Funding Innovation: New Models to Replace Traditional Approaches

Expert: Tristan KromerCurator: Hans Balmaekers

Tristan works with teams and leaders to create amazing products and build innovation ecosystems. He works with startups & >$1B revenue enterprises.

01 // New models for funding: why do we need them?

02 // What new models are emerging?

03 // How do these models influence the design and delivery of innovation programs in general?

// Summary

Large organizations are hungry for the creativity and agility that seems to come so easily to tech startups.

But what comes naturally to small teams often gets bogged down in logistics and bureaucracy once translated to larger organizations. In fact, startups can shift and pivot in the time it takes corporate teams to even form.

Curator Hans Balmaekers spoke with startup coach Tristan Kromer about how applying pressure through metered funding and success metrics can teach large organizations to innovate quickly and effectively.

Act like a startup. Fund like an investor.

For lean innovation, foster the investor/startup relationship and invest in a project in phases, rather than adhering to traditional funding models that place a large budget up front to fund a product through to completion without necessarily evaluating the market.

Because the results of each phase determines whether or not the project continues to receive funding, it applies pressure on the team to provide evidence that an idea is getting traction and scale. By showing strong actionable metrics, innovators and product teams justify further investment.

Build confidence with metrics

As intrapreneurs and entrepreneurs, we want to instill increasing levels of confidence in our concept or project. This is done by providing qualitative and quantitative data – ideally both – to show that the market is ready and engaging with our concept or product.

Don’t always expect a product as the end result

Success can mean different things for different teams. When we invest in a project, we learn, regardless of whether it results in a viable product. Large organizations can learn a lot from funding projects that deliver actionable data on whether a market is ready for a product or business plan, even if the product doesn’t go to market.

Apply pressure in the right direction

In the world of startups, funding is a forcing mechanism for entrepreneurs and intrapreneurs. However, no product team functions optimally under immediate pressure to get results tomorrow. Experienced investors are adept at applying pressure in the right direction, without creating useless stress to provide an ROI by an arbitrary deadline. The goal is to learn something, not to rush a product to market.

“The goal is to learn something, not to rush a product to market.”

Conditions for lean startup innovation

  • A desire to learn: Understand and integrate the benefits of innovation that may result in knowledge instead of a product.
  • Educated investors: Investors need experience funding start-ups, paired with a solid understanding of metrics and evaluation criteria.
  • A metered approach: Funding is delivered in phases based on evidence.
  • Pressure: Investors require evidence of success before any further funding.

New models for funding innovation

Metered: Funding for product development is delivered in phases based on pre-defined metrics.

Stage gate: Funding is delivered in phases based on decision points, or gates, where decision-makers agree to fund the next stage based on metrics, without repeating stages.

Scale gate: Funding is delivered in stages that can be repeated if the project pivots. Teams only receive investment sufficient to prove the next risky aspect of their business model is feasible without an “all in” mentality.