with all the non-profit incorporation stuff. I imagine you can find one to do it pro-bono. Also get your hands on some accounting software (Quickbooks or what have you) to keep track of your financials.

It's a big task, but with determination you can raise a lot of money. My friend's mom started The Breast Cancer Fund in her living room in 1992 - now it's a huge national advocacy organization.
posted by radioamy at 8:58 AM on June 20, 2007

You might look into community foundations offering donor-advised funds. The community foundation is an umbrella organization that provides all the logistical support for donors to make their own decisions on grants etc. They take in the money, handle the investments, and give it out as you direct. (They support themselves with a percentage of the investment returns.)

One drawback is that I don't know if these are well set up for grants to individuals rather than existing organizations. Also, the donor-advised funds seem to be aimed at people who give a big chunk of money themselves.

Other things to consider: If there are no community foundations that would serve your needs in Malaysia, could you find one in Australia? Do you expect to do most of your fundraising in Australia or Malaysia?
posted by expialidocious at 9:18 AM on June 20, 2007

Well, I think the money's going to be your biggest problem ;) I think it'll be a bit of a chicken and egg situation. You need to get people to trust in you before they'll give you any money, and they won't trust you until you've got a track record of dealing with money...

Oh, and remember, lots of community/voluntary projects fail, for lots of reasons. It's probably worth your while, if you want to be successful, finding out why others fail, and fail so often. You will have to overcome those same issues in whatever you end up doing.

Answers to some of your questions will really depend on the country your fund will be based in, and the rules of that country. I'm not entirely sure what the rules are for the UK, but I think they have to be registered as a charity, and conform to the Charity Commission guidelines. Not that relevant to you, but I can give you more detail if you want, because it might help you figure out some good management practice.

Have you heard of Rag? I don't know if they have it in Australia. I know it's not exactly what you want to do (they donate to other charities, rather than manage grants), but I mention them, because in the UK, they are a really good way to get experience of fundraising and managing funds for voluntary organisations. A successful Rag in the UK will manage several thousand pounds a year, and distribute that to dozens of charities and organisations.

There are loads of models of all varieties of youth-led funds in the UK that I can give you more information about, and in fact I probably have more information to help you in general. I'll have some time over the weekend to think about it. Email me (I now work for a funder).
posted by Helga-woo at 3:29 PM on June 20, 2007

what you're talking about is called regranting (when you don't have the money but want to decide who gets it).

In my country (the U.S.), most small organizations who give grants are distributing (regranting) funds they got from major orgs that actually have endowments and/or from the government. I've been involved on both the grantee and granter side (in the arts) and here it's a very clear trickle-down situation. For example the NEA (National Endowment for the Arts) funds almost no individuals directly -- mostly it funds medium-sized orgs which in turn fund individuals and small orgs they find exciting.

First you should contact the extremely helpful people at the Foundation Center for free advice about how to get started and find resources. Also try googling regrant and regranting along with your own interests (Malaysia, microloan, etc.) and you will find small orgs that may help answer your questions (and will be happy to have you volunteer if you want to see how it's done).
posted by allterrainbrain at 6:01 PM on June 20, 2007

"Well, I think the money's going to be your biggest problem ;) I think it'll be a bit of a chicken and egg situation. You need to get people to trust in you before they'll give you any money, and they won't trust you until you've got a track record of dealing with money..." Helga-woo

Furthering Helga's point...

I was thinking about this after my first post and talked with a few people at work. From my co-workers' point of view - A solid starting committee is key. A lawyer who will do pro bono work, a fund raiser, a rich person who will put up a lot of the start up money and a PR person plus a few important people in the community.

Creating this group of committed individuals who are willing to help in various ways maybe your best place to start.
posted by meta x zen at 10:18 PM on June 20, 2007

I work in the philanthropic field in Australia, which I see is where you are located, so the info I am about to give is for establishing this stuff in Australia (just in case you're thinking of doing it elsewhere). The info from the Foundation Center, etc, will not be useful in establishing an Australian-based entity as the legal structures available to you in Australia are completely different. You might actually be better off trying to do it outside Australia, for reasons that will shortly become apparent.

The most important things to be aware of are:

1. There isn't a charities commission or anything like that in Australia - there is no organisation whose job it is to help you set up this kind of thing - so information on establishing charitable organisations is pretty much only available from the ATO. I do strongly recommend doing some more research into other organisations which are working overseas, and perhaps trying to help them with their programs or fundraising efforts, rather than trying to establish another legal structure.

2. If you want to ask the public for donations, you will probably want to obtain DGR (Deductuble Gift Recipient) status for it, so that you can offer your donors a tax deduction. That's very difficult to obtain in Australia for a fund that will be sending money overseas; you have to establish what's called an Overseas Aid Fund, and it has to be solely for relief of people in a country which the Minister for Foreign Affairs has declared to be a developing country. Malaysia isn't one of those countries.

3. If you're trying to establish a fund with DGR status which solicits donations from the public, you'll need to establish it as a public, or ancillary, fund. A public fund must be administered by persons considered to have a degree of responsibility to the community; in practical terms that means they've been honoured by the community, or have tenure of a public office (doctors, solicitors, ministers of religion, councillors...) You'd have to have a board of trustees made up of those 'Responsible Persons', and they would decide where the funds go.

You can of course establish something which doesn't have DGR status but it will certainly have an effect on the number of potential donors, and on the amount they are willing to give. It may seem harsh, but what you're doing is effectively establishing a structure by which the government will forego some tax income, and you want to send it to a foreign country, and therefore the government puts a lot of rules in place to make sure: A) that you're legit and not just squirrelling away the money for some private or nefarious purpose; B) that the money will go somewhere that the government thinks is legit, and C) that there is some degree of accountability and public control over what ultimately happens to the funds. If it was just your own money you wanted to use, there wouldn't be nearly as much hassle or red tape - unless, again, you wanted a tax benefit for it, in which case there would be a different set of red tape :)

You should also be aware that the majority of Australian philanthropic foundations cannot make grants to overseas projects, and those that do, do so only through partners they've already established a trusting relationship with.

As for difference between a foundation and a fund, in Australia the word 'foundation' has no legal meaning and can be used by all sorts of organisations. The structure you'd be establishing would be a fund.

Given some of the unfortunate complications of setting something up here in Australia, you may choose to do it elsewhere, depending on what your eventual plans are. That is where my knowledge comes to an end :) The grantmaker support organisation in Malaysia appears to be ICOMP and they may be able to help you.

My email is in my profile, if you'd like to ask more questions. Other places to look for info:

- the ATO's info on overseas aid funds
- the Guide to Giving for Australians
posted by andraste at 10:54 PM on June 20, 2007