Funding Innovation: Top Tips

How can you fund innovation when your nonprofit continues to struggle to keep the lights on? Here are some ideas.

Funding Innovation: Top Tips
9 mins read

Some ideas to help your nonprofit fund innovation, even in hard times.

In the business world, innovation is seen as part of everyday business—it’s necessary for a company’s survival to stay ahead of the curve. In the social sector, innovation is just as important since nonprofits solve complex social problems, yet getting it funded can be a huge challenge. How many times have you heard a foundation say, “We would fund you, but you’re not innovative enough.”? Personally, I think that’s a polite way of saying that your nonprofit’s model is either outdated, the foundation program officer doesn’t understand your work, or some combination thereof. In any event, it’s super frustrating for folks offering essential skills to the community, especially when there may not be an innovative, scalable way to do that. And even if you do have some bold, new ideas, getting those funded can be tough, too.

So, what are you supposed to do? How can you fund innovation when your nonprofit continues to struggle to keep the lights on? Here are some ideas to get you started:

Commit to Innovation

Be clear about your vision. Make sure you clearly, compellingly explain the problem you’re trying to solve and who your work stands to benefit. The more you can hone in on what’s not working in your space and how your brilliant idea will solve that problem, the better. Have your board commit to innovation and identify goals and indicators that indicate you’re on the right path. Propose an allocation of time, resources, and metrics that indicate your innovation is on the right track, and share this with your board, but also with potential funders to secure their interest. This may include published articles, future funding, or the creation of a “Beta version.”

Develop a Beta Version

This is a fancy way of saying create a pilot program. Experiment with your idea and track what’s working and what’s not. Learn by experimenting and share the results with your board for open feedback. I’m always more curious to learn what’s not working, since there are often great lessons there. But the point is, if you have a clear goal and desired impact in mind and then you craft a range of potential approaches to advance that objective, focusing funder chats on the end game opens up checkbooks. Keep tweaking your model and advance the conversation. And remember to go back to your funders and share your findings. You never know, you may be “innovative” already! If you want to learn more about this approach, check out the new book, Lean Impact.

Partner with Others in your Ecosystem

Who else in your sector shares your goals and may be interested in innovation and collaboration? You might want to consider starting with universities in your area. Or better yet, tell your foundation program officers that you’re interested in creating a new product or service and ask them for intros to potential collaborators. They might be aware of potential partners or might even fund collaborative efforts. Also, look for business accelerators or incubators in your geography—they’re a hotbed of innovation, ideas, and funding. Finally, if you have interns, ask them to help with research; young professionals may have fresh ideas about how to search for partners and funding.

Get the Word Out

If you already have an “innovative idea,” then put it on paper. Create a one-pager that shares the basic elements of your idea with a visual and narrative description. If you cannot explain your idea in two to three paragraphs, it may be too complex. Once you have this marketing piece, share it with possible funders and invite their input. Make sure the piece speaks to how you plan to measure success.

Once you have more traction with an idea, make sure to publish your results. For example, as you learn from your Beta model, consider writing about the results and what you’ve learned along the way. Seek input from likeminded leaders and nonprofits. There’s no sense in keeping your good idea to yourself. And if your project really is innovative, it’s likely to capture a little buzz and might just capture the interest of a funder.

Invest in R&D

Many nonprofits budget for research and development. This can be fairly straightforward if you’re at a big nonprofit, but it doesn’t mean you can’t allocate time and energy even if you’re small. If it’s not in the budget, it’s not going to be funded, period. So, put a line item in your budget to support innovation. Boards of Directors (and funders) have the ability to restrict net assets for certain activities. Why not push your board to help fundraise and fund innovation? If for some reason you’re celebrating a milestone, use it as an opportunity to ask funders and donors to help fund innovation.

Where to Look

Remember, venture capital exists outside of Silicon Valley. Believe it or not, some foundations will actually fund innovation. We all know funder priorities change, so by the time you read this, the funders I share here likely will have already changed their priorities. But nonetheless, take a peek at Gates, Rockefeller, MacArthur, Knight, and Haas Jr. Yes, I know, it’s unlikely, but hey, you have to try, right? If you’re able to get an audience with a program officer, ask them if they know of any funders who might provide support for your idea.

Governments will also sometimes fund innovation. Expand your thinking and start asking your contacts in the government sector if they know of funders or programs that help seed innovation, or jump on or your local or state equivalent and snoop around. I know of several national and California-based government agencies that are looking for new ideas, especially in climate change. So, get your Google on, and start poking around!

Coming up with new ideas and approaches is difficult, and launching them can be even more difficult. And getting them funded so they have a long-term chance to make a difference? That may be the most challenging of all! But stick to it and take risks, both with your ideas and with your hutzpah in trying to get them funded. After all, where would we be without new ideas?

Here are a few more resources to put you on the right path, and please share any others you know of in the comments below:

Global Innovation Fund: GIF invests in social innovations that aim to improve the lives and opportunities of millions of people in the developing world.

Social Innovation Fund: SIF positions the federal government as a catalyst for impact, in which evidence-based programs and interventions are used to enable social innovation across America.

Harvard Business Review: HBS recently published a great article on exactly this topic called “Funding Innovation: Is Your Firm Doing it Wrong?”

About the Author

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Marc Rand has focused the last twenty years on supporting the nonprofit sector through capacity building and finance. He spends his time creating new and innovative ways of supporting organizations through finance as the Executive Director of American Nonprofits, which includes operating the Nonprofits Insurance Alliance of California and Bridge to Bridge Loan Funds. He is the former Program Director for Loans and Affordable Housing at Marin Community Foundation, one of the country’s largest community foundations. Prior to being a funder, Marc served with the Peace Corps in Romania where he led a team that developed five credit unions focused on underserved population. Before his service with the Peace Corps, Marc served as a Capital Markets Analyst with First Union National Bank.

Articles on Blue Avocado do not provide legal representation or legal advice and should not be used as a substitute for advice or legal counsel. Blue Avocado provides space for the nonprofit sector to express new ideas. Views represented in Blue Avocado do not necessarily express the opinion of the publication or its publisher.

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