This week we are promoting two articles about innovation and funding. These were originally written by Richard back in 2015 and have been slightly adapted to ensure they remain up-to-date.

In the week that Game of Thrones returns to TV (yes, we honestly wrote this article that long ago!), it’s fitting to revisit the favourite phrase, “Winter is coming”. So, there’s no better time to look back and ask the question as to whether public funding drives or supports innovation.

The major challenge we have here is correctly defining innovation. Many projects have existed to supposedly support innovation, but the same old problem exists – innovation is about a lot more than inventing something. In fact, just inventing something isn’t innovation at all, unless you start to draw commercial benefit from it. So let’s start by setting some parameters – Innovation is about gaining benefit by doing something different. This can include products, services, processes, markets, marketing and the way you structure and manage your organisation. Simple enough, surely?!

Innovation requires someone to benefit

Sounds it, but to draw the optimal benefit from innovation, you’ve got to understand the structure and rules. Which is precisely why the previous raft of funded innovation support projects are extremely unlikely to present the Return on Investment (RoI) that the government desire. We’re writing this as someone who’s sat both side of the fence, and on it. We’ve received funding as an SME, brokered a few million’s worth of innovation funding for clients, and worked for government based bodies granting funding.

When we performed our recent Get Innovation study (the innovation strategy document we compiled for Lancashire County Council), one of our major findings reinforced another major point – the majority of ERDF funding and a percentage of Growth Accelerator funded projects seem to be drawn down by small and new-start companies seeking to make a product or market breakthrough.

The importance of a portfolio

While this is essential to the companies themselves, sadly it will never present the RoI that the government and EU desire and require. Why? The rules of innovation dictate that the majority of small and new start companies are unable to make the investment and take the risk in a wide portfolio of innovation projects.

Those who seek singular evolutionary change projects will not make major leaps (they’re not yet “high growth”), whereas those seeking singular revolutionary change are more likely to experience failure that is critical to the business.

If, however, larger and more stable companies were undertaking this activity, they would have more resource to invest in a range of projects and as such, their attitude to investment and risk are likely to be more generous, and their innovation portfolio is likely to be greater. Therefore the chance of success in evolutionary and revolutionary projects is vastly increased, which is where businesses grow, jobs are created, and GVA increases.

So what's the conclusion?

In order to achieve a high return on investment against the public purse, funded innovation projects must start to present solid services and find ways to attract the non-micro and more established companies - those were the risk is not critical to the business, but equally the reward is worth having.

Every time the public purse is used, the situation should be addressed in the way an investor would address a project, asking what the real return on investment is likely to be, what the percentage chance of success is, and should the project therefore be funded.

Start-ups and small companies do need funding – but let’s not fall into the age old trap of calling everything “innovation”. Let’s develop the right funding streams for the right projects – if the new funds are intended to really help high growth companies achieve their potential, we need to develop innovation services appropriate to these organisations. Only then will these companies take innovation and public funded projects seriously, and realise the growth through innovation is actually much easier than growth through blood, sweat and tears.

2026: Looking back...

Looking back on this article, it captures exactly why the majority of public sector funding was cancelled. Very little is available now, but that is primarily because it was invested so badly at the time. To be fair, giving a larger organisation with a portfolio of activities a £5K Grant would have had very little impact – but for every 10 failures someone could've given a larger organisation £50K to investigate something meaningful with impact.

This is the exactly what in Innovate UK used to do before the world got taken over by grant and bid consultants, which has caused the funding roots to come crashing down under a barrage of criticism. Innovate UK needs to get back to what it used to be.

This is the advantage of working on the Innovator Founder Visa Route – we are permitted, and have to, pick the winners. And it's a pleasure to be able to do that without the burden of "having to support all", which results in a financial loss for all involved.