5 things funders can do to support innovation

For the past few years I've spent my professional career developing new organisations that deliver public benefit, and for the past four years in particular I have spent my time developing and raising money for my current enterprise, Mindapples, which aims to inspire and support everyone to take better care of their minds. Over my time developing Mindapples, I have met many funders and written many funding proposals. Some have been successful, most have not. I have heard a lot of feedback on my work, and had a lot of conversations about what people want to fund, how to measure success, the need for sustainability, which company structures are best, and so on.

Throughout this I have been struck by two recurring themes: firstly, that the people who are most complimentary about what I'm doing usually aren't the people who actually support us.

1. Drop the eligibility criteria

I have lost count of the number of strange reasons Mindapples has been ruled ineligible for funding by organisations that aim to promote our kind of work. Here is a selection of just a few of them:

• we don't fund early stage ventures;
• we don't fund established ventures;
• this could be funded elsewhere;
• you can't find match-funding;
• we only fund organisations with a turnover of at least £200,000;
• we don't fund health promotion work;
• we don't fund mental health projects;
• we only fund work in deprived communities;
• we only fund registered charities;
• we only fund for-profits;
• we only fund academic bodies;
• we only fund people under 30;
• we only fund projects in these target boroughs;
• we only fund service user organisations;
• we only fund organisations who provide healthcare services on site;
• we only fund projects led by clinicians;
• we don't fund projects that the state would normally fund;
• we only fund projects that the state will also fund;
• and so on. You get the idea.

Every time you add an eligibility condition to your fund, you create a barrier to innovation. Good ideas come from anywhere, and if you specify where they have to come from, you miss most of the best ones. Give up on the notion of bureaucratic systems to identify innovation, and start making decisions based on your assessment of the actual project and social need.

2. Do your research

Once upon a time I was amazed by how little funders seemed to know about the markets they invested in. However, now I've learnt more about how VC firms operate, I'm actually much less surprised than I was, because doing the level of research an average VC expects would cripple most grant funders. Unlike the private sector, they are spread too thin. Whilst commercial firms tend to specialise in particular verticals like clean tech or education, Organisations that fund 'innovation', for example, find themselves bombarded by bids from healthcare, microfinance, education, youth engagement, prison reform, public service redesign and so on. Now ask yourself: how many organisations do you know who are experts in all these areas?

No wonder then that most funders are forced to rely on external experts, who are often themselves too specialist to advise on everything, or worse, may be competitors of the applicants. (This has happened a number of times in my experience in the social innovation sector, and it is often difficult to find out who is even providing expert advice on applications, making the whole thing desperately murky.) 

The alternative is that they rely on applicants to tell them about the market, by asking them who their competitors are, what their research base is, how they prove the social need, and so on. If funders are going to really get to grips with an issue, they need to do their homework, and that means being embedded in the sector they are trying to change, not just parachuting into it and claiming to be radical and disruptive. 

3. Stop coming up with new ideas

As a funder, you don't know as much about any market as the entrepreneurs and innovators on the ground. Any guess you make about what solutions are needed will be just that: a guess. It is very tempting to sit around in the office and come up with new projects, but you are just adding to the pile of untested ideas when there are already plenty of better, more developed ideas out there that haven't yet been put to the test. I have even had the experience of being told there wasn't enough evidence for the efficacy of my own projects, by funders who then went straight on to give larger grants to completely new ideas with no track record at all. Yes, of course sometimes there are new ways of doing things emerging that need to be tried, but chances are if you've thought of it, someone somewhere has done it, and maybe they need your help.

Coming up with ideas is great fun, but try to resist the temptation. Instead, spend your time exploring the social issues facing us all, learning how and where they show up, and figuring out how to measure impact in those areas cheaply and reliably. Then be as open as possible to where the solutions might emerge. If you publish the goals in a clear enough way, you don't need to specify how they will be solved, and you may find that some existing ideas turn out to work brilliantly. What's more, you may find that your money is better spent helping promising ideas learn, improve and scale up, rather than feeding more innovations into a sector that is well known to have a big funding gap for promising early stage projects.

4. Find out what your peers are doing

Funders tend to move in packs. Whatever buzzword is flavour of the month - volunteering, sustainability, exercise, employability - you will tend to find a number of funds focussing on it at the same time. The result is that funders specialise in areas that already have plenty of money, and neglect areas where they could have a big impact. Think, for example, how many volunteering projects were funded in 2011-12, and how few mental health projects; yet wind the clock forward, and young people's mental health is flavour of the month and volunteering has had its turn. Strangely though, this clustering doesn't seem to result in genuine collaboration between funders or the projects they support. Very often we hear stories of two near-identical projects being funded simultaneously, and both then struggling for sustainability. 

So question your assumptions, ask yourself why you picked these themes rather than others, and check your prejudices at the door, because I assure you that you have them. Find out where other funders are putting their money. If you want to follow them into the same markets, do it strategically and try to support projects your peers have already found work. If you want to address areas of genuine need, look for the gaps in the current funding landscape and plug them.

5. Decide whether you are a funder or an incubator

If you want to fund things that will be sustainable, it is not enough to give them a handout and then say "where's your sustainability plan?" If your goal is to create sustainable enterprises then you need to invest in a pipeline, help them find clients, teach them to sell, introduce them to follow-on capital, and do all the other things that commercial incubators do well. If you don't do these things, you are basically getting great projects started and then leaving them to die on the vine.

Recognise too that sustainability is not always possible. Not everything that is worth doing has a business model, and not every social need has a corresponding market. If you want to create viable businesses, recognise that this means you will have to ignore most of the really challenging and important social issues of our time. If you want to tackle real social problems, accept that you or one of your peers needs to support these organisations to continue their work after your initial investment, otherwise you will just be adding to the set of projects that did wonderful work but then had to shut down because no-one would pay for the public benefit they created.

Ok, everyone hates a know-it-all, and it's not nice to tell busy people how to do their job. In fact, that's often why funders and frontline innovators fall out in the first place. We're all busy, and we're all doing the best we can. So what do I know? But after nearly a decade in this space, I've found that an alarming number of funders fall into one or more of these traps, and that very often everyone is so busy they haven't even thought about it. In an under-resourced and over-burdened sector, it's easy to fall into simple traps and fail to notice you've done so.

Over the past decade, I've met all kinds of amazing people in funding organisations, and worked with some brilliant funders. I've even been rejected by some brilliant funders who were quite right not to fund my half-baked idea. But I think a few small changes could make a big difference, and if we don't speak out when we think things could be better, then we really aren't our jobs right.

So what do you think? Am I being too critical, or underestimating the work that foundations do? Or are these things getting missed in your experience too? Answers on a postcard...