The past decade has seen the remarkable rise of collaborative funds – vehicles that pool resources from multiple donors to tackle complex, interconnected challenges, at scale. These funds have more than doubled in number from 2010 to 2020, and today collectively deploy as much as $7 billion.
Yet as these funds have rapidly expanded, the infrastructure that makes them possible – particularly fiscal sponsorship organizations – has not kept pace.
Collaborative funds rely on fiscal sponsors, and other host organizations, to provide their legal, financial, talent management and operational backbone. These hosts create the conditions that allow funds to launch quickly, navigate complex compliance environments, and move money in ways that individual donors or foundations often cannot.
Despite this central role, donors have invested limited attention and resources in strengthening these host organizations. As Loren McArthur and I argue in our recent report, this is more than a minor oversight – it’s a structural flaw that threatens collaborative funds’ long-term sustainability and effectiveness.
Without greater attention to the host organizations that provide the backbone for these funds, the collaborative funding ecosystem risks becoming fragile – and even replicating the very silos and inequities it aims to overcome.
Creating a “frictionless” fiscal sponsorship market
In the aftermath of the pandemic, collaborative funds surged in response to urgent community needs. For example, Health First Collaborative brought together over 20 funders to address racial health inequities in Chicago, one of many funds that centered intentionally on racial justice and equity.
During this boom period, fiscal sponsors were inundated with requests to host new collaborative funds, This stretched their staff and systems, sometimes to the breaking point. As one data point – even now, three years later, 86% of fiscal sponsors report turning away projects because they lack the staff and resources to support them.
This volatility is not an anomaly; I expect it will only increase as social, political, and ecological crises continue to intensify. This is the proximate cause of the challenge.
The root cause, however, is that fiscal sponsors have (and still) operate in an environment of misaligned incentives and fragmented information. Demand for their services is highly volatile, leading to cycles of boom and bust that strain staff capacity, erode institutional knowledge, and create persistent service challenges. The core of the challenge is donors that create volatility in this ecosystem due to their lack of coordination when it comes to launching and scaling funds.
What a thriving ecosystem looks like
In the report, we outline seven enabling factors that must be strengthened for this ecosystem to thrive. Some relate to operations—like building robust internal systems and cultivating talent. Others focus on financial resilience, including risk diversification. Still others concern governance and decision-making, such as clarifying roles and ensuring alignment between hosts and the funds they support. Each of these are important in their own right; collectively, they build greater resilience in the ecosystem.
Importantly, each of these requires deliberate investment and sustained support – not just one-off grants to collaborative funds themselves, but core funding and capacity-building for the fiscal sponsors that host and sustain them.
Ultimately, collaborative funds are only as strong as the infrastructure that supports them. I’ve seen how donors’ tendency to treat fiscal sponsors as vendors, competing on price rather than quality, undermines this capacity. Without intentional funding of this enabling infrastructure, we will continue to face bottlenecks, burnout, and misalignment. Funds will struggle to achieve their full promise, and the communities they aim to support will bear the costs.
The future of collaborative funds demands that we see fiscal sponsorship as part of the mission, not just a back-office function. It means funding not only the grantees and the programs, but also the operational backbone that makes collective action possible. It means investing in governance, talent, systems, and shared learning—so that collaborative funds can truly fulfill their potential as vehicles for equitable and transformative change.
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