At first glance, funding seems to be the cornerstone of innovation. However, a deeper examination reveals a more nuanced truth. Let’s unpack the often-overlooked – yet equally crucial – components that drive innovation.

“We can’t push through with the project at this moment.”

I tried to maintain my composure as I absorbed this shattering statement during a Zoom call with the CEO of a housing developer in the Philippines with whom we were supposed to partner for our first big project.

We’ve been pursuing the endeavor for over 18 months, and I poured every ounce of energy and hard work into it. In fact, each time they raised a question or a concern, I made it a point to agree and not to negotiate hard or leave them hanging.

My answer to their every parry was automatic – Yes, sure, I’ll do it. We even reached a pivotal stage where the contract was signed and sealed, marking a significant milestone in our journey.

By this point, we had completed the fundraising for the project – often the most difficult hurdle in pushing through with an innovative project. After dedicating over six months of fundraising to this effort, we were finally ready to move forward. But then came a twist that triggered the developer to slam the brakes.

What could have prompted them to back out of the project we’ve been trying to set up for a year and a half? The answer was as surprising as it was ironic. Instead of being pumped up to start now that we had the money and faced no apparent obstacles, the developers got cold feet.

Funding Matters, But It’s Not Everything

I’ll get to the details of that later. For now, let’s discuss funding.

If I were to come face-to-face with my younger self, the fresh-out-of-corporate, non-profit founder I was a decade ago, I’d be looking at someone trying his best to navigate what seemed to be the most crucial challenge: funding, of course.

Money, after all, appeared to be the make-or-break factor for any ambitious project. That said, it’s not surprising that most of my primary goals back then were anchored on how to get funding.

Who should I pitch to to get funding? How could I make this project more appealing to investors?

It seemed straightforward to me then – secure the capital, and the path to success would be clear. Boy, was I wrong.

My years of experience have taught me that getting the first capital or seed capital is just the beginning of an uphill battle.

Initially, securing funding for a project in its early stage—still a concept on paper or a preliminary sketch—can captivate investors. The allure lies in the possibility of transforming this concept into a tangible reality, a process often met with enthusiasm and optimism from funders. The decision to fund is based more on the confidence of the entrepreneur and the novelty and excitement of the new idea.  

But if getting initial funding is already challenging, doing so as the project transitions from execution to scaling up is even more complex.

After all, scaling up introduces new questions and communications, ranging from practical execution-related issues, such as obtaining necessary permits or managing manufacturing processes, to broader concerns about the project’s long-term viability and profitability.

Scaling requires navigating a more scrutinized funding environment focused on the practicalities of bringing a product to a broader market.

In short, getting investors on board doesn’t get easier over time; on the contrary, it gets trickier.

But despite the challenges of securing funding – whether seed capital or scaling-up funding – it’s not the be-all and end-all of driving innovative projects to success. If I were to talk to my younger self and have an opportunity to give him sound advice, I would tell him to be wary of other key factors that can equally hinder the success of innovative projects.

Fear, Anxiety, and Lack of Strong Leadership 

Let’s go back to the story of the halted project in the Philippines. Once the project was signed, we raised the money and told the developer we were ready to start executing.

After a few weeks of silence, they told us they wanted to jump on a call. That’s almost always never a good sign.

On the call, they said they didn’t want to push through with the project because they had a new CEO, so there would be changes in the business direction. There was also a mention of the work backlog they must deal with.

The developer’s decision to pull the plug on the project created a seed of doubt in my investors; after all, we raised the funds with the Philippine project as our focal point.

And so, my investors traveled with me to the Philippines to meet with the developer and get to the bottom of things. Interestingly, in the presence of the investors, the developer offered a different explanation for their decision to back out of the project.

As the story unfolded, it became clear that the real grounds for the developer’s withdrawal were rooted in a complex policy framework. They realized that their current practices of business as usual wouldn’t support the actual execution of our pathbreaking concept of housing projects.

This revelation surprised me; despite my 18-month effort to address every challenge that arose, not once did they bring up this particular issue. It seemed to be an internal concern within their team that was used as a pretext to back out of the project.

The underlying issue, as it turned out, was the fear harbored by the new CEO. In any organization, the CEO is accountable to the board, and the board, in turn, influences the CEO’s decisions. In this case, the CEO was hesitant to take on the responsibility for a project that was not only innovative but also charged with the risk of failure.

Her cautious approach highlighted a leadership style that favored minimizing risk rather than embracing bold innovation. This cautious approach, while understandable, underscores a critical aspect of leadership in innovative ventures: the ability to balance risk with opportunity.

Fear, a natural part of the human psyche, often acts as a protective mechanism. However, in the realm of business and innovation, this fear can become a significant barrier. It can prevent leaders from making bold decisions that, while risky, can potentially break new ground and drive innovation.

The ability to manage fear, channel it constructively, and make informed, courageous decisions is what often distinguishes transformative leaders from the rest.

The problem is even more systemic. In this case, even if the board, which supported us, was to put its foot down and make the project happen, who would be held accountable if the project went south? The dilemma of responsibility would arise between the CEO and the board.

In addition, the CEO and everyone down the chain of command have annual bonuses and targets. A failed project has financial implications not only for the business but also for individual members of the team. This makes execution very, very hard for traditional businesses unless there is a kindred spirit of innovation and everyone agrees to both gain and lose depending on the outcome.

Dishonesty, Lack of Transparency, and Stakeholder Misalignment

Sometimes, it’s not a lack of strong and courageous leadership that’s the problem, but rather, a difference in goals and an erosion of trust crucial for effective collaboration.

A few months ago, we were on the cusp of initiating a challenging project in India to build houses for a poor community. The complexity of the project was heightened by the fact that the homes we planned to build were relatively more expensive than standard housing projects. 

Remarkably, we managed to secure a funder willing to finance these houses as a pilot project in India. It was no small feat, as the financier had to triple its budget to meet the requirements of building BillionBricks houses.

Our role was to design and ensure the execution met the required quality standards. Meanwhile, a local NGO was responsible for identifying locations, involving the community, and securing necessary government permits and stakeholder agreements.

However, a significant issue surfaced as we neared the project execution. We found out that the NGO was not very honest and transparent about crucial details, including who would live in the houses, what type of land they had, and the project’s sense of urgency. 

It was not a matter of miscommunication; they knowingly gave us false information.

Furthermore, they began to pressure us to expedite the project, urging us to compromise on the innovative aspects we were bringing in. This shift in their approach raised serious questions about our continued involvement.

The NGO’s dishonesty and lack of transparency fostered stakeholder misalignment. BillionBricks wanted to build prototype houses and innovate, but the NGO was probably more keen on raising funding on the back of our idea but never intended to build homes.

 This time, it was us who needed to step back from the project.

In this case, the novelty of the innovation was used to secure funding – larger than possible otherwise – with no real intent of following through on it.

The Challenge of Timing

Beyond the human-induced challenges such as fear and anxiety, leadership issues, dishonesty, and goal misalignment, there’s also the critical element of timing to consider.

American investor, fund manager, and Idealab founder William Hunt “Bill” Gross, in his TED Talk in 2015, argued that timing was the most crucial factor to the success of startup companies. He even proposed that timing was more critical than the startup’s idea, team, business model, and funding. 

Gross looked across 100 Idealab companies and 100 non-Idealab companies and found that timing accounts for 42% of the difference between success and failure.

In the Philippines project I mentioned, the timing of the shift in management triggered a halt. As for the India project, the local partner’s change in timeline and urgency could no longer coincide with BillionBricks’ objectives and could no longer be achieved with the change in project timeline. 

Reflecting on these experiences, it becomes evident that timing is not just a factor but a pivotal force in the success or failure of any project.

It’s a stark reminder that even with all elements seemingly in place – funding, a strong team, a solid business model – the timing of certain actions and decisions can have a profound impact.

Navigating the Hurdles to Project Execution

As illustrated by the experiences I shared above, it’s clear that funding, while essential, is not the only factor that can make or break a project. In the end, it’s all about execution. 

Let me give you an example of a startup that had ample funding – $120 million of it – but epically collapsed due to poor execution.

Juicero was a Silicon Valley startup that launched a controversial $400 juice press in 2016. The juice press had Wi-Fi connectivity and was used to process single-serve Juicero packets sold by subscription.

The controversy mainly stemmed from the high cost of the machine and the juice packets, as well as the discovery that the packets could be squeezed by hand without needing to use the expensive Juicero machine. The company shut down in 2017.

Despite securing millions in venture capital (possibly due to funders’ enthusiasm and optimism, which I discussed earlier), Juicero’s poor execution sparked mocking questions about the necessity and value of its product.

Ideas, even brilliant ones, are a dime a dozen. It’s proper execution that separates successful ventures from those that falter, and this is where many organizations, despite having initial funding and investor support, can stumble.

Rethinking the Innovation Equation: It’s More Than Just Funding

The experiences I shared here underscore that while funding is a critical catalyst, it is far from being the most important ingredient for successful innovation.

The real test lies in navigating the intricate web of human factors and organizational dynamics. Leadership’s approach to risk, the clarity and honesty in communication, and the alignment of goals among partners are pivotal in steering a project to fruition. Moreover, the timing of decisions and changes within the project’s ecosystem because of external factors not in our control can also significantly sway the outcome.

The story of Juicero, with its ample funding yet ultimate failure, serves as a stark reminder that the essence of innovation lies in execution. A brilliant idea, backed by substantial financial support, can still falter if not executed with honesty, precision, adaptability, and a keen understanding of the broader context in which it operates.

In the end, innovation is more than just a brilliant idea or a flush bank account. It’s a complex process that demands careful consideration of various factors, many of which are interdependent. 

That said, if I were to talk to my younger self, I would tell him to continue working hard at pitching to potential investors. But just the same, pay equal focus on courageous leadership, honest communication, stakeholder alignment, and the often unpredictable element of timing. After all, funding, while essential, is just one piece of a much larger puzzle.

References:

Gross, B. (2015, March). The single biggest reason why startups succeed [Video]. TED Conferences.

The Guardian (2017, Sept.) Squeezed out: widely mocked startup Juicero is shutting down