Challenge Gift

A challenge gift or challenge grant is one in which a donation is contingent on some other goal, usually another donation. For example, a corporate donor may say that they will donate $10,000 if the organization can first raise $10,000 through different means by a certain date.

What is a challenge gift?

A challenge gift is a gift with a challenge issued as a contingency. Nonprofits usually only receive the gift if the challenge is met. This could mean many things, depending on who made the challenge:

• There might be a set amount of money that must be raised by a certain date.
• There might be a matching component (i.e., the challenger will donate whatever the organization raises up to a certain point.).

This challenge could be made by many different individuals or groups:

• An employer who might specify a matching program for their employees
• A corporation
• An individual donor
• A trust
• A government agency

What are the typical requirements for a challenge gift?

While the specifics of a challenge gift depend in large part on the donor making the gift, there are some standards that are pretty common:

1. There is usually a set amount that must be raised for the nonprofit to receive the gift. If there’s a matching component, there may also be a cap on what the challenge donor will match.
2. The donor usually sets a time restriction on when this challenge must be met in order to receive the donation.
3. The donor may set requirements for what counts as a donation. For example, they might only count direct donations, as opposed to donations made through a purchase at an auction or through a raffle.

Assume your donors want frequent updates about the progress of the challenge. The more transparent you are, the better.  

What are the benefits of challenge gifts?

A great reason to fundraise around a challenge gift or challenge grant is that it gives you a chance to bring in more donors. Because donors will feel like their gift has double the impact when they give during a challenge drive, donors who might not typically give or who might feel that their small impact won’t make enough of a difference to be worth donating may decide to make a donation during this time.  

On top of bringing in new donors and potentially doubling the amount the organization raises, a donation challenge can help energize and motivate the team and your current donors. Having a specific goal and prize at the end can help motivate people to work even harder to meet the challenge.  

What are the challenges of challenge gifts?

While the benefits are powerful, the downside of a challenge gift is that there’s no guarantee that the organization will receive the funds. If the organization doesn’t meet the goal, it won’t get the challenge gift, which can be frustrating and disheartening. The more challenging the requirements, the more the organization will have to work to meet the goal.  

How can you get donors to support a challenge gift campaign?

The first step in starting a challenge gift campaign is to get an individual or organization to make a challenge.  

There are several ways to do this. Here are just a few:

1. Know the benefits to the donor. It’s always easier to get a potential challenge donor to bite when they know what’s in it for them. One enticing possible benefit is the positive public reaction the donor will receive as the nonprofit markets the challenge. Make sure your donors know that you’re interested in this challenge benefiting them as well as the nonprofit.
2. Create a proposal to send to possible challengers. Make it clear what your ask is so there’s no confusion.
3. Research potential challengers to target. You’ll want to reach out to the right person or organization with the right offer.
4. Use the organization’s network to reach potential challengers and set up the challenge. Rely on your network to connect you with the people or organizations who might be interested in participating.

Tips on promoting your challenge gift campaign

Once a challenge has been issued, you should start fundraising and marketing the campaign. After all, your donors can’t meet a challenge if they don’t know about it. To that end, here are some tips on getting the word about a challenge gift out to the donor base or general public:

1. Set goals and make a plan. The more prepared you are to meet a challenge, the better the odds you’ll accomplish it.
2. Market through the organization’s typical methods, such as on your website, social media platforms, and emails.
3. Market through public means such as radio announcements and public TV spots if your budget allows this type of marketing effort.
4. Host a fundraiser around the challenge. This is an easy way to highlight the gift and compel donors to give.

These are just a few ideas, but however your organization does it, remember to update totals and celebrate accomplishments!

Bottom line

In the end, a challenge gift is a great way to boost energy and increase donors’ interests by creating a situation in which donors can feel like their gifts are being amplified.  

Related resources:

• Nonprofit Quarterly: Challenge Gift Drives And Corporate Matching Gifts
• Philanthropy Works: Facts About Challenge Grants And Matching Gifts
• Charity Navigator: The Do’s And Don'ts Of Matching Gifts And Challenge Grants