First in a three-part series on Making Innovation Funds Fundable — what must be in place for a law firm innovation fund to earn investment, demonstrate value, and keep growing.
RISE Above AI Chaos ends with the firm establishing a self-sustaining innovation fund. The book doesn't explain how it got there.
At ILTACON, it was clear that firms - Big Law especially - are working hard on one half of that question. How to make the case to the partnership. How to get a budget line approved. How to convince skeptical partners that dedicated AI money is worth setting aside rather than routing it through ordinary IT spend.
That work is real, and in a partnership structure it is genuinely difficult.
What I almost never heard discussed was the other half: what makes an innovation fund fundable in the first place - and keeps it fundable once the initial money has been spent?
A fund that doesn't produce evidence of value won't survive its second cycle.
Securing the money is half the work. And doing it first is backwards.
I've watched the other ordering play out, in a different setting with a different technology.
What a blockchain lab taught me about making an innovation fund fundable
A few years ago, I worked with an IT advisor at a Dutch government agency who wanted to build what she called an inspiration lab: a shared space where different branches of government could experiment with blockchain, big data and other unfamiliar technologies before committing to any of them.
She had asked leadership for a budget. She persuaded them to give her a fair amount, but it was fully committed by the end of Q1. And in those three months, there obviously weren't any concrete results yet, meaning there was no realistic path to ask for more.
Management wanted proof.
So asking for more money wasn't the way forward.
She spent her own professional-development budget on formal training in new business development and used that structure to force herself to answer the questions a budget request usually lets you skip.
How would the current projects demonstrate feasibility? How would she measure that? What would count as evidence that the lab was working?
Then she put the blockchain initiative within those constraints.
Within six months, they produced a white paper on collaborative blockchain experimentation that drew real attention from clients and the press. She used the traction to secure a small pilot and, a year later, several government branches were running projects through the lab she'd built.
Only then did she go back to leadership — not to ask for investment, but to show results.
Management didn't just approve the lab. Over the following years, they increased its budget more than tenfold.
The lesson isn't about blockchain, and it isn't about government IT.
It's that the fund followed the process.
She could not have argued her way to a tenfold increase. She got there by having something real to point at: a repeatable way to move from idea to pilot to scale, with milestones and evidence at each step.
The process for proving value came first. The money followed.
Why the ordering keeps getting reversed
Law firms are solving the more urgent problem first, which is understandable. Partnerships are hard to move, and getting real money set aside for experimentation is a hard-won accomplishment.
But once the money exists, a familiar pattern shows up.
A tool gets funded because someone senior is excited about it. A pilot starts because another firm announced something similar. A team builds an agent because the technology now makes it possible.
None of those are bad reasons to start something.
They're just not reasons to keep funding it.
Without a mechanism that tells the difference, everything keeps getting funded anyway. Call it drive-by innovation: initiatives that start on enthusiasm and continue on momentum because nobody built the thing that would say when to stop.
Six months in, the firm has more licences, more pilots and more people involved in AI, but no clearer sense of what any of it is worth, or where the money comes from to keep paying for it.
I've seen how quickly budgets disappear once the money is there.
A budget and an investment are not the same thing
Most firms will hear that as a semantic quibble. In practice, the difference is large.
When you fight for a budget, you argue why the funding should happen: what you'll do with the money and what happens if you don't get it.
Once it's approved, nobody challenges it again until the next cycle. Especially not if it was a ten percent increase on legal tech spend, where there was never much accountability for the purpose of the money in the first place — only goals broad and plausible enough that everyone supported them and nobody could be held to them.
When you invest money, someone is on the line for the return. Funding is released against specific milestones. If those milestones start slipping early, the money stops. That kind of accountability is normal in startup funding. It is not normal inside law firms.
There's plenty wrong with how startups raise money, and the bureaucracy that comes with it is not something you want inside your firm. But the discipline with which investors release money is worth copying.
That discipline is also what makes an innovation fund fundable. Leadership is not simply being asked to trust that good things will happen. It can see how money will be allocated, what evidence projects need to produce, and when a project will stop receiving funding.
Start with the problem, not the tool
To get that accountability, projects have to be defined by the problem they solve or the opportunity being missed, not by what the technology makes possible.
Where is work actually slowing down? Where is margin leaking, quality inconsistent, or the client feeling friction the firm isn't addressing? And what is it worth to fix — including what loss the firm can afford in trying?
That's what a business case is for.
It changes the question the innovation fund has to answer.
Instead of "should we pay for this tool?" it becomes: "is this problem worth solving, and is this the best way to solve it?"
When the technology comes first, the business case gets built afterwards, as justification. When the problem comes first, the technology has to earn its place.
It also changes what happens when a project stalls, which it will. Every project hits a roadblock.
The question becomes whether that roadblock is worth getting past. If the business case is strong enough, spending an extra $100,000 can still be the right call.
The part that's harder than it sounds
Most firms don't have too little AI activity. They have more tools and experiments than any organisation can sensibly absorb.
The capability that matters is being able to choose, test, learn and scale without losing sight of what the firm is trying to improve.
An innovation fund can support that capability.
It cannot substitute for it.
And as firms spend more, money may turn out to be the lesser constraint. Attention, clean data, willingness to change workflows, and the capacity to evaluate what's actually working are all harder to replenish than cash, and none of them respond to a bigger cheque.
So yes: create the innovation fund.
But before asking how large it should be or how to persuade the partnership to fund it, build the process that will make it worth funding again.
That is what makes an innovation fund fundable.
Which raises the obvious next question: if funding is released against milestones, what does a milestone look like for work like this?
Not revenue or promised returns - the first won't materialize for a while, and the second are nearly always empty promises.
The honest answer is that the early proof points don't look anything like legal work, which is exactly why firms throw them away.
That's the subject of the next post.
If you're already thinking about an innovation fund. I work with firms on the pieces that make one fundable: designing the process that produces evidence, setting milestones a partnership will accept, and getting the incentives right so partners will back work outside their own practice.
That includes the unglamorous half — knowing when a project should stop, and stopping it early enough that the money still bought something.
Rise Above AI Chaos: A Business Fable About Leading Organizations Through the AI Revolution