Not every institution is in the position to raise endowments, but for the many that are, here are some of the common fallacies:

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“Endowment is the hardest money to raise.” 

• For institutions that already have an endowment, this statement  is simply untrue.  What is true is that 1) endowment gifts tend to be among the larger gifts an institution receives and can have a disproportionately high impact on Donor Lifetime Value in a number of situations, 2) the fact that an institution may not have a large number of endowment prospects does not at all mean there is not a strong market, it usually means that rather it is a rarefied market at an altitude where the air is very thin, 3) while the number of major prospects may be relatively small, the individuals are often among an institution’s closest supporters, 4) an institution’s solicitation success rate for truly qualified endowment prospects is often very high

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“Endowment giving is only done by the rich.”  

• It is true that endowment gifts don’t have significant annual economic impact on an institution’s budget unless the funds are at least $500,000.  It is also true that for institutions with major donor constituencies in the hundreds of people, there are few worthwhile opportunities to establish what can be called small endowment funds. So in terms of lifetime giving, for many institutions, it is certainly true that their endowment fund-raising focus is on the very rich.  But in raising money, that is of course where one wants to be.  

“It is a waste of time to secure endowments under $250,000-$500,000.”  

• For institutions with thousands and tens of thousands of constituents, particularly museums, performing arts organizations, and leading hospitals, there is a clear opportunity to develop an endowment product and work with donors to create endowment funds starting at $100,000. The economic and other advantages are considerable and include:

  • By motivating these donors to set up initial endowment funds, you are establishing a permanent asset in their name (or in the name of someone they wish to honor), and they can be induced to add to their Fund over time.

  • Having established a named endowment and joined your Endowment Society, their relationship with your institution has just become closer and this should lead to other gifts of various types.

  • You obviously have a new gift you wouldn’t have had otherwise.

  • Their Donor Lifetime Value has increased significantly.

  • They are now more likely to make planned gifts.

  • Their gift will motivate others so there will be a snowballing effect.

“Endowments are vitally important because they provide a predictable income stream.” 

• While endowments provide a predictable income stream in stable and rising financial markets,  their true importance lies in the fact that they provide the resources for institutions to do new and unpredictable things, over and above the basic operating budget. Such new and unpredictable things can range from groundbreaking research, to establishing major new programs or initiatives, to recruiting new top talent to new or existing positions, to mounting extraordinary productions or exhibitions, to providing new access to under-served constituencies, etc.