innovation for the public good: financing tools for social innovation

8/3/2019 Innovation for the Public Good: Financing Tools for Social Innovation

1/3

1 Center for American Progress | Innovation for the Public Good: Financing Tools for Social Innovation

Innovation for the Public Good: Financing Tools

for Social Innovation Three Financing Principles to Guide Social Innovation

By Kristina Costa

October 2011

Las week we examined why s rong leadershipis essen ial o public-sec or innova ion.

An agency leader who wan s o develop more innova ive solu ions o social problemscan expec resis ance on many ron s, bo h poli ical and logis ical. Bu no obs aclelooms larger han he problem o nancing.

Public-sec or innova ors have o convince a risk-averseand nancially cons rainedpoli ical sys em o ake a chance on new ideas.

Te nancing hurdle can be overcome wi h a litle crea ivi y, however. Success ul new and emerging social-innova ion nancing models are an encouraging sign or agency leaders, communi y advoca es, and nanciers alike.

Tere are hree key principles or success ul social-innova ion nance. Firs , innova ionrequires appropria e levels o nancial backing a each s age o he process, wi h small sumsavailable or promising ideas and larger sums or proven innova ions ha meri scaling up.Second, money mus ollow success, rewarding new ideas ha work and pulling undingaway rom less-success ul innova ions. Finally, i some imes makes sense or governmen

unds o be supplemen ed by con ribu ions rom priva e-sec or nonpro sespecially orhe mos experimen al ideas. Le s consider each principle in grea er de ail.

Apply stage-gate funding

Te so-called s age-ga e approach ensures he righ level o nancing is made availableo programs a di eren s ages o heir evolu ion.

Tis me hod was used by he Depar men o Educa ions Inves ing in Innova ion Fund,o herwise known as he i3 Fund. Te smalles i3 gran s, up o $3 million each, weremade available or programs ha used an innova ive approach o improve educa ion
http://www.americanprogress.org/issues/2011/10/ipg_101211.htmlhttp://www.americanprogress.org/issues/2011/10/ipg_101211.html


2/3


ou comes bu lacked su cien da a o meri scale. Te larges gran s, up o $25 millioneach, were arge ed or innova ions ha already had proven resul s and needed suppor

o scale up heir e or s and increase heir reach.

Social Innova ion Fund gran s, which have been given ou by he Corpora ion orNa ional Communi y Service since 2010, incorpora e an addi ional innova ion.

CNCS gran s are given o in ermediaries who hen sub-gran hem o o hers. As aresul , governmen policymakers are insula ed somewha rom he poli ical allouassocia ed wi h ailed ven ures.

S age-ga e unding has ound success in o her governmen s as well. In he Uni edKingdom, he Na ional Heal h Service is pilo ing Regional Innova ion Funds. Te undshave inves ed abou a hird o heir o al $350 million on he 250 mos promising proj-ec s, ini ially gran ing $15,000-$70,000 o new ideas. Te res o he unds are ocusedon scaling up he bes in erven ions ha boos ou comes and also save public money.Tese include innova ions ha help move special-needs children rom hospi al o home

ve mon hs sooner, saving he heal h service more han $2,000 a day. Ano her innova-ion ha received unding or scaling up was inhalers ha whis le when used correc ly.

Ta means ha he 50 percen o Bri ons who incorrec ly used radi ional inhalers arenow much less likely o have an as hma atack.

Make sure money flows to success

Te second nancing principle o arge ing money o hings ha work needs o beanchored in a commi men o da a-driven ou come measuremen s. I success ul pro-

grams know hey will atrac more unding, here is a much grea er incen ive or innova-ive approaches o emerge.

One example is he work o he Uni ed Kingdoms Grea er Manches er region o reducecriminal recidivism. Tis program brough oge her 10 local au hori ies, 10 programs

arge ing young o enders, wo magis ra e cour s, and a prison o pool heir unding andapply i o he approaches ha were proven o work bes . Ins ead o unding more han200 di eren , small-scale e or s, unds were moved o he 10 programs mos success ula reducing reo ending among you h.

Think outside the traditional budget box

In order o make nancing innova ive social programs ruly e ec ive, agencies shouldengage he suppor o o her sec ors. Bo h i3 and he Social Innova ion Fund requiregran ees o demons ra e hey can access unds rom o her sources, like ounda ions. Tis


3/3


encourages social innova ors o look beyond governmen or resources and allows a rela-ively small amoun o ederal money o leverage ar grea er amoun s o priva e capi al.

For ins ance, $50 million in SIF unding will be complemen ed by a leas an addi ional$150 million in nongovernmen unds.

New York Ci ys mos un es ed innova ions have ofen been backed by unding rom

ounda ions and priva e sources. TeFund or Public Schools , or example, has raisedaround $150 million over he las ve years rom he priva e and philan hropic sec-

ors o suppor ini ia ives such as heinnova ion zone ha allows schools o ry new approaches. I some o hese approaches prove unsuccess ul, poli ical leaders are insu-la ed rom he claim ha public money was was ed.

Arranging nancing or social innova ion work is bu one crucial par o he puzzle. Nex week well consider wha makes an agencys cul ure mos able o innova e.

Tis is he la es ins allmen o a weekly column on governmen innova ionproduced by

CAPs Doing Wha Works eam in par nership wi h he Bellwe her Educa ion Par nersand he Young Founda ion, as par o he Innova ion or he Public Good series.

Kristina Costa is a Special Assistant at the Center for American Progress.
http://schools.nyc.gov/fundforpublicschools/http://schools.nyc.gov/community/innovation/izone/default.htmhttp://www.americanprogress.org/projects/doing_what_works/innovation/http://www.americanprogress.org/projects/doing_what_works/innovation/http://schools.nyc.gov/community/innovation/izone/default.htmhttp://schools.nyc.gov/fundforpublicschools/

innovation for the public good: financing tools for social innovation

Documents