Center for American Progress

New Financing Tools Can Encourage Public-Sector Innovation
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New Financing Tools Can Encourage Public-Sector Innovation

Successful new and emerging social-innovation financing models are an encouraging sign for agency leaders, community advocates, and financiers alike.

Part of a Series

Last week we examined why strong leadership is essential to public-sector innovation. An agency leader who wants to develop more innovative solutions to social problems can expect resistance on many fronts, both political and logistical. But no obstacle looms larger than the problem of financing.

Public-sector innovators have to convince a risk-averse—and financially constrained—political system to take a chance on new ideas.

The financing hurdle can be overcome with a little creativity, however. Successful new and emerging social-innovation financing models are an encouraging sign for agency leaders, community advocates, and financiers alike.

There are three key principles for successful social-innovation finance. First, innovation requires appropriate levels of financial backing at each stage of the process, with small sums available for promising ideas and larger sums for proven innovations that merit scaling up. Second, money must follow success, rewarding new ideas that work and pulling funding away from less-successful innovations. Finally, it sometimes makes sense for government funds to be supplemented by contributions from private-sector nonprofits—especially for the most experimental ideas.

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