Key takeaways from 19 research and infrastructure institutions: Part 2 – Funding Strategy

Over the past few months, we have taken a closer look at 19 research and infrastructure institutions from Germany, Europe and North America: their history, governance models, funding sources, strengths, potential blind spots and opportunities. These institutions vary widely: some have existed for decades, whilst others are still finding their footing; some enjoy secure, long-term funding, whilst others move from one project phase to the next. In this six-part series, we examine the findings from this analysis most relevant to the establishment of a German Research Software Institution.

Across the institutions analysed, one challenge appeared again and again: securing sustainable funding. A project grant is launched, a dedicated team builds up expertise, services are developed, and a community takes shape. But then a critical question arises: what happens when the funding runs out?

Three distinct funding models can be identified among the 19 institutions studied: long-term institutional funding, membership fees and service charges, and project-based external funding. Each model serves a different purpose and comes with its own strengths and limitations, making it worth examining them in more detail.

Institutional funding – whether through affiliation with an institutional umbrella organisation or via a federal-state agreement – provides a stability that is difficult to achieve in the German funding landscape. Institutions with this form of funding can plan for the long term, retain expertise through stable staffing and build a recognized brand over many years. However, the transition from project funding to permanent institutional funding is rarely straight forward and in many cases, requires flexibility, persistence and tough negotiations.

The model based on membership fees and service charges operates on a different principle. It works particularly well where an institution provides services that its members depend on and for which there is no equivalent alternative. A prominent example is the German National Research and Education Network (DFN), with over 350 members, which is funded entirely by membership fees and service charges. The model is resilient to political cycles and thrives on a structural advantage: services with a clear user focus and a high barrier to changing providers. However, for an institution seeking to set standards in a still-emerging field, this model is usually insufficient, as the willingness to pay for standardisation generally only emerges only after standards have already become at least partially established.

Project-based funding is the most common, but also the most fragile approach in the German funding landscape. It forces institutions to reapply for funding every three to five years, repeatedly requiring them to justify their continued existence. This systematically results in fixed-term positions, making it difficult to retain skilled staff and leading to a continual loss of expertise. Furthermore, it hinders the development of sustainable infrastructure, as many programmes do not fund the maintanance, coordination and long-term stewardship on which infrastructure ultimately depends. Several of the institutions examined are struggling precisely with this logic: they offer impressive services, but cannot guarantee that these will still exist in three years’ time.

The analysis suggests that relying on a single source of funding always poses a significant risk. The most resilient institutions in the analysis combine several sources of funding. A possible structure could look as follows: 40% public funding, 30% membership fees, 20% service charges and 10% project-based third-party funding. The exact proportions would vary depending on the institution’s maturity and business model, but the principle remains the same: no single source should account for more than half of the budget. Beyond that point, dependency becomes a strategic vulnerability.

A second insight concerns the starting point. Several of today’s successful institutions began with start-up funding that provided three years of operational stability, and in some cases as much as five years. During this time, they were able to establish fee-based services, attract members whose contributions now support day-to-day operations, and develop relationships with funders who now regularly finance projects. Without this start-up phase, none of these transitions would have been possible.

A third insight concerns the use of funds. Those receiving funding should invest part of it in building structures that can attract further funding in the future. These include a central coordinating unit with a visible public profile, a professional online presence, and systems for documenting impact and demonstrating value over time.

Sustainable funding does not come from a single source, but from a portfolio. The most resilient institutions diversify their income across multiple pillars and use start-up phases strategically to build structures, services and relationships that support long-term sustainability.