Why Most Innovation Funding Fails—and the Model That Changes Everything

Is Your Funding Model Ready for What’s Next?

Most companies say they want long-term growth, but when it comes to funding, they’re stuck in a short-term mindset. The traditional funding model—focusing on quick wins and predictable returns—is holding them back. If you’re using this approach to fund every project, you’re likely missing opportunities to future-proof your business.

Here’s where the Next Funding Model comes in. This model is all about flexible, staged investments that help you grow more than just financial capital. It allows you to invest not only in projects that promise immediate returns but also in those that build essential, long-term assets—like reputation, relationships, and intellectual capital.

Traditional Funding Gone Wrong

Take a common scenario: a company receives a million-dollar budget for a big idea, and they rush to execute. They’re told it has to fit into a predefined structure, be completed by year’s end, and deliver immediate ROI. But innovation doesn’t work that way. It’s unpredictable, and not every project will succeed on the first try.

Case in Point: A Misfit Million-Dollar Prototype

Imagine an innovation team in the Air Force tasked with creating a “rescue package” to drop from aircraft into combat zones. They received $1.5 million to build a prototype. But no one stopped to check if the prototype could even fit into the aircraft it was meant for. After a year and $1.5 million, the team found that the rescue package was too large to fit. A quick test early on could have prevented this, saving time and money.

In the Next Funding Model, funding would be released in stages. Instead of $1.5 million upfront, the team might get a small amount to create a scaled model and test the concept. This approach allows for flexibility, early corrections, and minimizes the risk of blowing the budget on something that doesn’t work.

The Next Funding Model: Funding That Builds Long-Term Capital

The Next Funding Model isn’t just about financial returns. It looks at six types of capital—financial, intellectual, human, social, reputational, and political—and asks how a project contributes to each. Instead of pouring money into projects that only promise immediate profit, this model funds initiatives that strengthen the organization’s foundation and create opportunities for the future.

Google X and the Smart Exit

谷歌 X once attempted to build an airship as part of their “Other Bets” division. The project showed early promise, but as they reached the next stage, they faced a decision: continue with an additional $200 million investment or redirect those resources elsewhere. Instead of pushing forward, they chose to stop. In a traditional model, this might look like failure. But under a flexible funding approach, this was a strategic win. Stopping at the right time saved resources that could now be redirected toward more impactful ideas.

By freeing up capital, Google X created room to fund emerging technologies that aligned better with their future goals. This allowed them to explore new fields, such as autonomous systems and AI, which promised higher potential and a broader range of applications. Today, Google’s ongoing breakthroughs in these areas wouldn’t have been possible if they had stayed locked into the original project.

With a Next Funding Model, you’re not just investing in what works today—you’re making room for what will power tomorrow.

How to Shift to a Next Funding Model

1. Map the Full Capital Impact of Each Project Don’t just look at ROI. Map each project’s impact on the six types of capital—financial, intellectual, social, reputational, political, and human. Consider questions like: Will this project build our reputation? Strengthen partnerships? Attract talent? These questions help you identify projects that add value in ways financial metrics can’t capture.
2. Apply a Stoplight Model Use a “Stoplight Model” to quickly assess projects as green, yellow, or red based on their impact and potential to build long-term capital. This approach saves time and directs funding to high-impact projects.
3. Stage Your Funding Based on Capital Milestones Instead of lump-sum budgets, break funding into stages: Renew (Explore), Growth (Expand), Optimize (Exploit), and Maximize (Extract). Tie each stage to specific goals for capital growth, not just profitability. For example, does a pilot phase attract key partners (social capital) or boost your market reputation (reputational capital)? If a project reaches its capital goals, it moves to the next stage; if not, funding stops.
4. Develop Flexible Plans for Every Project The Next Funding Model is built to handle uncertainty. Instead of betting everything on a single path, build in Plan B, C, and D options. If one approach fails, having backup plans allows you to pivot without starting from scratch.

Bottom Line: Fund for the Future, Not Just the Next Quarter

In a fast-changing world, the companies that thrive will be those that fund with the future in mind. The Next Funding Model doesn’t just fund ideas—it builds the backbone of a resilient, competitive business.

So, next time you’re debating project funding, ask yourself: Are we funding for today’s profit, or tomorrow’s growth?