Is Michigan’s Innovation Fund a Blueprint for Success?

Chris Dorobek recently interviewed David Behen, the Chief Information Officer at Michigan’s Department of Technology, Management and Budget on the DorobekINSIDER.

I’ve been following discussions on GovLoop over the past several months on whether government should fund innovation initiatives and how it could do so during tough fiscal conditions, so I was really interested in hearing about Behen’s experience of getting the innovation fund off the ground in a state that has been hit hard during the recession. He credits two main things for the success of the program, which provides loans to state agencies, local governments, and nonprofits for innovative IT projects:

Strong Leadership

Behen talks about the importance of strong executive sponsorship in getting the fund off the ground. The conditions that allowed for this in Michigan were a combination of a governor (with an IT background!) who understands the importance of technology and innovation, a director of technology and budget who believes in funding IT projects that have both a strong ROI and potential to help reinvent the state, and a great relationship with the legislature.

Giving Loans, Not Grants

One of the unique aspects of Michigan’s innovation fund is that the state provides loans, not grants, to agencies, local governments, and non-profits. Behen thinks this is where some past attempts at establishing similar funds have failed. By providing a loan, rather than a grant, the state can keep the fund operating in perpetuity, rather than having to constantly replenish it. Loans also cause applicants to really understand the potential ROI and strength of their business case, since they maintain risk associated with having to repay the loan.

To hear more about how the fund works, check out this clip:

David Behen talks Michigan’s Innovation Fund by cdorobek

What do you think? How can fund proponents get less eager leaders to buy into and support the idea of an innovation fund? Are loan programs the right way to go, or are they too risky for the agencies and localities that apply for funding?

To listen to David’s full interview you can catch the full radio show at GovLoop Insights or your can subscribe to our itunes channel.