Traditional grant programmes often fund proven approaches in proven organisations. But many funders want to catalyse genuine innovation — funding new approaches, new organisations, or new combinations. This guide covers how to design grant programmes that drive innovation and what applicants can expect.
Standard grants fund track-record organisations with established delivery models. Innovation grantmaking:
- Accepts higher risk — some projects will fail
- Prioritises learning from failure as much as success
- May fund organisations or approaches that don't yet have evidence
- Often uses different process design (challenge prizes, expressions of interest, open grants)
Funders need to consciously design for innovation — default processes select for incumbents.
Challenge prizes (competitions for innovation):
- Open brief: Funders define the problem, not the solution
- Multiple entries: Many teams compete — winner gets the grant
- Market signal: Challenge prizes surface what's actually possible
- Examples: Prize competitions for new health technology, climate solutions, social innovation
For applicants: challenge prizes require pitching the idea, not just the organisation.
Open, responsive grantmaking:
- Open rounds: Applications accepted from anyone — not just invited
- Expression of Interest (EOI): Two-stage — EOI first, then invited full application
- Rolling open grants: Applications assessed as received, not in rounds
Open grants favour innovative organisations that haven't yet built funder relationships.
Community deciding who gets funded:
- Community grant panels: Lived-experience people on the panel
- Peer funding: Organisations vote on each other's applications
- Crowdfunding match: Public crowdfunding matched by funder
Participatory grantmaking shifts power from funders to communities and applicants.
Innovation requires learning:
- Learning grant: Explicit funding to learn what works
- Developmental evaluation: Evaluation designed for emergence — not proving, but learning
- Reflective practice: Funded reflection time built into project
Many innovative projects don't have clear evidence — learning grants fund the evidence generation.
Early-stage innovation:
- Prototype funding: Small grant to test a concept
- Pilot grant: Fund a structured pilot with evaluation
- Feasibility grant: Fund a feasibility study before full funding
Prototype funding reduces risk for both funders and applicants.
Investment-style grantmaking:
- Intensive support: Grant plus coaching, networks, and strategic support
- Multi-year: Longer relationships than single-year grants
- Equity focus: Some venture philanthropists take equity or quasi-equity
- Exit planning: Building towards sustainability rather than perpetual funding
Ākina Foundation (NZ) and similar organisations use venture philanthropy approaches.
Strong innovation applications demonstrate:
- Problem insight: Deep understanding of the problem being solved
- Novel approach: What's different about this vs. existing solutions
- Learning plan: How you'll know if it's working and what you'll do if it's not
- Risk acknowledgement: Honest about what could fail and why
- Team: The right people to try this — insight, skills, and relationships
- Minimum viable test: What's the smallest test that would prove the concept
Funders evaluating innovation grants want intellectual honesty about uncertainty — not overpromising.
Funder practices that enable innovation:
- Lower administrative burden: Shorter applications for early-stage funding
- Relationship-based: Know your grantees beyond the application
- Multi-year: Innovation needs time — single-year grants rarely enable it
- Risk tolerance: Explicit tolerance for failure as learning
- Co-investment: Leverage other funders alongside innovation grants
Tahua's grants management platform helps funders design and manage innovation grant programmes, tracking learning outcomes, prototype progression, and innovation ecosystem development across their grant portfolio.