Funding Innovation

Funding innovation through ownership is expensive. It is expensive as the rewards of innovation go to the innovator through dividends and Capital Gains. Perversely this discourages more innovation and reduces the chances of adoption.

A solution is to replace the cost of dividends and Capital Gains as the way to reward Innovations. Instead, we reward the innovator by giving more of the output from the innovation for a lower price.

Most successful innovations reduce the cost of goods and services. They enable us to do more with less. They should lower the cost of goods and services. The pressures of providing dividends and Capital Gains drive increases and maintenance of prices whereas providing more output for a lower price encourages lower prices which translate into higher productivity.

The savings to the community of this innovation is the cost of dividends and the cost of Capital Gains. Innovators and those who implement them receive more goods and services for lower cost.

The savings come by removing the Time Value of Money.

An Organisation Structure for Innovation

For a Company, there is one share of $1 held in trust for the innovators and implementors of innovations. These individuals receive the Rights to purchase goods and services at a discount. They exercise their Rights by purchasing the output, and they receive a return on their efforts by the company selling for them at a higher price.

It is the same mechanism as Water and other Rewards that removes the cost of interest. Implementation can be to give the early innovators and investors a higher discount than later investors.

Using this approach investors in innovations can easily spread their risk. Innovations often fail because once they prove they are viable they need to raise many times more funds than already spent. Trying to evaluate ownership value is remarkably difficult and raising money through issuing of shares is expensive, slow and a gamble. Raising money through selling more future output at a discount is lower risk and gives investors a fair safer return on their investments. Early investors are rewarded for their earlier risk by getting later investments at higher discounts than new investors.