10/20/2011 12:04 pm ET | Updated Dec 20, 2011

Too Many NonProfits? It's Time for Funders to Consolidate

If you ask just about any philanthropist, from big-time givers to Joanne Q. Public, they'll tell you there are "too many non-profits." They need to merge or consolidate. Or at the extreme, more of them need to "go out of business."

I'd be disingenuous if I said I didn't agree with that perspective to an extent. There are so many nonprofits that scrape to get by (some of that is because of funder practices, but that's a subject for another post), and there are some high-performing nonprofits that deserve more capital to scale up.

But there is MUCH less talk about funders consolidating or collaborating. Where is the outcry for the sources of capital to better rationalize their philanthropic investments? In many ways, they are just as fragmented as the receivers of their capital, i.e. the non-profits. But who is gonna put the pressure on funders to change their practices? .... Who?

It pretty much has to be self-directed. There is no market or customer pressure to force funders to change their practices. Nonprofits have to deal with each funder individually, their particular reporting requirements, restrictions on each of their grants (also a subject for another post) and more.

I was at our International conference this week and thankfully, there are beginning to be nascent, and growing efforts for funder consolidation. Edna McConnell Clark's Capital Aggregation project is an example. Venture funds like New Profit, VPP Partners, and SVPI consolidate parts of individual philanthropists' funds. There is progress.

But we have a long way to go. We need to keep moving to more and more rationalization of the "social capital market" if we want nonprofits to do the same.