Kevin Davis is CEO of the Investigative News Network.   Above: Newsroom lights reflected in the glass of an iPad by Troy McCullough on Flickr.

This week marks the opening of the third round of the INNovation Fund, a micro-grant program managed by the Investigative News Network to help with business experimentation in nonprofit and public-media newsrooms across the country. Related Links 

“What you need to know about the $1 million INNovation Fund” by Kevin Davis and mon Knight Blog, 1/28/2014

“New fund to give $1 million in micro-grants to innovative nonprofit news and public media projects” – press release, 1/28/2014

The program is made possible by a $1 million commitment by over two-years to invest in business experiments that look to drive audience engagement or experiment with new revenue streams.

Unlike for-profit organizations, nonprofit news organizations do not have equity to leverage when seeking capital for business investment. Furthermore, most grantmaking puts limitations on the amount of overhead allowed on any given grant.

Yet nonprofit newsrooms are expected to iterate and innovate to increase the amount of engagement with their target audiences, reduce their dependence on existing funders and diversify their revenue streams to become sustainable.

In its first year the program funded 16 business experiments; applications for the third round are now available with a deadline of March 2, 2015. We will announce winners on April 15.

Here’s what we’ve learned from the experiments we have funded so far:

1.     Accept this for what it is—and for what it’s not. We understand the need for nonprofits to secure as much funding as possible. We also understand the frustration when a nonprofit has funding needs that are more pressing than business experimentation. The INNovation Fund grants are not a good vehicle to address those pressing issues; it is designed specifically for organizations seeking diversification of funding but do not otherwise have the wherewithal to experiment with diversification. We have received many proposals from great organizations that unfortunately are either not in a position to conduct experimentation or who look to leverage these funds into a larger fundraising drive that makes it difficult for us to determine what the experiment is, and how we can measure the impact of our investment.

2.     Do your homework. Every winning INNovation Fund grant proposal can be found at Journo.biz, including copies of the original proposal and budgets. In addition, the Investigative News Network publishes information about all of the other programs that we offer to support nonprofit newsrooms. When we see grant requests for projects that are materially the same as what we have previously funded or are covered under current programs we already offer (i.e. a mobile-ready, WordPress CMS and Web services), it’s unlikely that we’ll fund your proposed project.

3.     Leave the kitchen sink out of it. Paying for overhead continues to be a big challenge for nonprofits. And it is reasonable to include some level of overhead—less than 10 percent—in a budget proposal. But adding budget line items for resources or costs that are not directly related to or working on the proposed projects is a no-no.

4.     Focus on achieving one or two desired results using one or two independently verifiable metrics. Impact measurement and metrics are an important yet evolving topic. With this program, we intentionally left the definition of what metrics will be used to evaluate the effectiveness of the business experiment up to the nonprofit to avoid imposing anything arbitrary on top of the work. However, defining metrics has proven to be tricky for some nonprofits. For example, many proposals were submitted previously with upwards of 10 different proposed metrics. Instead, think about the one or two ways you personally will measure the success of your experiment. In this case, less is definitely better than more.

5.     Be open to unexpected results. As a society, we often frown upon failure or see anything less than what was expected as a sign of weakness. In business, however, organizations often pivot because the realities on the ground can be very different from expectations. We urge grantees to be transparent about the process and results, to share that knowledge and to embrace the unexpected. We do not penalize organizations that try and fail, but we cannot help organizations that are not open to learning from the process regardless of outcomes.