E-book: 8 building blocks for effective interdisciplinary collaboration
05
Financing
A financial investment confirms that the project is viable and realistic. Whether you want to co-finance with partners, search for an external financier, or be the financier for other parties, it is advisable to seek advice from internal or consulting financial experts.
The partners of the collaboration can pool resources—possibly in proportion—and co-finance the project together. In the case of a public-private partnership, the private sector entities often contribute through investments and expertise, while the government contributes through guarantees, subsidies, and regulatory support. Alternatively, seeking external financiers brings significant advantages, besides the opportunity to grow substantially. As Browaeys and Van Damme (2) describe, they can help you sharpen your focus, connect you with valuable industry relations, and consult with their expertise. See the overview below for different financiers. Finally, the partners can also act as financiers for other parties and distribute, for example, grants, procurements, or investment
Types of external financing to consider
| Loans Borrow capital, repay within agreed terms and with interest. | Grants Non-repayable gift, competitive application process, strict conditions. | Investments Acquire capital, expertise and connections, and give interest/shares in exchange. | Rewards Non-repayable support to encourage specific sectors and activities. | Fixed revenue Deliverables and cost prices are established and transacted. |
|---|---|---|---|---|
| Bank loan | Government grants | Investment funds | Government subsidies | Income from sales |
| Government start-up loan | NGO grants | Corporate venture | Tax deduction | Reward-based crowdfunding |
| Government co-finance | Foundation grants | Private equity; angel investors | Sponsoring | Government tenders |
| Microcredit | Government investment | Crowd donations | ||
| Crowd lending | Crowd equity | |||
| Government guarantees | Social or green bonds | |||
| Ideal for predictable revenue and risk-averse activities. | Ideal for non-viable pilots and early-stage innovation. | Ideal for rapid growth and large-scale projects or activities. | Ideal to strengthen or boost ongoing operations. | Ideal for predetermined output and rewards exchange. |
Matchmaking and compliance
External financing often requires regular reporting, typically on a monthly or quarterly basis, detailing successes, setbacks, challenges, opportunities, and the allocation of funds.
Grants in particular involve a competitive and time-consuming application process. Specialized companies can assist with grant applications, helping to navigate through programs and government levels, identify opportunities for matchmaking, align your project objectives with grant requirements, write the proposal, and coordinate the application process with multiple stakeholders. Although government financing comes with a lot of paperwork, they are the ones who invest in high-risk innovations that cannot be viable in the short-term financial markets. As Mazzucato illustrates (3), many of the most significant innovations of our time were made possible through government support, which remains crucial for addressing current societal challenges.
To conclude, financial partnerships must comply with local, national, and international regulations. Adhering to the relevant legal frameworks and ensuring transparency with clear KPIs are crucial for attracting and retaining investors.
Finances: questions to answer
- Who will manage the finances within the collaboration? Will this be handled by the partner with the most expertise, an external accounting firm, or another option?
- If partners are co-financing the project, will contributions be proportional to each partner’s size and expected ROI, or will everyone contribute the same fixed amount?
- When applying for grants from NGOs or philanthropic organizations, what are the true motivations of the grant provider? As Colson (4) points out, double check if they genuinely wish to address societal issues rather than mask or compensate harmful activities.
- Does the collaboration have the appropriate legal structure to carry out the selected financial activities?
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