Building Moonshots – Invest in the Future
Tamara Carleton, PhD
Award-winning professor, industry advisor, and author of radical innovation and strategic foresight
Co-authored with Dr. William Cockayne
This Way is one of 50+ ways for building moonshots, the focus of my current book project with William Cockayne.
Way #42: Invest in the Future
Funding the future requires every part of the economy to chip in.
About the Way?
The key question for any moonshot-seeking organization is: how do we finance the long path from an almost impossible idea to scale? As Meta CEO Mark Zuckerberg stated at the re-launch of his company, “This is not an investment that is going to be profitable for us any time in the near future.” Successful moonshots are built upon a financial model that supports the pipeline of curiosity-driven imagination and science to lab-proven concepts and technologies that eventually scale to “ubiquitous products that people want and can afford to buy”, borrowing a comment from Bill Gates.?
Andrew Lo, a prominent economist and MIT professor in finance, argues that a new financial model is needed to help finance breakthroughs, or “longshots” in his phrasing. Even after a breakthrough in nuclear fusion at MIT – which in itself is a major technical milestone – Lo recognized that “another 10 years and about $5 to $10 billion in additional investments” is required to reach the bigger goal.
Other financing experiments are occurring using consortium approaches. For example, the future of sustainable flight is being developed at the Global Technology Centre, an joint R&D center at GKN Aerospace (now part of Melrose Industries) in the United Kingdom. Two dozen organizations are working together to research and build the technologies needed for the airplane of the future with name-brand programs, including Airbus’ Wing of Tomorrow, and state funding from the Aerospace Technology Institute. Melrose COO Peter Dilnot says, “This is about groundbreaking technology for the future of flight to make aircraft more sustainable.” The model of long funding was critical, and Dilnot adds: “We still have a strong position but it requires continued funding – you can’t turn the tap on and off on this sort of stuff – for us to sustain that position.”
Even America’s historic ARPA model is being expanded to fill gaps between classically financed and siloed stages. This handoff is crucial because moonshots ideas take a longer journey to build. ARPE-E – the government entity in the US Department of Energy tasked with funding R&D for advanced energy technologies – has launched two programs to help teams cross the next bridge in development. The ARPA-E Tech-to-Market program helps teams get a jump on exploring possible commercial viability of their technology, and the ARPA-E SCALEUP program requires teams to find at least one commercialization partner to help with market deployment and adoption.
Value of the Way????????????????
Economists find that the interaction of finance and technological innovation is rarely studied, even though technological change is vital for economic growth. Yet moonshot innovation cannot occur without serious and continuous financing. This way of investing moonshots follows an idea from curiosity to scale. When tracing its trajectory, a moonshot is often built on a collection of breakthroughs that string together multiple horizons of investing. There is not a single investor or one investment. By taking the long view, continuous investment ensures funding for breakthrough ideas over an extended timeline and across development stages.
Following the Way
Leaders at every level should challenge themselves to align their biggest cost – the talent that imagines and builds the organization’s success – with the organization’s biggest opportunities for success. One powerful way to strengthen an organization’s innovation pipeline is to create an incentives model that helps to connect each person’s goals with the development of a nascent, world-changing idea into a scaled market success. When teams are separated by stage or function, what should be Strategy and Research and Development and Market Success instead becomes broken apart: the “ands” have turned into “ors”. The first step is to hold an honest conversation about incentives – ideally at all levels so from senior leaders to project managers to even external partners – and have the goal to reprioritize existing incentives and add new incentives that keep a moonshot idea advancing.
Living the Way
Example team discussion prompts:
Example in Action
Venture capital (VC) is a major mechanism for funding the conversion of new ideas into market value, although VCs typically focus more on near-term returns than proper moonshots. Recently, they have started to respond to their startups’ need for longer development timelines, realizing that multiple teams required support beyond the usual ten-year fund. Notably, tier-1 venture firm Sequoia Capital – whose early investments include category-defining companies like Apple, Google, Oracle, and Zoom – announced a new Sequoia Fund as “patient capital for building enduring companies”. Sequoia partner Roelof Botha explained, “Our industry is still beholden to a rigid 10-year fund cycle pioneered in the 1970s.” The firm argues that patience and long-term partnerships generate exceptional results, and as such, they will now use a new structure that “removes all artificial time horizons”, funneling capital down to a series of smaller funds that invest by stage.
Tamara Carleton, Ph.D. soon after your insightful piece [Funding Moonshots really wants to be a book] the Financial Times covered a handful of trusts “raising record sums to fund a new wave of innovation in a period of rapid technological change.” In a piece titled ‘Investment trusts rediscover their roots with a 21st century twist’ the authors describe how a small number of investment trusts dating back over a century were founded in search for long-game income: “F&C Investment Trust, formerly Foreign & Colonial, which dates back to 1868, initially invested in overseas government bonds and Alliance Trust was an early backer of mortgages for North American railroads and Texan oilfields. Scottish Mortgage Investment Trust, another supercentenarian, was set up to lend money to rubber planters in Malaya.” As the funding of a long-view, better future comes full circle – trusts, private wealth (Gates, Schmidt, and many more), and the expansion of the ARPA Vision in the U.S. and globally – the question that gnaws at me becomes, “How are we building on the lessons from Foreign & Colonial, Carnegie, and the early years of ARPA?”