Bridging the funding gap for innovators

Innovators play a much more important role than most people even realise. We often applaud the Apple and Tesla of this world, but when you look closely at where that fantastic innovation that these companies adopt, package and market, the truth is that it comes from often university or government funded research programs.

There's a myth that companies are the main drivers of innovation. This is exactly that: a myth. with some amazing exceptions, most companies are terrible at enabling transformative innovation as it is an investment that is often very difficult to justify internally as it is often way too early for commercial adoption, which means the person championing that investment will probably not see much commercial benefit. Read Prof Mazzucato's book "The Entrepreneurial State" for a much more eloquent insight into this.

But this means that innovators are essentially stuck between the oven and the frying pan. Almost everyone wants to support them, yet very few are prepared to fund them. The investments required are often highly risky capital allocations that would make even experienced angel investors shrivel up.

Understanding innovators and their abilities

So let me speak frankly.

In my view as an investor (both private and public funds - we have invested in over 300 innovative) and an entrepreneur (with way too many failures under my LinkedIn belt) as well as one of the people behind of the world’s biggest educational portals for SMEs, my view is that innovators don’t – with a few exceptions – deserve the capital that they need.

Before you fire off a hate mail, allow me to clarify by inviting you to join me on a flight over Africa....

You are sitting in a (hopefully) beautifully engineered and tested airplane with well trained staff that knows exactly what to do and have been trained for many eventualities including emergencies (such as running out of Coffee and having the Chief Coffee Drinker on board). Look around you. Everything is well researched and fine-tuned. Materials are stress tested. The seats are the product of years of engineering and passenger feedback.

The airplane is the product of a powerful choreographed team of engineers and support staff on the ground. It is truly a well run and usually big business.

Now please look through the little window at the innovator on the ground. Sitting there with often with inadequate tools but a great invention.

She/he is trying to hammer a small plane together with substandard materials to help his innovation take off (in this analogy the plane is the business in case my sub-standard writing skills are not getting the message across correctly). If the innovator by some miracle and lots of mentoring assistance does manage to put together something that could fly, most innovators are hopelessly under qualified to actually staff the aircraft, both from a pilot’s skillsets as well as from a engineering perspective (e.g. engines, electrical, etc). Some do, most crash, many run out of fuel (cash).

So how do we fix it practically?

More money? Maybe, but money is a finite resource. And most innovators are too brilliant and nerdy to navigate the flashy sometime superficial world of investor networking (fundraising is a full time job that often is attracted to the loudest and flashiest people - case in point Adam Neumann and his WeWork scam).

Better more focused incubators? Also an idea, but expensive to setup and run (though they provide an incredible supporting ecosystem!)

My suggestion?

1. Place the innovator inside a mid to large corporate where their innovation has a practical application and can be supported on the back of organisational infrastructure, access to finance/markets and staff expertise.
2. Give some of the funding to the innovator, but the bulk to the corporate to manage on behalf on the innovator (and ring fenced so it is accordingly focused).
3. Give tax or co-funding incentives to the corporate (e.g. for every USD 100 the corporate puts in, they get USD 500 in co-investments or tax incentives.
4. Have a clear and direct feedback mechanism (think uber or AirB&B ratings) to track both the progress of the innovation in the commercialisation journey as well as the behavior of both the innovator and the corporate.
5. Give the innovator a shareholding structure that is fair and incentivised to align to commercialisation or impact targets.

In other words, invite the innovator to board the big airplane and be part of the airline so they can reduce the risk that innovators inevitably face in their journey to market.

Am sure the more experienced amongst you will find holes in this. Please comment below with your feedback.

But the truth is that the innovation and SME support ecosystem is broken. We live in a society that is attracted by the superficial even if all the evidence points to the influence to save the planet that true innovators bring to the table. Funding innovators is not easy or free from risk. But if we want make enormous leaps we need to support them.

How can you get involved?

Assuming not all of you are investors or related to investors, how can you support innovators?

1. Go and hang out at nerdish events at incubators, accellerators etc. Listen to some of the awesome things people are working on and start being a champion for their cause (eg. a linkedin post like "Yesterday I attended this event and met the amazing team behind company X who is working on an amazing technology to reduce wear and tear of tires on the road which in turn drops pollution to... ". Most innovators struggle enormously with visibility.
2. Pick up the ball and volounteer for that innovator. Maybe take over their social media accounts and help them to post things 2 or 3 times a week or create a little newsletter etc.
3. Be a champion for that innovator and introduce them to people and organisations where they might be opportunities.
4. If you are working in a large organisation try and use your internal network to get someone to meet with them (assuming there's a fit). You never know. And innovators struggle enormously with access to markets
5. Cheer them up. Innovators often are trendsetters working in isolation and often feel the brunt of loneliness.. touch base with them. Cheer them on. Pay for their coffee or invite them for a meal.
6. If you have an office and spare capacity why not offer them a desk and wifi access? It costs virtually nothing to you but helps the entrepreneur enormously.

Every little bit helps. Try not to take on too much but helping even one innovator can make the world of difference.

Hope the above helped. Have a good flight :-)