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U.S. nonprofits face rising vulnerability as fewer donors give more—learn why overreliance on major gifts threatens resilience and what steps can help diversify your funding base.
In Managing Your Nonprofit for Resilience, I described “Donor Base Squeeze” as the peril of relying on a narrow pool of donors, often just a few individuals, foundations, or institutions, for a disproportionate share of your funding. This over-concentration increases your vulnerability and limits flexibility. Why? If even one major donor pulls back, it can trigger a shock revenue loss that puts your mission at risk. In short, a scant donor base is a single point of failure. it heightens the risk to sustainability by placing your financial health in the hands of a very small cohort. A resilient nonprofit needs more breathing room than that.
Unfortunately, recent trends show this challenge has become even more acute. Donor behavior from 2023 through mid-2025 reveals a worrying decline in broad-based support, coupled with a growing concentration of philanthropic wealth. Fewer Americans are donating at all, and those who do are giving in larger amounts.
In fact, fewer than half of U.S. households now make charitable contributions – a nearly 20 percentage point drop since 2000. This decline in small-dollar donors has continued unabated. The Fundraising Effectiveness Project (FEP) found that the number of donors plummeted 4.5% during 2024, marking the fourth straight year of decline. The smallest donors saw the steepest fall: the count of micro-donors (gifts under $100) dropped by almost 9%, and small donors ($100–$500) fell 4%.
Economic pressure on everyday families – from inflation in food and childcare costs to lingering uncertainties – has squeezed out many would-be small givers. At the same time, U.S. tax policy changes in recent years (like the doubled standard deduction under the 2017 tax reforms, reaffirmed by inflation adjustments in 2023) mean far fewer middle-income taxpayers itemize their donations. In practical terms, charitable tax incentives now skew toward the wealthy, underscoring the notion that big philanthropy is a domain of the rich.
All these factors have made it harder for nonprofits to attract and retain small-dollar donors, even as they know a broad base is healthier. As a result, major donors and mega-gifts have taken on an outsized role. Total charitable funding has been supported by a few exceptionally generous donors, which obscures the broader decline in participation.
Recent analysis by FEP noted that 2024’s fundraising totals were “saved only by major and supersized donors providing more support.” Donors giving over $5,000 – roughly the top 3% of donors – contributed about 78% of all donation revenue in 2024. This represents a significant shift: a small number of supporters now provide the vast majority of funding. While those transformational gifts are deeply appreciated, they highlight a philanthropic power imbalance. As the Chronicle of Philanthropy observed, mega-gifts that grab headlines also reflect the broader inequality in wealth and giving in America. In effect, nonprofits are becoming more dependent on the wealthy few, as small donors retreat and the donor pool narrows. This makes donor diversification efforts an uphill battle.
These trends have challenged nonprofits’ efforts to broaden their donor base. Declining participation means fundraisers must work smarter to engage new supporters. Some have embraced tactics like digital campaigns, micro-giving days, and recurring gift programs to recruit and retain smaller donors. Notably, recurring monthly donations have been one of the few growing areas of giving in recent years, offering a path to build sustained support. Even so, the overall picture is that donor bases have not diversified easily. Organizations that entered the pandemic with a broad constituency proved more resilient, whereas those leaning on a few large funders experienced more turbulence. This reinforces the lesson that diversifying donors is essential for stability; however, achieving this goal is harder than ever due to economic stratification.
On the policy front, some might point to areas of potential improvement, but that ignores the reality. Yes, the new One Big Beautiful Bill took some steps to make charitable giving more accessible, but that's looking at the deck chair and not the iceberg. Billions of dollars have been withdrawn from the nonprofit sector this year. For many nonprofits, this has been a time of proving the need for a diverse donor base. Unfortunately, everyone is learning that at the same time, and everyone is accessing the same diminished pie with requests for money.
By all indications, this challenge has worsened since the book’s publication. The fundamental vulnerability – overreliance on a narrow funding base – is more pronounced in 2025. We have fewer donors overall, with a greater share of money coming from top donors, and continued uncertainty in the economy. Nonprofits that struggled with donor concentration in 2022 likely find it even riskier now. The “squeeze” is tighter.
That said, awareness of the issue is also higher. Sector leaders increasingly recognize that having, say, 50% of your budget comes from one or two donors is a recipe for sleepless nights. There’s more conversation about donor retention, segmentation, and engagement to widen the funnel. We will address potential steps you can take in our next post.
Risk Alternatives enhances the resilience and sustainability of nonprofits through comprehensive tools, training, and support. For inquiries about conducting a risk inventory or other matters, please contact Risk Alternatives at info@tedbilich.com.