There are two types of funding needed to launch a charity pharmacy: seed funding and ongoing funding. Seed fundingaddresses the initial planning and startup expenses of a project, whereas ongoing fundingcovers the post-implementation, day-to-day costs of a community charity pharmacy. These two types of funding cover different phases of the nonprofit’s organizational life cycle (launching work versus ongoing service delivery work). As such, the needs differ between funding startup and ongoing efforts. Similarly, the character and expectations of seed funders are different than ongoing funders. For reasons outlined below, it would not be uncommon to be declined seed funding by a funder with the profile more akin to supporting regular post-implementation service delivery. This section will attempt to explain the two types of funding, the needs of the funders, and how to approach each on a program’s way to sustainability.
Seed funding is the term that represents the initial dollars needed to cover expenses associated with a launch of a program. As such, seed funding is heavy on the kinds of expenses that would count as new, one-time costs (capital expenses to purchase a facility, renovation costs, personnel firm hiring searches, initial marketing design work, initial legal expenses, etc.). More nonprofit programs fail at conception than at adulthood as the most vulnerable days of a new nonprofit are its early development. A seed funder will shoulder the burden of funding the highest risk period for a program (its earliest days of service) and covering the cost of some of the costliest program expenses. The nature of seed funding must be far more tolerant of program risk and the potential for organizational failure. Therefore, seed funders must be cultivated in a way that acknowledges the higher risk to the funder.
Unknowns create risk. Seed funders wish to make sure that the leaders overseeing the creation of the program are as thorough as possible with a plan to manage unknowns. Planning reduces some of that risk and lowered risk means a higher probability of success at a lower cost. Since the risk profile for a new program is much more tenuous than a program with 10 years of operating experience, funders must be cultivated initially that will be tolerant of the risk.
Seed funders have different questions and different expectations than an ongoing funder. A solid business plan is required by most seed funders. For instance, since there will be no program history to provide, program leaders will need to provide benchmarking data and examples of the programs they envision. Replication of proven programs and an actionable plan are desirable for seed funders – who are often eager to confirm that there is a business plan in place for a community charity pharmacy. A sound business plan demonstrates that the program knows what it will attempt to create, will know how much money is needed over a given time period to create that program, and will know the way that the program will measure success over time (See: The Fund Development Plan and the Fund Development Planning Process).
Seed funding opportunities differ from ongoing funders in type as well. Funders with a higher tolerance for the increased risk of seed funding typically include those with a closer proximity to a program’s work (same community, rather than a federal or national funding concept), and are ones with a more direct potential benefit for the program’s successful work. Prospective funders with a close proximity and a greater potential benefit include:
- Local hospitals– Next to patients served by the community charity pharmacy, the local hospitals will have the greatest financial and mission benefit from the work. Seed funding conversations should engage hospitals early and should seek to understand issues such as:
- What is each hospital’s perception of the need for increased medication access among the poor? (Is medication access a topic in the hospital’s strategic planning? Has medication access been identified as a strategy for increasing the health of the community? Has medication access registered in the local health department with the Chief Public Health Officer, and/or in the local nonprofit hospital’s community health needs assessments?)
- Is the hospital looking to save money among the self-pay/uninsured population by improving the health of the uninsured through the provision of stable access to a robust formulary of essential medications? (Where is the Chief Medical Officer on the topic of chronic illness management and medication access? Is the hospital’s director of pharmacy amenable to expanding medication access for the poor?)
- Is the hospital in a financial position to partner with the leaders of the community charity pharmacy in the goal of opening a robust and functioning charity pharmacy? (Where is the Chief Financial Officer and the Business Development Office on the topic of investing into a community-wide solution to lack of medication access?)
These and other questions can be answered through relationships with the local hospital, partnering and communicating the opportunities to move medication access forward in the community.
- Local Foundation Grant Investment– Foundations are grantmaking organizations which seek to partner with local charities to achieve a defined mission. That mission is a statement which is publicly available for review, listed in each foundation’s annual IRS990PF (an annual tax document available for free to view on Guidestar.org). It is important to approach foundations with a mission that is complementary to the work of your community charity nonprofit.
Most foundations distribute a percentage of an endowment each year. The distribution process is overseen by a board of directors responsible to ensure that the funding distributed aligns with mission. Being caretakers of an endowment, foundations may be a bit more willing to absorb the risk of funding a startup concept, especially when the business case and replication demonstrate the community charity pharmacy has a solid plan and a lowered risk. For that reason, a foundation may be willing to contribute to a risky startup venture when other funding sources cannot tolerate the potential risk of a funded failure.
It is always best to follow the process for a funding request outlined by the foundation. However, when not explicitly discouraged by the foundation, it is recommended to request a meeting with a foundation to share about the work that the community charity pharmacy aims to do and to understand:
- Does the foundation accept funding requests solicited by the community, or are funding offers only extended to organizations approached by the foundation?
- What is the foundation’s level of comfort in funding a new effort?
- What kinds of pre-work planning is typically required of a foundation to support a new initiative?
- Corporations and Corporate Foundation Investment– Corporations may offer funding to the community, either as a direct support from the revenue of a corporation or through a charitable foundation tied to a corporation. When considering the opening of a community charity pharmacy, consider the businesses that are at work in the community, and seek to meet with that business to understand:
- Does the corporation fund community efforts?
- Is the focus of that funding compatible with the work of the community charity pharmacy?
- What is the corporation’s level of comfort in funding a new effort?