Funding – A Practice Guide

Funding is essential for social innovation to grow and thrive. This is why SIX has an entire programme dedicated to philanthropy. The SIX Funders Node challenges, enables, and inspires funders to be more systemic and innovative in their thinking and practice. Our aim is to increase the flow of funding to social innovation and systemic change.

We believe in the potential for foundations to create a transformative social impact. They can play a key role in creating supportive environments for innovation to thrive. However, this potential can not be realised through traditional grantmaking methods and mindset alone. At SIX, we shift thinking within philanthropic foundations by convening global peers, building capacity and developing knowledge and learning (find out more about our approach here).

Throughout the past four years of developing and growing this programme, we’ve learnt how many foundations operate, the challenges they face and the unique opportunities that they have to fund differently and increase their impact. A lot of the discussion at our gatherings focuses on how the mechanics of foundations – how they structure their portfolios, how they measure their impact, what the right structures and governance models are to support new approaches; alongside new trends and topics of interest like how to prepare for the future and how to engage with data and new technologies.

I was excited for the recent opportunity to attend the launch of Nesta’s new ‘Funding Innovation: A practice guide’ – detailing their approach and tools to supporting innovation and practical advice to other funders.

This handy guide includes a helpful typology of the vast array of different tools that Nesta uses, alongside examples with corresponding advantages and challenges – ranging across a continuum from pure grants designed to achieve public benefit, to very commercial investments primarily designed to achieve a private return.

Not all of these tools will be appropriate or useful to other foundations, but the practice guide presents a great opportunity to stop, reflect and evaluate the approach you’re using and the impact that it has. This guide is timely. Through the SIX funders node, we know of many foundations who are asking what else they could do with their endowments (granting is often a small percentage and the rest is left with traditional investments) and many who have a desire to have a bigger impact.

As Vicki Sellick, Executive Director of Programmes at Nesta and author of the report, said at the event, ‘sticking to a single method is one of the most common pitfalls that foundations find. They believe that less methods will be mean less risk but this often misses the opportunity to find more innovative things in your pipeline. We’ve found a combination of methods to be particularly effective’.

After reading the guide and reflecting on our own knowledge and experience, I had the following questions for funders to consider as they engage with the guide. Some of these are also outlined throughout Nesta’s guide and many of these questions have also been asked at SIX’s retreats for philanthropic foundations.

Your approach and role within the ecosystem:

  • How do all of your different practices fit together? How does your portfolio encourage different stages of innovation?
  • Are you thinking through what capacity you need to develop internally alongside new tools?
  • How does your approach fit with your peers? Are you aware of your role in the ecosystem? Are you helping to develop this ecosystem? If everyone were to adopt the same approach, what would this mean for your funding partners? How can the ecosystem better work together (signposting grantees and partners, a better pipeline, sharing due diligence, publishing open and useable data)?

Learning, success and impact:

  • What are your metrics for success and how do you measure your impact? As the report mentions ‘impact means different things to different people. In the context of impact investment, you need to work out where on the spectrum you sit and what important means to you (financial vs social returns)’ pg 32.
  • How are you learning – with both your staff and your partners? How do you talk about and reflect on failure?
  • What does risk mean to you? How do you manage risk throughout these approaches? How are you promoting risk to spur innovation?  

Working with partners and grantees:

  • How do all of your approaches foster trust and relationships with your partners and grantees? Is this important to you? Are you working with them to design and implement the best funding processes for all parties?
  • Are you thinking through and discussing issues around sustainability and dependency? With your staff and your partners?  
  • Are you thinking through and addressing the barriers to entry for different individuals and organisations? Are you aware of certain power dynamics and normative behaviours your processes may perpetuate?

Not all of the tools mentioned in the guide are for everyone. Not everyone is or should be an impact investor. And not every social problem has a business solution (although see pg 25 for a helpful guide on supply and demand).

This guide has further questions to consider when designing new funds (see page 41) and helpfully articulates the challenges and opportunities that Nesta has discovered. We applaud this effort to share practices and frameworks to support peer learning for other foundations who may be new to this field or are looking to pivot their practice. If you’re interested in systems change frameworks, we produced this guide in 2016 with 4 case studies from global foundations after our retreat on the matter.

I look forward to continuing to discuss the above and more through our Funders Node. If you’re interested in joining this global group of peers – please contact