Concept
Metered Funding
Metered funding is the way Eric Ries, in The Startup Way, proposes to pay for uncertain work: instead of a full annual budget, an internal startup receives enough to reach its next learning milestone, and each further sum depends on evidence of learning.
In most companies money follows the plan: a business case is approved once a year and the whole budget is allocated on forecasts nobody has tested. That suits predictable work and creates the wrong incentive for uncertain work. A team that finds its key assumption is false stays quiet, because saying so puts the budget at risk. Ries borrows the alternative from venture capital. Investors fund a young company in rounds, each tied to what it has proved since the last. Under metered funding the decision belongs to a growth board, which reviews the team's innovation accounting rather than its slides: an assumption tested, a cohort that now behaves differently. Two cautions matter. Metered is not starved; every stage must be large enough for a genuine experiment. And evidence is not only early revenue: a team that stops a weak idea early and cleanly has also created value for the company.
A real-life example
At a mobile operator in Ankara, a team asks for a year's budget to build an app for seasonal farm workers. The head of digital channels offers eight weeks of funding and a meeting with a three-person board. The cohort shows most workers stop after one top-up, and the board releases a smaller second sum to test the same service over text messages.
How to use it
- 1Fund uncertain work to its next learning milestone, not to the end of the year.
- 2Set the date the evidence will be reviewed before any money goes out.
- 3Record an idea stopped early and cleanly as a result, not as a failure.