To Be Experienced or to Be Innovative? Signals Influencing Nonprofit Start-Ups’ Philanthropic Funding Acquisition

Abstract

Prior research has illuminated how emerging and new nonprofit organizations struggle to garner financial resources, including philanthropic funding. Yet, few studies have examined how nonprofit start-ups are able to overcome this “liability of newness” and struggle to secure philanthropic funding. This article uses signaling theory to examine how two types of quality signals emanating from a start-up nonprofit’s initial assets—founders’ experience and organizations’ innovativeness—affect the organization’s philanthropic funding acquisition outcomes. We find that philanthropic funding is more likely to flow to nonprofit organizations with founders who have less prior founding experience and with prior accelerator experience but less likely to flow to organizations that are self-identified as innovative. We conclude with recommendations for nonprofit practitioners and policymakers regarding signaling strategies and infrastructure support.