The Story of Grant Funding

This post shares our take on the story of grant funding. What it is, why it’s important, how things went wrong, how it can be fixed, and what OpenGrants is doing to fix it. We’ve been thinking deeply about this topic for years, and we’re excited to share our thoughts with you.

Get ready to learn how the world’s most important form of capital works, how it got broken, and how we’ll fix it.

• Why Grant Funding?
• What Went Wrong?
  • Waste
  • Inequity
• OpenGrants Vision & Mission
• The Future of Grant Funding
• OpenGrants Today & in the Near Future

While it’s rarely discussed outside of specific circles, grant funding is the most important capital vehicle in the world. Most of the core technology used in your phone was originally developed with grant funding.

Grants are an ideal form of capital for people who are taking on the challenges of improving society and advancing humanity. While most capital seeks to minimize risk, grant funding has been proven as an effective tool for taking on the work of researching and developing solutions that will push humanity forward. In addition to carrying the highest risk profile of any capital, grants are non-dilutive, require no repayment, and desired outcomes are typically impact focused.

Grants are awesome.

While Venture capital is much more agile and efficient, and better marketed, the incentives and risk profiles of these groups are unfortunately often misaligned with addressing impact-driven objectives like economic empowerment and public good.

With total annual U.S. grant funding hovering near one trillion dollars, the sheer quantity of grant funding far outpaces any other type of capital. This funding goes to smaller governments and organizations of all sizes to serve the public good and advance our nation’s technologies and global economic competitiveness.

The U.S. grant funding budget is massive.

Unfortunately, it’s estimated that 20% or more of this capital is wasted in inefficient processes and bureaucratic bloat. With a lack of accurate data on recipients, this funding also tends to be distributed conservatively, ending up in the same hands over and over.

Our grant system needs help.

In the next few sections, we’ll address these issues more deeply. Then we’ll discuss how OpenGrants is building the network and technology to solve them.

While many grant programs exist, most have become victims of bureaucratic bloat and private interest issues. Additionally, many of the grant funding ecosystems were designed with the funders in mind, with little thought given to the end users. For this reason, despite consistent increases in both public and private funding, returns on investment are decreasing.

Grants have become inefficient.

In the public sector, 20% of grant funds are spent on admin expenses. In the private sector, around 30% of grant funding never reaches its intended target. Funders (governments, foundations, and individual donors alike) have neither access to modern tools, nor the bandwidth to process applicants, so they are very prone to incidents of unintended favoritism, waste, and even fraud. Inefficiencies in this ecosystem kill healthy competition, slow innovation, and reduce equitable access, causing economic strain and social unrest.

Public grant programs in the U.S. are divided into two main categories: federal and non-federal. While there is a centralized authoritative source for federal grants at grants.gov, this does not include state- and locally-managed grants. The Catalog of Federal Domestic Assistance (CFDA) sources for non-federal grants are more scattered, with some companies providing centralization for a fee.

Grant data is unorganized and hard to navigate.

Even though there is some degree of centralization, the lack of clear communication paired with the complexity of the search, application, and reporting processes creates a user experience that is unbearable for anyone without deep expertise in the field. It looks more like legal due diligence than a funding process. Hence, the industry has become a rather closed and protected ecosystem that breeds inefficient consulting services to help find, apply to, and manage grants.

In the next section, we’ll discuss how this waste breeds discrimination and hinders innovation.

There are a variety of discrimination and bias issues in the public sector’s innovation funding ecosystem. Some of these issues are the product of decades of systemic bias including racism, while others have developed over time through bureaucratic bloat and other shortcomings.

No matter the providence, the effect is the same: innovation is stagnating as more and more grants are delivered to older, white men while diverse groups, younger scientists, and riskier, high-impact ideas are shut out from the process. 

Grants lack equity.

A glaring example of this issue can be found by looking at the research project grants from the National Institute of Health. The Research Project Grant (R01) provides support for health-related research and development. It’s awarded to a specified project to be performed by the awarded investigator or researcher. In 2018, nearly 94% of R01 grants were awarded to White/Asian applicants, while 2% were awarded to Black/African American applicants and 4% to Hispanic/LatinX applicants.

Diversity has an important and often overlooked psychological role in innovation. In an article published for Scientific American, Professor Katherine Phillips described the following:

“Members of a homogeneous group rest somewhat assured that they will agree with one another; that they will understand one another’s perspectives and beliefs; that they will be able to easily come to a consensus. But when members of a group notice that they are socially different from one another, they change their expectations. They anticipate differences of opinion and perspective. They assume they will need to work harder to come to a consensus. This logic helps to explain both the upside and the downside of social diversity: people work harder in diverse environments both cognitively and socially. They might not like it, but the hard work can lead to better outcomes.”

Diversity is critical to a healthy innovation ecosystem. 

Currently, public innovation funding does not curate or encourage diverse teams to come to the table. If this ecosystem is going to thrive, if we are going to address the challenges that face our world, we need programs that encourage and invite diverse teams of innovators.

In the next section, we’ll dive into the OpenGrants vision and mission, and share our approach to solving these intractable challenges.

OpenGrants envisions a world where people are empowered with access to simple, fair, merit-based grant funding. Our mission is to deploy modern financial infrastructure to support efficient, equitable, and transparent grant funding processes. 

The OpenGrants software platform and network of users—and the data generated by them—unlocks new levels of communication, insight, and targeted action between funders and applicants.

So far we’ve built a grant search engine powered by the most comprehensive database of grant funding in the U.S., and a robust marketplace of independent grant consultants. We are doing this to unite and organize the entire ecosystem of funders, recipients and consultants.

We’re setting standards for this industry and empowering decision makers with the data they need to intelligently design funding programs. Ultimately, we will deploy modern financial infrastructure to facilitate the efficient and equitable deployment of capital.

We are in the process of building a single, integrated services platform to serve federal, state and local governments, global NGOs, private foundations, family offices, and any other organizations that need to distribute funding in an intelligent, modern and data-driven manner.

In the next section, we’ll share our vision for the future of grant funding.

There’s a common concept in business—that for large organizations, new ideas are more likely to succeed from the outside in. They must be developed outside of the “immune system” of the organization, then introduced after they’ve been developed enough to show promise. Knowing the reality of this concept, we founded OpenGrants as a private startup to build a new ecosystem for grant funding, with the understanding that the chance of this same innovation happening within the current system is near zero.

Grant funding is not going to change on its own.

We are developing modern infrastructure that improves capital efficiency, accelerates funding, increases transparency of how funds are being used, and improves equitable access to those funds. OpenGrants targets antiquated technologies, operational models, and cultures that are deeply rooted in grant funding entities, and are a primary cause of their inefficiencies.

The OpenGrants software platform and network of users—and the data generated by them—unlocks new levels of communication, insight, and targeted action between multiple layers of funders and applicants. We’re organizing public entities, private organizations, and individuals to create funding solutions that allow our society to be strengthened by technological change, rather than crumble beneath it. We’re targeting 30% improvements in capital efficiency for all funders, and plan on charging 1-2% in transaction fees across our network.

The impact of modern funding infrastructure is huge.

The future of grant funding has no applications. The current approach to awarding funding is something that is simply a hold-over from a bygone era. At best, this practice is still around because of a lack of the correct tools. Similar to modern loans generated by lenders with a continuous understanding of your financials, the future of grant funding is based on a trustless ecosystem, where capital partners have all of the data they need to approve and provide funding, while managing their risk. Applicants will maintain a single profile and account on a grant funding network (OpenGrants), giving them expedited access to funds housed in tax advantaged structures managed in DAO’s, custodial accounts, and other vehicles that live on the OpenGrants network.

In the next and final section of our series, we’ll share who is supporting this work, and the focus of our efforts now and in the near future.

Our partners include visionaries at the frontiers of technology, product experts, and veteran operators in the government consulting space. Key strategic and capital partnerships currently include companies like AWS, Boost VC, Momentum, eCivis, Globivest, Builders & Backers, Finclusive, The Stacks Foundation, and FYC Labs. These partnerships represent significant revenue generating vehicles as well as opportunities for considerable user growth.

We are also specifically engaged in a mission to include our ecosystem and community partners as financial partners in this venture. For that reason, contractors on our platform have access to $GRANT and can receive equity in the company. Additionally, we are raising capital using a variety of tools to ensure that taxpayers and citizens around the world can participate in developing this company into the source of public good that it should be.

Stakeholder capitalism is much more than a buzzword for us. We see it as a means of creating a safe, sustainable and democratic future for the world. As alluded to earlier, grant funding is a key to unlocking an equitable economic future for the world, and we feel strongly that it is our responsibility to enable that future. For this reason, over the course of this venture we will continue to engage our community as users, beta testers, influencers, referral partners, and investors.

Our focus over the next few years will be to continue to scale the marketplace and embrace an API-first future where OpenGrants will efficiently provide ecosystem data and grant matching tools, as well as test deployment of modern financial infrastructure. Our transformative vision sees us becoming global infrastructure that is, in part, owned by the public. Integrations with our partners will support the quality and capabilities of the ecosystem overall, further enriching our own data products and improving the performance of our AI/ML driven tools.

Thank you for joining us on this journey, from what grant funding is, to the major challenges of this form of capital, to the specifics of how OpenGrants is solving those challenges. I hope you’ll continue to support and engage with this work in whichever ways fit best for you. Please consider keeping in touch on social media and via email, invest in our work, and create an account to experience OpenGrants for yourself.