Too Big, Too Small: The Funding Trap Facing Racial Justice Organisations – Part 1

What happens when organisational growth makes an organisation more vulnerable, not less?

Within philanthropy, success is often defined through familiar benchmarks such as larger budgets, more staff, and wider geographic reach. These measures, rooted in a largely capitalist logic of scale, are frequently used as proxies for impact, but they do not always align with how communities themselves define meaningful change.

For some organisations, expansion is not a strategic ambition but a response to rising and unmet needs. Racial justice work depends on building trust, depth, and long-term relationships within communities. It cannot always be scaled neatly or quickly. At the same time, many organisations operate under conditions of chronic underinvestment. Leaders are often building organisational infrastructure while delivering frontline services, developing systems, managing teams and responding to urgent demands all at once.

Against this backdrop, increased funding can be both transformative and destabilising. It creates new possibilities, but it also introduces new pressures and expectations that organisations are not always resourced to meet. This creates a Catch-22. Organisations are expected to grow to demonstrate impact, yet that very growth can make them appear riskier or push them beyond the funding structures that once sustained them.

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Everyone Loves a Rising Star

Funders want to be associated with the rising star. Far fewer are willing to walk alongside organisations through the messy and fragile stages of growth.

One of the Clothworkers' Race Equity partners described this as being like a "child star". Everyone wants to be part of the moment of visibility, the breakthrough, the recognition, but far fewer stay committed to the cause when it really matters.

As organisations gain visibility, expectations rise. Funders often look for mature governance structures and sophisticated systems, features that take time to develop. Organisations still building this infrastructure can be perceived as a risky investment. Yet this notion of risk is often overstated. Funders typically have far greater financial resilience, while the real exposure to risk sits with frontline organisations. Rather than reducing risk, this dynamic redistributes it. It moves away from institutions with broader shoulders, onto those with far less margin for error.

In this context, the greatest risk lies not in investing, but in failing to invest when organisations most need support.

The Stranded Funding Effect

For more established organisations, this Catch-22 becomes even more pronounced. We describe this as the Stranded Funding Effect.

A surge of investment may enable organisations to expand their staffing, programmes and infrastructure, increasing their income and visibility. But this growth can also shift how they are perceived within the funding landscape.

Organisations may exceed the income thresholds of smaller trusts and foundations that historically provided consistent, flexible support. At the same time, they may still lack the scale, infrastructure or fundraising capacity required to compete for larger national grants. In effect, they become stranded between funding tiers.

Their growth changes how funders see them, but not necessarily what they need.  They become too large for the funding streams that sustained them, but not yet large enough to access the next tier. As another Racial Equity Programme grantholder reflected: "All these new funders came in, but what about the one core funder who stopped funding us?" Ironically, the prospect of growth can lead to increased precarity.

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The Hidden Leadership Burden

Growth also creates a leadership burden that is rarely visible or acknowledged. Leaders must navigate increasing demand, organisational complexity and heightened expectations from funders, while remaining accountable to the communities they serve. This often takes place within systems that have historically excluded organisations like theirs.

Yet what is often framed as risk is, in reality, a proven track record. These leaders have built and sustained organisations despite operating within systemically racist structures that routinely produce scarcity, uncertainty and complexity. To survive and succeed in these conditions, they have had to hone their craft, developing resilience, adaptability and strategic acumen that many leaders have never had to call upon, let alone master. By this measure, they are not a risky investment. They are a highly credible one.

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The Racialised Dimension of the Funding Gap

These challenges are further compounded for organisations working to address racial inequality. There is a persistent contradiction within philanthropy. On the one hand, funders may acknowledge the systemic nature of racial inequality. On the other, they question the legitimacy of organisations whose primary purpose is addressing racial inequities.

Black-led organisations have historically faced chronic underinvestment, limiting opportunities to build fundraising capacity, financial systems and organisational infrastructure. Even where organisations have the track record to manage large-scale funding, they are often directed towards race-specific funding pots, which tend to be significantly smaller in scale.

These organisations are treated as niche or specialist rather than as integral to the wider social and economic infrastructure. Underlying this perspective is an unchallenged assumption that Black-led initiatives should remain small. It reflects a broader failure of imagination within the sector: that Black-led organisations are rarely imagined operating at the scale of the UK's largest charities.

When funding systems ignore these dynamics, they do more than overlook inequities. They reinforce them. The question, then, is what it would look like for philanthropy to genuinely support organisations through growth, transition and uncertainty, rather than simply rewarding moments of success.

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This two-part blog was written by Natalie Cleary of Liberating Knowledge, and Dee Breacker and Derek Bardowell of Ten Years’ Time. Liberating Knowledge and Ten Years’ Time are the Learning Partners to our Racial Equity Programme, and have been working with The Clothworkers’ Foundation and the four Racial Equity grantholders over the last three years.

Click here to read part 2 of this blog as we explore what we are learning from the Clothworkers' Foundation Racial Equity Programme about funding differently and what it takes to support organisations through growth.

The Racial Equity Programme provides core funding to support the strategic development and growth of the four organisations, and these blogs describe the ‘funding trap’ that can hinder racial equity organisations as they grow, as well as the way funders can act to avoid this.

Read more about our Proactive Funding

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