Brenda Herchmer is the owner of Grassroots Enterprises, a community development consulting company.When Funders Confuse Bigger With Better
When funders confuse size with value, the people doing the deepest, most innovative work are often the first to lose out.
Some of the hardest working, sharpest, and most relentlessly creative people I know are social and systems entrepreneurs.
If that’s you, thank you for doing the heavy lifting of change.
If you aren’t one, or you don’t know much about them, it’s likely because they operate under the radar—busy weaving together people, ideas, and systems.
Despite quietly delivering outsized impact and typically being closest to our toughest problems—and the most promising solutions—the majority of system and social entrepreneurs, as well as smaller, community-rooted organizations, are unable to access much of government, corporate, and philanthropic funding. Larger, established players continue to dominate the field, even when their work is further from the ground.
If you work in funding or policy, this is about whether your money is reaching the people doing the real work. If you’re in a community-rooted organization, it’s about why the system so often feels stacked against you.
In practice, the funding architecture is geared toward slow, bureaucratic organizations—the ones that can produce a multi-page risk framework on demand—not the small, agile teams trying to address local challenges alongside global priorities such as the UN SDGs.
Most government funding is designed around scale, compliance, and “low risk”, which naturally rewards large institutions with formal infrastructure, traditional governance, and long track records. Smaller, innovative organizations—especially those led by and rooted in communities—struggle to even get in the door, regardless of the strength of their ideas or the significance of their impact.
This isn’t about who cares more or works harder because, goodness knows, all social purpose organizations are struggling these days. It’s about how rules, processes, and habits were designed, and for whom they were designed.
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1. Risk rules favour big organizations
Governments are understandably cautious. To manage risk, they rely on detailed paperwork, policies, financial controls, and audits. On paper, the “safest” choice is the organization that can show:
- Professional finance and HR teams, and access to legal expertise;
- Formal policies and procedures for everything;
- A history of managing large public contracts.
That describes big institutions far more often than lean, community-based groups doing frontline work, even when those groups are the ones funders say they want to reach.
The irony is that smaller organizations often have deeper trust and accountability to their communities. But because they don’t look like a traditional bureaucracy, they’re treated as risky—even when they’re the ones consistently reaching people and places the systems keep missing.
You can think of it this way: the more time an organization spends on policies and procedures, the less “risky” it appears—even if the real risk is that funding never reaches the communities it was intended to serve.
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2. Short-term projects, no stable base
Most government and philanthropic funding is short-term and project-based. Larger organizations can typically manage multiple grants, reassign staff among projects, and bridge gaps between funding cycles. Many have enough core funding and reserves to weather delays, redesigns, and audits.
Smaller organizations face a different reality. They spend huge amounts of time chasing one or two-year project grants. When a project ends, so does the funding for key staff, relationships, and learning. Promising work often dies at the end of a funding cycle, not because it failed, but because it never had a stable base.
Innovation, systems change, and work that addresses the UN SDGs—the world’s most pressing issues—require continuity. The current model keeps many smaller social purpose organizations in permanent “pilot mode”: constantly testing, rarely allowed to take off, and continually being asked for just one more report before boarding.
Think of the small neighbourhood group that quietly prevents evictions on one block, while a national program spends significant dollars on research about affordable housing and promising practices. Both have a role, but only one is typically funded, and it’s not the little guy.
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3. Same admin load, smaller grants
One of the most basic structural problems is also the easiest to overlook: the administrative load doesn’t scale down with the size of the grant. Writing the proposal, negotiating the agreement, and completing the reports is the same whether you’re applying for 10,000 dollars or 1 million.
For big players, those costs are absorbed by dedicated teams and spread across large budgets. For small teams and volunteer-staffed organizations, they become a major burden, eating into already limited time and energy.
The result is that small organizations pay more—in time, stress, and opportunity cost—for every dollar they receive. At the same time, funders quietly push funding toward those who can afford the paperwork. Risk is managed on the funder’s balance sheet but borne by communities through under-resourced local work.
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4. “Big numbers” often dominate profound, meaningful change
Funders often seek extensive reach and broad geographic scope: large numbers of participants, many regions served, and significant overall budgets.
That naturally favours national and provincial, or sector-wide organizations. We’ve decided that if a program doesn’t come with an org chart and a prestigious board of directors, it can’t possibly be doing anything significant in a single neighbourhood.
The reality is that some of the most transformative work and learnings we’re seeing address poverty, education, housing, mental well-being, safety, job creation, and climate resilience.
- in one neighbourhood
- with a specific community
- as a result of shared values and long-term trusted relationships.
That kind of work doesn’t always impress funders. It’s easy to miss if you’re only scanning for scale. When “big” is mistaken for “better,” small, place-based innovators are overlooked, even when they’re changing lives and systems in ways that could be replicated elsewhere.
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5. Why does this also hurt SDG progress
The UN Sustainable Development Goals don’t live in policy documents; they live in real communities:
- in housing and homelessness,
- in food insecurity,
- in mental well-being and social isolation,
- in climate shocks and
- in local economies.
Smaller, social-purpose organizations and social enterprises are often where the real experimentation happens. These include:
- trying new models that respond to root causes, not just symptoms,
- building cross-sector collaboration and partnerships,
- integrating multiple SDGs in one place (for example, decent work, health, and climate resilience together).
The reality is that the system and social innovators are too often funded last and least. Small, community‑rooted innovators aren’t nice extras. They are the infrastructure of real change and impact. We say we care about innovation, communities, and meaningful impact—yet for the most part, our funding systems still reward bureaucracy over impact.
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A question to sit with: If you work in funding or policy, here’s a simple starting question:
Who is closest to the problem—but furthest from our money?
In Part 2, I’ll share what we’ve learned from community leaders about practical changes in funding design, process, and use of intermediaries that can help close that gap—without abandoning accountability or scale.
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Posted on 01-30-26
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