Building Innovation Communities #2 | Money matters
Lesson 1 laid out the case for a mission as the key to building innovation communities. This post suggests that money - and in particular a sustainable business model - can't be far behind.
One of the reasons I started this newsletter was because goodwill and “vibe” isn’t enough. Mission is Number One, but it’s not sufficient for an innovation community to be sustainable. In the world of Web1.0 / 2.0 there have been a number of financing options for those building innovation communities:
Grants. In theory, philanthropy would be well aligned with the goal of building an innovation community, since the fairly amorphous, systems-improving goals fits well with philanthropists’ ambition for change. At Aging2.0 we were fortunate enough to get a $100k+ grant from Robert Wood Johnson foundation, but we had to go through many hoops as we were structured as for-profit. Plus it had to be scoped very tightly to serve the mandate (e.g. US only, which didn’t fit with our global mission), Further, most such grants only pay for programs (e.g. we had to deliver a novel report) rather than pay for the dreaded “overhead”.
More broadly, many groups looking for funding find large (e.g. USAID) grants go to big prime-vendor consortia which are only open to invited partner organisations. Those who excel at front-line innovation are generally not the ones who excel at completing soul destroying grant submissions which require rigorous and detailed auditing that most small entities don’t have.
Salaries. Big companies often have their staff work on innovation projects - Google famously have their 20% rule for innovation projects (though not more general innovation communities as far as I’m aware). Whilst at Nokia in Finland in 2006-2008, I built a community of around 1000 people engaged in innovation projects, called naturally, Nokia2.0. This community came together organically, with a number of events, building new apps and services (such as developing the first mainstream podcasting app) because as a number of us were worried that Nokia wasn’t going to be competitive in the Internet-era, despite being the dominant player in the mobile market at the time. The downside is that this was just an internal community, so its scope was limited. Plus, the company wasn’t keen on granting employees stock or bonuses based on new ideas or companies created (other than a venture prize that got me €3k for creating an app). It’s hard to change the world when everyone clocks off at 5pm.
Funds. At Aging2.0 we often joked that it’d be much easier to attract the startups that we were searching for if we just had a $100m fund - they’d find us. In part that’s what happened with the space, as new funds have sprung up, and promising startups now have more options to get help. The downside here is that most funds tend to be fairly territorial about their funnel and deals, so this again doesn’t grow the ecosystem as much as an independent effort.
Events & Sponsorship. This became our default model, event ticket sales for the HQ events (local ones tended to be free), and corporates supporting with checks of $5-$50k. The challenge here is that you are competing with professional event organisers as a community group, so need to develop dedicated skills around event marketing, ticket sales and sponsor business development.
Membership fees. With critical mass of members and / or unique content you can offer a membership models like an association - either for individuals or companies. This again requires a dedicated team to sell and serve the members. At Aging2.0 we had different versions of this over the years - the Leaders Circle, the Alliance and The Collective - all of which required significant account management, often for very different companies looking for very different things, so it tended to bleed into the consulting realm (see below). What’s less appreciated is that the DNA will shift from an independent pursuit of a powerful mission, to one that’s pursuing success of the members. These may be in conflict - see for instance how many industry associations and unions are reactionary and resist changes to the status quo.
Consulting. Companies want insights and some of this can be garnered from a community’s discussion, along with information about the most promising startups in any particular area. However, consulting projects are generally focused on the client, and may be hard to translate to broader ecosystem objectives.
Tech licensing. Bluetooth is an example of a novel widely adopted technology that was created by a consortium, that created a non-profit to license and manage the tech. This is less a mission-driven innovation community and more of a vendor structure.
The elephant in the room here is that the whoever pays the bill gets to name the tune, and this can get awkward. An innovation community around health sponsored by Big Food or on climate change sponsored by Big Oil doesn’t feel good.
Going forward there are going to be new models for funding communities that recognise contributions, share ownership and reward efforts. The cooperative model has been around for centuries, and was largely replaced by limited liability companies for the very good reason that limited liability reduced the risks and encouraged entrepreneurship. Emerging models of DAOs take elements of coops and build on them, and can in turn learn from the history of coops. Unpacking the new business models for communities is what this site is all about, and one that we’ll be diving into in ever more detail in the weeks to come.