However your organisation defines a ‘principal gift’, you can bet your CEO and Board will be at their happiest when they’re thinking about what a gift at this scale might mean for your organisation!

Charities commonly define principal gifts as $1 million or more—the upper end of the major gift spectrum.

Yet while the familiar major gift cycle for principal donors is almost the same as for major donors, it is important to realise there are some subtle but critical differences:

1. Be ready for transformative gifts to transform in unexpected ways

Principal gifts are synonymous with ‘transformative philanthropy’. Their scale is often such that the magnitude of the gift might forever change the way that the organisation or institution pursues its mission. This is undoubtedly true, but in my experience, it’s the non-financial ways that such a gift can transform an organisation that are both unexpected and wonderful.

The Tuckwell Gift, one of the largest gifts in Australian philanthropic history, was announced one morning at the Australian National University at the time I was heading up Advancement. The ANU leadership knew that the gift, which created a scholarship program of considerable enormity, would have a huge impact. But as I walked across the campus following the announcement, I was not prepared to hear every group of undergraduates I passed speaking about the gift and what it meant for the reputation of their university. The gift was an extraordinary vote of confidence—a huge affirmation—for the prestige and standing of their university, and their own thinking was changed by this.

What the leadership didn’t know then—and couldn’t have known—was that the gift, the scholarships it created, and the quality of student applicants it attracted (who were required to show aptitude and achievement over and above their studies), would change the way the university admitted students: the university began placing value on broader community achievement for ALL of the students it admitted, broadening the intake and indelibly changing the nature of the undergraduate student body.

This caused other universities to think about their own admissions practices, and to change them.

Ultimately, the Tuckwell Gift is the ‘pebble in the pond’ that caused a wave of change across Australia, both in changing the face of Australian philanthropy, but even more importantly in how we recognise, nurture and support the achievements of the young people who will shape the future of Australian society. Truly, a life-changing gift.

2. Principal gifts can take a long time

When I created the Principal Gifts Strategy for the ANU, I took the counsel of highly respected international fundraisers in the US and UK who had been pursuing gifts of this scale much longer than I. One piece of advice that sticks in my mind is, “If you’re not thinking in decades, you’re not thinking right!”.

For major gifts, our first approximation of scale is an average of 18 months—from first meeting to solicitation. There’s not yet enough data to make the same calculation of an average time frame for principal gifts. What is clear is that, with few exceptions, the organisation/institution and the donor need to be working alongside each other for many years before a vision can be sufficiently shared to enable large scale philanthropy.

Thinking on a timescale of 10 years or longer has major consequences for planning: most significantly perhaps, this is generally longer than the average time in office for both leadership and fundraisers! Therefore, the handover process of a donor relationship may have to occur one or more times during the long cultivation phase. It is worth thinking carefully about this as initial cultivation plans are made.

3. Be ready for intensity: principal gifts are all-absorbing and all-consuming

Principal gifts are life-changing for the fundraiser also! Working with the generous donors of the Tuckwell Gift was one of the most intense periods of work of my career to date. And I know from speaking to others who have raised similar sums that they’ve found the same. Quite apart from the huge amount of detail to be covered, chances are high that the donor isn’t in the same time zone as you—meaning all the deep conversations that need to take place are going to happen at the end of a long flight, on the phone late at night or in the early hours of the morning.

This is an exciting time, but it’s also a significant addition to your day job!

4. Principal gifts have so much heart, but also a deep demand for business logic

Principal gifts, like all gifts, are ultimately decisions made from the heart, and their scale necessitates a lot of heart from the donor, the fundraiser, through all operational staff involved, to leadership.

What is less expected is the degree of business strategy and discipline needed alongside this. Gifts of this magnitude are big decisions, and they’ll be subject to the same business rigour that any big financial decision demands. You need to be ready to speak the practical language of business or have someone on hand who can. In my experience, these conversations used every ounce of my MBA—if this isn’t you, make sure you identify a senior person in your organisation who can speak this unique language, early in the process!

5. Be ready for complex gift structures

As fundraisers, we soon become used to the idea that major gifts rarely mean instantaneous cash transfers at the value of the gift. There is usually a pledge structure, and sometimes critical decision points and performance hurdles to be negotiated.

This is never more so the case with principal gifts, which, subject to the business discipline mentioned in point #4, often involve the entire financial spectrum available to business. This might mean cash and/or pledge from both the individual donor and their business, shares, debt on different terms, and even interest rate swaps!

6. The value of the gift will be much more than the monetary value

The thing that warms our hearts as fundraisers is the same thing that warms the hearts of our donors: the stories of personal impact and outcome that are created. You need to be ready for your principal gift to create a lot of stories. Be ready to record them, and then to communicate them, and initiate this right from the beginning!

7. Great stewardship can lead to repeat gifts… and gifts for others

In the case of two of the first-time principal donors with which I have been involved, excellent and deeply attentive stewardship has led to gifts of greater magnitude in the space of only a few years. Dedicated and high-level stewardship is one of the very best investments you can make in your fundraising program.

What you might not expect is the flow-on philanthropy that comes with a highly positive experience. The old adage, ‘A rising tide lifts all boats,’ holds as true for principal gifts as for, well, boats! I expected the Tuckwell Gift to have a huge impact within my institution; what I didn’t expect was that the original gift would be more than doubled by the donors, and also cause at least three gifts by other donors to other institutions at a similar level.

This reciprocity of generosity is a marvelous expression of the heart behind all philanthropy—that one principal gift has worked not only to forever embed a culture of philanthropy in the institution it directly benefited, but has contributed to building the philanthropic culture of the entire nation.

Read about “Australia’s 50 biggest givers” for 2019 (Financial Review)

Dr Colin Taylor is Vice-President (Asia Pacific) for Global Philanthropic, a strategic fundraising consultancy that specialises in principal gift management, as well as a host of other stakeholder engagement and fundraising services. Read more about how we can help you raise Life-Changing Gifts. Read more about how we can help you raise Life-Changing Gifts.