How do I raise capital from a foundation?
Short answer
Start by checking whether your fund is large enough. Institutions like endowments and pension funds typically write checks of 10, 20 or 50 million dollars and rarely want more than 10% of a manager's assets. Foundations are similar institutional investors. If you manage a small fund, look at smaller or closer-to-home foundations first, build your materials for that exact investor, and plan on a long process.
Check the size math before you write a single email
Most managers who ask me about foundations skip the first question, which is whether their fund is big enough. I cover this in the positioning part of our workshops. In my experience, endowments and pension funds often write checks of 10, 20 or 50 million dollars. Foundations are institutional investors of a similar kind, so I would expect similar math to apply in many cases, though check sizes vary.
In this clip I explain why the size of your fund decides which investors you should even approach.
Summary and key takeaways from this video
"And usually they don't want to be more than 10% of anybody's total assets under management."
Run that through. If a foundation writes a 10 million dollar check and wants to stay under 10% of your assets, you need around 100 million under management. If you manage 4 million, pitching a large foundation is usually not a good use of time for either side.
Where a foundation conversation can still work
There are a few exceptions I have seen. A very small regional endowment may write smaller checks. Your alma mater may listen. Someone you know may sit at an institution with an emerging manager incubator or a seed capital program. Outside of those cases, I would look elsewhere first.
Foundations also come in many types. A small family foundation behaves very differently from a university endowment or a large community foundation. So define your investor avatar. That means the exact type of investor who will say yes most easily to you. Then ask who in that group already understands your strategy.
One more point. Many managers talk to a securities attorney about how to approach and communicate with foundations.
Build the pitch for that one reader
The type and size of investor should change what is in your materials. It should change what you say and the vocabulary you use. A foundation investment committee reads a deck differently than a wealthy individual does. Show them your team, your process and how you protect their capital.
These capital raisers talk about why team, preparation and patience matter before you go out to raise.
The panelists in that clip make a point I agree with. Build the foundation before you go out. They say a raise can take six months or more to get traction. Institutions tend to move slowly, so I would plan for that and keep enough cash to get through the slow stretch.
Finally, do not come across as desperate. Foundations can tell. Respect their process, answer their questions and keep your materials consistent from the first call to the last.
More from my talks
Here is a point I would add for managers who are not ready for a large foundation yet. Most people who raise capital successfully stair step. They raise from one level of investor, then use that track record to move up to the next level of sophistication. You do not have to jump straight to the institution. I also suggest budgeting about point one percent of what you are raising on your materials. Better materials make you more credible and professional, and you often raise faster with fewer meetings.
Key facts
- Endowments and pension funds typically write checks of 10, 20 or 50 million dollars.
- In my experience, institutions often prefer not to be more than 10% of a manager's total assets under management.
- A raise can take six months or more before you see real traction.
Sources
From Richard C. Wilson's Centimillionaire Strategies YouTube channel: Positioning Foundation for Your Pitch Materials - PODCAST - Family Offices & Family Office Club, Success Raising Capital Stories from Teams Who Have Raised $50 Million. Quotes come from the video captions, lightly edited for readability. Figures are the speakers' own estimates and experience.
General education only. Not legal, tax or investment advice.
Talk to a securities attorney to explore options around approaching foundation investors, investor eligibility rules and offering communications. Do not use AI to write your own legal agreements.
Next moves
- Write down your assets under management and compare it to the check sizes foundations typically write.
- List small, regional or personally connected foundations that fit your size.
- Define your investor avatar and tailor your deck and vocabulary to it.
- Consider talking with a securities attorney about how to approach and communicate with foundations.
- Plan for a process of six months or more and budget for it.
More questions on this
Can a small fund raise money from a foundation?
It is difficult with large foundations. Smaller regional ones, your alma mater, or a seed capital or emerging manager program give you a better chance.
Why do institutions limit how much of my fund they own?
In my experience they usually do not want to be more than 10% of a manager's total assets under management. That sets a floor on how big your fund needs to be.
How long does it take to raise capital from institutions?
Panelists in one of our videos said it can take six months or more to get traction. Plan your cash and your expectations around that.
Related questions
- How do university endowments allocate to real estate sponsors?Most university endowments put money into real estate through their alternatives bucket, which is a large share of their total portfolio today.
- What is a fund of funds and how do I pitch one?A fund of funds pools investor money and spreads it across several other funds instead of buying assets directly.
- What role do investment consultants play in institutional allocations?Investment consultants advise institutions like endowments and pension funds on which managers to hire.
- What is the minimum check size for institutional investors?There is no single minimum check size for institutional investors.
Work through it with the dilution calculator. See all institutional investors resources.