San Diego Just Built a Fund That Pays Nonprofits to Consider Merging. There Is No Application Portal.

There is a category of nonprofit expense that almost no grant will cover. It is the cost of seriously evaluating whether your organization should still exist in its current form.

Due diligence on another organization's books. Legal counsel for both sides. A facilitator who can run a joint board conversation without it collapsing. Systems integration. Severance. Rebranding. The expense of running two back offices during an eighteen-month transition. None of it is program delivery, none of it photographs well, and none of it fits in a project budget.

The Nonprofit Sustainability Initiative San Diego exists to pay for exactly that. It went live September 2, 2026, with more than $1 million committed, beginning with early investments from the Prebys Foundation and Alliance Healthcare Foundation. San Diego Foundation is a founding funder, alongside the Avila Fund and additional institutional and individual philanthropic partners. The fund is fiscally sponsored by Catalyst of San Diego & Imperial Counties.

It supports nonprofits navigating critical moments of change: collaborations that range from shared administrative functions and jointly managed programs to shared ventures and full-scale mergers.

Two products, and the smaller one comes first

NSI San Diego offers two grant types:

• Exploratory Grants — to help organizations assess whether a partnership is viable at all.
• Implementation Grants — to execute the partnership once the decision is made.

The entry point is not a portal and not a deadline. It is a request for a Readiness & Alignment Conversation, made through Catalyst. That structural choice is worth understanding before you reach out, because it changes what you are being evaluated on.

A deadline-driven RFP evaluates a document. A readiness conversation evaluates whether two organizations are actually in a position to do this work — and the honest answer is frequently no. Funders in this category have learned that the most common applicant is a single organization in financial distress, looking for a merger partner as a rescue, with no counterpart at the table and no board mandate. That profile does not get funded, because the money is not a bailout. It is capital for a decision two parties have already agreed to make together.

The model it is copying, and the track record behind it

NSI San Diego is a deliberate replication. The Los Angeles–based Nonprofit Sustainability Initiative has been operating since 2012, backed by roughly two dozen foundations and funders, and has become the reference implementation for this kind of fund.

The LA structure is instructive because it reveals the full tier ladder that San Diego has compressed into two products. LA runs two funds:

The Sustained Collaboration Fund, restricted to nonprofits based in Los Angeles County, moves applicants through three stages — an Exploratory Grant, then a Planning Grant, then an Implementation Grant. You do not enter at implementation. You earn your way there by completing the stage before it.

The Executive Transition Fund handles leadership departures through Transition Planning and Transition Implementation grants, using a cohort-based model that convenes peer groups of executive directors and board chairs going through transitions simultaneously.

Fourteen years of a staged model in LA, then a second city standing one up in 2026. That is the signal: this is no longer an experiment. It is an established philanthropic product line being exported.

For San Diego applicants, the LA ladder implies a tactic. Ask for the exploratory grant first, and ask for it small. An organization that arrives requesting implementation money for a merger it has not yet studied is describing a decision it has not made. An organization that asks for a modest exploratory grant with a named counterpart and a defined question is describing a process. The second one is fundable, and it is the on-ramp to the larger grant.

Why this category is growing in 2026

Collaboration and merger capital is having a year, and the reason is not subtle.

We documented the shift in our analysis of how "bridge grant" changed meaning in 2026. The Greater Washington Community Foundation's Community Resilience Initiative lists support for "mergers and collaborations" and "organizational sunsets" as program components — a philanthropic line item for helping a nonprofit close. Meyer Memorial Trust pulled $6.5 million from its endowment. Boston funders are financing merger facilitation directly.

In 2025, bridge funding meant: hold on until the federal money comes back. In 2026, a growing share of it means: let us help you figure out what you should become, including the possibility that the answer is a merger or a wind-down.

The macro context is the federal grant environment. Nonprofits have spent the year absorbing terminations, impoundments, and a proposed Uniform Grants Regulation that would let agencies end discretionary awards whenever termination is "in the interest of the Federal agency," with no appeal rights. Pooled funds like NSI are the sector's structural response — not replacement revenue, which philanthropy cannot provide at federal scale, but capital for restructuring.

It is also worth noting what NSI is not. It is not general operating support, and it will not fill a revenue hole. An organization that needs $800,000 in replacement program revenue should not spend its effort here. An organization that has concluded it can no longer sustain a standalone back office, and has a peer organization willing to talk about sharing one, is exactly the intended applicant.

How to come to the conversation prepared

If you are considering requesting a Readiness & Alignment Conversation, the following will determine how it goes:

Bring a named counterpart. One organization exploring collaboration in the abstract is a strategic planning exercise. Two organizations with leadership on both sides willing to be in the room is a project.

Bring board authorization. Not a full merger vote — a documented board decision that leadership is authorized to explore a specific partnership and spend time on it. Collaboration conversations die at the board level more often than at the staff level, and funders know it.

Define the question narrowly. "Should we merge?" is unanswerable in a six-month grant. "Can we consolidate finance, HR, and IT into a shared services arrangement, and what would it cost each of us in year one?" is answerable, scoped, and budgetable.

Be explicit about decision rights. Who decides? What happens to each executive director? Which board governs? Who holds the name? Teams that cannot discuss these questions with a funder present will not be able to discuss them with each other later.

Name what you would give up. The credibility test in a readiness conversation is whether the applicant can articulate a real concession. Both parties claiming they will keep their brand, their ED, and their board majority is not a collaboration plan.

Understand who holds the money. NSI San Diego is a pooled fund fiscally sponsored by Catalyst, not a program of a single foundation. Your grant agreement, reporting, and payment relationship will likely run through the fiscal sponsor rather than through Prebys or San Diego Foundation directly. Plan your finance workflow accordingly.

If you are not in San Diego

The replication pattern is the actionable part. Los Angeles in 2012, San Diego in 2026, with Press Forward, the Humanity AI fund, and a growing roster of regional resilience funds demonstrating that pooled vehicles are how 2026 philanthropy organizes around a shared problem.

Two moves follow. First, check whether your region already has one — these funds are often fiscally sponsored by a regional association of grantmakers rather than branded as a foundation program, which means they are poorly indexed and easy to miss. Second, if there is no such fund where you are, that is a conversation to have with your community foundation, and the LA and San Diego structures give you a specific, fourteen-year-tested model to put in front of them rather than an idea.

San Diego also continues to run more conventional opportunities alongside the new fund — San Diego Foundation's affiliate programs include a Chula Vista student learning grant of $10,000 to $30,000 due November 19, 2026, and an Oceanside food insecurity grant of $10,000 to $25,000 due November 14, 2026. Those are program dollars. NSI is something different, and the distinction matters: one funds what you do, and the other funds deciding what you should be.