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For several years, the Wikimedia movement has been having discussions about whether or when to begin building an endowment. The purpose of this essay is to provide some general information on endowments and endowment campaigns and to hopefully spark a renewed community discussion. In this essay, I discuss:

A note before beginning: Building an endowment for the Wikimedia Foundation could help ensure the long-term future of the organization. It is by no means an easy undertaking. It is a very long-term decision that will require a high level of organizational commitment, persistence, and patience. Before we can begin to support an endowment, there is also significant strategic groundwork that should be completed to ensure that the effort is both thoughtful and successful. As endowment consultant Kathryn Miree says: “An endowment campaign should be undertaken for need – not for sport.”[1]

Lisa Seitz Gruwell,

Chief Advancement Officer

(PS: I seeded the discussion page with a few questions that we are hoping you will help us answer. Please give us your thoughts on the questions I didn't think to ask, too.)

Defining a Strategic Goal for an Endowment

The first step in building an endowment is defining a very strong, strategic reason for why it is needed – one that we can communicate to potential funders. While the reasons might seem obvious, this has to be more strategic and more compelling than “more money is better than less money” or “we can raise the money, so we should.” As endowment consultant Diane Newman writes:

“The well-articulated case describes gifts to the endowment as philanthropic investments that strengthen the organization’s capacity to do something important. It describes how the endowment’s earnings will impact people. It is an inspirational call to action, focused on the prospective donors’ charitable objectives and desire to help people, not the organization’s needs.”[2]

WMF needs to arrive at a stated goal that justifies the endowment’s reason for existence. This will help us answer the question that we will certainly be asked, “Your annual campaigns are so successful. Why don’t you just raise the money you need every year?”

Even this first step of defining the goal of the endowment requires some deep strategic thinking and broad agreement from the community. The strategy should not only make sense operationally; It should also resonate with the people we want to contribute to the endowment.

Determining the Right Size of an Endowment

The strategic goal of the endowment dictates its size, which informs the revenue strategy. After deciding the goal of the endowment, the next big decision is what is an appropriate size of an endowment. The size of the endowment can also have a large effect on the organization in the future – well beyond financial impacts. The critical considerations are both financial and psychological. As Warren Buffet said when asked what was the right amount of money to leave to one’s children: “Enough to let them do what they want—but not enough that they don’t have to do anything.”

Additionally, we have to balance our annual fundraising needs against our desire to build an endowment. In other words, we have to arrive at a target endowment size that meets the strategic goal we set out for an endowment, but does not derail our annual fundraising efforts. This could happen in two ways:

  1. We devote too much staff and donor attention to fundraising for an endowment at the expense of annual fundraising, and/or
  2. We create an endowment that is so large that we experience a donor backlash.

While it is a delicate balance and there is no one “right” answer, it is commonly accepted among U.S.-based nonprofits to attempt to build an endowment that is two times the organization’s operating budget. For example, the National Center for Nonprofit Boards’ guidelines state that organizations should hold “not more than two years’ expenses” in an endowment. Andrea Kihlsredt of Guidestar writes:

“ . . . if your endowment is twice your operating budget and if you take five percent of it out each year to spend on operations, you’ll be able to count on income from your endowment to the tune of ten percent of your operating budget each year. More than that amount, and organizations run the risk of becoming fat and lazy. Less than that, and it’s a hand-to-mouth existence every year.”[3]

The elite universities in the United States and a few abroad have endowments valued in the billions, but that is not the norm in higher education in the U.S. or around the world. According to the United States General Accounting Office, the median endowment size for the nearly 2000 four-year U.S. colleges and universities was $21 million in 2008.[4] As an international organization with a very broad small donor base, we need to be very mindful of not creating an endowment that will make our small donors feel like we don’t need them. Mark A Hager, Associate Professor of Nonprofit Studies at Arizona State University says:

“It’s hard for a well-endowed nonprofit to make the case to average donors that the organization still needs regular donations to maintain operations. If endowment income can’t keep pace with a decline in donations, it might end up being a drag on your operations rather than the cure-all you expected.”[5]

Finally, there is a widely touted school of thought in philanthropy started by American philanthropist Julius Rosenwald, which holds that endowments that are too large cause organizations to lose their innovative spirit and to become unresponsive to their constituents’ needs. “Real endowments are not money, but ideas,” Rosenwald wrote in 1929. “Desirable and feasible ideas are of much more value than money, and when their usefulness has once been established they may be expected to receive ready support as long as they justify themselves.[6]” We should consider all of these dynamics carefully when deciding the appropriate size for an endowment for WMF.

Long-term Considerations of Starting an Endowment

The decision to start an endowment is more than just a financial decision; It is one that has broad implications for the long-term strategic direction of the organization. It really requires WMF to arrive at two underlying conclusions:

  1. The Wikimedia Foundation will be relevant forever (or at least for the very long term) and should remain in existence for perpetuity, and
  2. It is more important to use funds to support the future needs of the organization than some current needs.

As one of the most popular websites in the world, we are a player in the technology space, which is rapidly changing and has witnessed the fall of numerous Internet giants. In order to convince our donors – many of whom made their money in the technology sector – to contribute to an endowment, we need to present a convincing case that WMF will be relevant forever. Further, an organization can lose its relevance through failure or success. According to the Center for Nonprofit Leadership, “The board needs to agree on the permanence of the organization. That might sound strange, but some organizations may, if they are successful, cease to exist.[7]

The second underlying conclusion is tethered to the understanding that WMF’s fundraising capacity, while impressive, is not unlimited. There is a tradeoff between building an endowment and the rate of growth to the annual budget that the organization can sustain during the period when we would be building an endowment. It would require WMF to grow its annual budget at a more tempered rate than we did under the organization’s first five-year strategic plan. However, after the endowment is fully funded at twice the organization’s future annual budget, our capacity for growth could potentially be higher.

These are big decisions that would require significant discussion. Instead of creating a separate process for strategy around an endowment, it would make sense to have this discussion as a part of the movement-wide planning process for the strategic plan.

A Recommended Endowment Building Strategy

Building an endowment for WMF would be a very significant undertaking that would require an investment in fundraising staff but mostly, a great deal of patience. While mature endowments tend to grow rapidly, it takes at least a decade for a new endowment program to be productive. This is not only because an endowment would represent a huge sum of money, but also because most endowments are built from planned gifts, which take time to mature. An endowment building program will feel very different from our online fundraising efforts – that produce immediate results – and would require patience on everyone’s part.

Additionally, it is usually more difficult to raise money for an endowment than it is to raise funds for the annual budget, and it may be more costly in the short term. As Tom Riley wrote for the Philanthropy Roundtable:

“There’s also a healthy skepticism on the part of many donors who want their gift to have immediate impact—not to dribble out in 5 percent (or lower) annual doses. While endowments can build an organization’s capacity to help constituents in the future, most donors are interested in seeing their grantees perform all those good things they do now.”[8]

It could take up to 10 to 15 years to reach the goal of having an endowment that is twice the size of WMF’s annual budget. This is obviously dependent on a big unknown: the rate at which WMF’s annual budget grows in the future. We should have a better sense of this after the next strategic planning process is complete. The rate at which WMF grows in the future could make the goal of building an endowment that is twice the size of annual budget achievable during this timeframe or much more difficult.

I am recommending the WMF create a “growing endowment,” one that continues to grow in concert with the increases in the organization’s annual budget. This means that we would raise endowment funds continually, so that the endowment remains twice the organization’s annual budget as it grows. We would begin with a 10 to 15 year “endowment building phase” and then enter into a permanent “endowment sustaining phase.”

The Endowment Building Phase (Approximately 10 to 15 years)

During the Endowment Building Phase, we would be aggressively growing the endowment through a combination of small donations, planned gifts and major gifts with the goal of accumulating an endowment twice the size of WMF’s annual operating budget in 10 to 15 years.

Individual Donations

We would seek to raise the bulk of the endowment through gifts from individuals. This would be primarily major gifts, but could also be supplemented by our smaller online donations. Our online fundraising campaigns are the backbone of our fundraising operations. It is not only where we have excelled, it is also what we are built to do on an organizational level. While very few endowments are built by small donors, WMF is an a-typical organization – designed to be supported by a very large international small donor base. This organizational DNA is enabled by our greatest fundraising strength: our ability to communicate with and appeal to our readers who appreciate our sites. Online small donor fundraising has been our most successful fundraising tactic for the annual campaigns and it can also be successful for endowment fundraising.

To help build the endowment, I would recommend focusing on major gifts, but also diverting a small percent of our annual funds raised online to the endowment during the endowment building phase. We will want to be very straight-forward with our donors with how their donations are being used. It is likely that our donors will find it reasonable that we are using a small percent of all donations to invest in the future of Wikipedia. Throughout the endowment building phase, we will have to be very mindful of our donors’ perceptions of the endowment, so that we do not experience a donor backlash.

Planned Giving

We should supplement the small donor efforts by developing a new revenue stream for the foundation: planned giving. As Miree explains, planned giving is a way of collecting pledges for future donations, typically through estate planning:

“Deferred gift endowment campaigns proceed at the pace common for most planned giving programs – gifts are solicited today but do not begin to produce regular revenue for seven to ten years. The majority of contributions consist of bequests, insurance beneficiary designations, retirement plan beneficiary designations, insurance policies, charitable remainder trusts, and charitable gift annuities.”[1]

In the most simple form, a planned giving program simply asks donors to include a gift to the Wikimedia Foundation in their wills. WMF has already received a few bequests and has established a basic page on the foundation website for what we call “Legacy Gifts.”

We are not currently actively seeking planned gifts, but are prepared to accept them when donors contact us. At the moment, we use planned gifts for general support. In the future, we would seek to designate planned gifts to support the endowment. We would also have an active campaign to solicit planned gifts and add this expertise to our fundraising team.

The upside of planned giving programs is that they are usually extremely productive in the long term. The downside is that they do not produce immediate returns and they are less predictable than other revenue streams – which makes them a good match for an endowment, where there is not an urgent need for predictable funds. This new revenue stream is consistent with the organization’s values and our strengths, but it requires a lot of trust and patience, because the results are not immediate.

Based on the experience of other nonprofits, we could expect our planned giving program to begin producing substantial results seven to ten years after it is launched. We would aim to have planned gifts fund approximately 30 percent of the endowment during the Endowment Building Phase, with the majority of these gifts coming in toward the end. During the Endowment Sustaining Phase, we would aim to have planned gifts funding close to 100 percent of contributions to the endowment.

Probably Not Foundations

Unfortunately, there are very few grantmaking foundations that make gifts to endowments, so we should not count on this as a revenue stream. Most of our current foundation funders do not fund endowments according to policy. Even those foundations whose policies allow for it rarely fund endowments as a matter of practice. Tom Riley explains for the Philanthropy Roundtable:

“The issue of endowment is a traditional fault line of philanthropy. Nonprofits want endowment grants, but foundations want to avoid them. Why have donors historically avoided giving to endowment? The main reason is that, simply put, donors believe that they can manage the money better than the nonprofit can. And why shouldn’t they? Making periodic donations to a grantee allows donors to respond to the changing needs of the group.”[8]

While we would pursue a grantmaking foundation that has an interest in funding endowments, they are extremely rare, so we would not rely on foundations to fund an endowment.

The Endowment Sustaining Phase

Once we build an endowment that is twice the size of our annual budget, we would enter the Endowment Sustaining Phase. As Miree recommends:

“The best endowment campaigns reach their goal and keep on going. (A campaign that never ends.) While a comprehensive campaign has a finish, and a stand alone endowment campaign has a goal-driven completion date, both efforts should quickly move to a sustained planned giving mode. Use the visibility and case for support trumpeted during the campaign to continue to build the endowment through planned gifts.”[1]

In order to sustain an endowment that continued to cover 10 percent of annual expenses, we would have to grow the endowment as the annual budget grows. For example, if the annual budget from one fiscal year to the next grew by $5 million dollars, we would need to grow the endowment by $10 million in order to maintain an endowment that funded the organization at 10 percent through endowment investment income. In other words, for every dollar the annual budget grows, the endowment would need to increase by two dollars.

At this point, WMF would be 10 to 15 years into its planned giving program and those deferred gifts should be coming into fruition. While precise numbers of planned giving programs are very difficult to predict this far in advance, we would aim to have built a planned giving program that fully funds the endowment’s growth each year. According to Newman:

“A growing endowment builds a pipeline of gifts that will mature in the future, because many endowment gifts are designed to be used at a future date, often upon the death of the donor. An organization that attracts deferred gifts enhances its future financial security and positions itself to enjoy increasingly larger gifts in the future.”[9]

Again, this is largely dependent on the rate of growth of WMF’s annual budget in the future. Additionally, it is likely that some years, the investment income from the endowment would be greater than five percent and the surplus investment income could potentially remain in the endowment to help it keep pace with the growth of the annual budget.

What would be needed to proceed with building an endowment

Strong support for an endowment

In order to effectively build an endowment for WMF, we would need strong support for an endowment for the long-term. As Miree states:

“The board must embrace endowment building, understand the case for endowment, allocate adequate resources, ensure policies and procedures are in place to manage funds, and account to donors.”[1]

Building and sustaining an endowment is a marathon, not a sprint. It will require a great deal of persistence and patience on everyone’s part. We have to be absolutely committed to executing our endowment building strategy and seeing it through before we accept the first gift. We cannot view building an endowment as an experiment. The decision to start an endowment has lasting implications for the organization and we should have a very strong level of “buy-in” and commitment.

Long-term Vision Document for WMF

We would need to develop a long-term vision document for the organization that broadly describes Wikipedia’s value and ongoing relevance twenty five years from now. This document will answer the questions such as “Will the world still need Wikipedia 25 years from now and why?” and it will also defines the strategic goal of the endowment. Tom Wilson and Trish Roth explain in the Nonprofit Times:

“An organization must share its 25-year plan with endowment donors, not its three-year plan. People plan on living for a long time and don’t like to hear suggestions that they won’t. The organization should show them it has a long-term perpetuity plan for this ‘gift of a lifetime.’”[10]

We have to ensure – and make the case – that WMF will be relevant forever in order to justify a permanent or even semi-permanent endowment.

Agreement on the endowment size and the long-term revenue plan

We would need to agree to the size of the endowment and the long-term strategy for raising the funds. While we will likely need to make course corrections to our fundraising strategy over time, it will be critical that we give the planned giving program time to mature and to become effective.

Support for endowment staff

Building an endowment for WMF would be a massive undertaking for our fundraising department and we would need to grow the team in order to be successful. Initially, we would need to add an Endowment Director and likely additional planned giving expertise to cultivate and manage planned gifts. We would also need to scale the overall Fundraising team accordingly as the annual fundraising goal increases. As Newman writes:

“Organizations that are serious about building endowment funds usually allocate resources to the endowment effort within the organization’s comprehensive development plan. If the endowment is ignored or brushed aside in the organization’s comprehensive development plan, neither the board nor the staff is encouraged to work for its growth.”[11]

Mature planning giving programs typically spend eight percent on fundraising costs. This figure matches with what several U.S. universities report spending to raise endowments through planned gifts.

The Wikimedia Foundation could benefit greatly from an endowment, although we should not see it as a panacea for all of the organization’s future funding needs. An endowment could fulfill a strategic goal and ensure that Wikipedia thrives in the future by providing ongoing operating support. It could be a lifesaver in years when funds are tight, as well as a launchpad for growth when times are good. Building and sustaining an endowment will not be easy, however. It would require a great deal of long-term strategic thinking, persistence and discipline on behalf of the movement, the staff, and the board – both present and future.

Wikimedia Endowment update

Please see Lisa Gruwell's message on wikimedia-l to learn more about the Wikimedia Endowment, announced in the context of Wikipedia's 15th birthday and established as a Collective Action Fund at Tides Foundation.


  1. a b c d Kathryn W. Miree, “From Theory to Practice: Three Successful Models to Build Endowment,” October 23, 2003.
  2. Diane S. Newman, Nonprofit Essentials: Endowment Building, 2005, page 31.
  3. Andrea Kihlsredt, “How Big Should Your Endowment Be?,” GuideStar, April 25, 2012.
  4. GAO Congressional Report, “POSTSECONDARY EDUCATION: College and University Endowments Have Shown Long-Term Growth, While Size, Restrictions, and Distributions Vary,” February 2010, page 6.
  5. Mark A Hager, Associate Professor of Nonprofit Studies at Arizona State University, “Should Your Nonprofit Build an Endowment?” Nonprofit Quarterly, June 21, 2006.
  6. Julius Rosenwald, “Principles of Public Giving,” Atlantic Monthly, May 1929.
  7. Center for Nonprofit Leadership, Adelphi University, “Endowments: Are they right for your organization?”
  8. a b Tom Riley, “Them as Has, Gets: The problem of the profitable nonprofit,” Philanthropy Roundtable.
  9. Diane S. Newman, Nonprofit Essentials: Endowment Building, 2005, page 5.
  10. Tom Wilson and Trish Roth, The Nonprofit Times, May 16, 2011.
  11. Diane S. Newman, Nonprofit Essentials: Endowment Building, 2005, page 60.