Saturday, April 17, 2010

Funding those great ideas - finding cash for Innovation!

Funding for Innovation and new technology projects has always been an issue for large companies as budgets are put under pressure and the drive to continually reduce costs is maintained.

Typically companies have a ‘cookie jar’ where they keep some seed-corn funding available for new stuff or more usually things get funded by reducing spend in other areas.

I was talking to a few innovation practitioners across companies about funding and they all report a similar pattern to the one faced in Royal Mail when I headed up the Innovation team. There was a ‘plenty and famine’ pattern with the gap between the two being around 18 to 24 months - money would be put into Innovation and new things, typically CEO or Marketing led, and then taken away again - typically finance or HR led.

Last week I came across an interesting concept, which was Crowd Funding of start up projects. There is a website where people across the world can invest small amounts of money in start-up projects that they are interested in. For your investment you don’t get any equity but the investee provides some sort of tangible benefit that costs very little. I invested $10 in three girls from New York who have a great idea for a cake decorating company, in return for my $10 I get emails that tell me how they are getting on an a recipe a month for 12 months.

As I got involved in the site I started thinking that this might be an interesting model for companies to get seed-corn funding from their employees. The concept is that ideas would be put forward and employees asked to put a small amount of investment - probably £1 - £5 - in the projects that they thought would ‘fly’. This concept brings together a couple of interesting ideas - the Wisdom of Crowds ideas where the mass of the company will tell you which they think is a good idea by putting their cash behind it, and secondly they will be engaged in the success of their chosen projects. Secondly, the concept of crowd sourcing of ideas and knowledge.

The idea concept would need to be fleshed out to a point where it could be taken forward with a small amount, typically £10,000 or less, of cash. The idea would be put on a web site, either owned by the company or a third party, or made available to the workforce. The amount required would be shown and people would then choose to invest or not - no money would be taken until the target had been achieved. This gets round the problem of having to give money back etc. and reduces the possibility of fraud etc.

Having this sort of initiative in place would also, I believe, encourage people to put their own ideas in to the mix, as it provides a way of giving permission to people to ‘do’ something, particularly if they see other people who they know get funding.

The bit I haven’t worked out yet and would like some thoughts on is how to do the ‘pay-back’ - what would be the equivalent of the recipes? One idea could be that the ‘investors’ would be entered into some sort of competition maybe for a prize draw at the end of the year.

Clearly there are a lot of questions that need answers and things to sort out but it seems a great way a getting that much needed seed-corn funding as well as engaging with the workforce in a positive way.

If you are interested in exploring further please get in touch - or if you have ideas about how to ‘pay-back’ I would be interested in your views.
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