Small-Medium Nonprofits Need More Than Foundation Grants in 2026 & Beyond
Most small-medium nonprofits I talk to have the same funding plan: find more foundations [throw spaghetti at the wall]. It makes sense. Foundations publish guidelines, post deadlines, and give grant writers like me something concrete to research.
But a July 2026 essay by Jan Masaoka, "Is the Era of Foundation Dominance Coming to a Close?", makes a case that every Executive Director should hear. The money isn't where the sector thinks it is, and it mostly never was. Here's what she found, and what I think it means for small-medium, grassroots nonprofits.
The Money is Moving
New wealth is flowing into donor-advised funds (DAFs), LLCs, family offices, and private schools, instead of staffed private foundations. According to Masaoka, DAFs now give out more than $50 billion a year, close to half of the $110 to $120 billion that private foundations give. At current trends, DAFs could pass foundations within 10 years (2036).
Some foundations now make a single grant a year, straight into their own DAF. Masaoka puts that flow at more than $3 billion a year, money that then carries no public disclosure and no required payout.
The practical problem for a small nonprofit: a DAF isn't a funder with a mission, deadline, or easily navigable process. It's an account. The money moves only when the person who controls it decides to move it. You can't research your way into that. You have to know a person.
Foundations Were Never the Biggest Source
Here's a number that stopped me: Even after setting aside universities and hospitals, Masaoka reports that foundations provide only about 5% of nonprofit revenue. Government provides about 30%.
And less than 20% of foundation dollars go to benefit economically disadvantaged people, a figure that includes research and intermediaries. So the organizations doing the hardest work on the ground, the shelters, recovery homes, and clinics, are competing for a small slice of an already small source.
None of this means that foundations don't matter [of course]. They still give billions, and they remain important partners for many nonprofits. It just means that a funding plan built only on foundations is built on a small piece of the pie.
What This Means for Small-Medium Nonprofits
If you run a health or housing nonprofit with no development staff, this shift lands hard. Larger organizations already have major gift officers, government contracts, and board members with connections. Small, founder-led organizations often have one person, usually the founder, writing foundation applications at night (In fact, I’ve been there with my young nonprofit - Mindful Founders Inc!).
Masaoka describes nonprofits adapting in 3 ways: some are dropping the traditional donor ladder to focus on a few large donors, many are turning to government funding and advocacy, and others are competing with private equity, which has moved into senior living, mental health, addiction services, disability services, and home health care.
That last point matters for my corner of the sector. The fields I work most in, housing and health, are exactly where for-profit operators are showing up. Small nonprofits that rely on one funding stream are often the most exposed.
Three Moves You Can Make
Take government funding seriously. If the government provides about 30% of nonprofit revenue and foundations about 5%, your city, county, and state deserve at least as much of your attention as foundation calendars. For housing and health nonprofits in Colorado, that means local human services funds, CDBG and HOME dollars passed through your city, and state programs like Medicaid-funded supportive housing services.
Build relationships, not just lists. A DAF typically can't be found in a database. It moves when a donor decides to move it. Your board, your volunteers, and your event guests are how you reach the people who hold those accounts.
Treat business sponsors as a funding stream. Local businesses fund events, programs, and in-kind needs, and they come back year after year when the relationship is handled well. A first gala or community event is the best time to build that base.
Foundations still belong in the mix. They just shouldn't be the whole plan.
The Question
The question isn't "which foundations should we apply to?" It is "where does the money that could fund our work actually sit, and who decides where it goes?" For most small nonprofits, the honest answer includes government, local businesses, and a few committed donors, with foundations as one piece.
That's the kind of research I do for organizations across the USA, but particularly in Colorado and California: not just a list of foundations, but a clear picture of the funding landscape around your programs. If you'd like to talk through yours, reach out. I hope this helps!
Sources
Masaoka, J. (2026, July). Is the era of foundation dominance coming to a close? Proximate. https://www.proximate.press/latest-stories/is-the-era-of-foundation-dominance-coming-to-a-close
