What does it mean for social enterprises to be ‘investment ready’? What support do they typically need to meet the investment criteria of social impact investors? And what lessons have been learnt in the UK that can be applied across the globe?
We’ve invited Chris Dadson of the UK’s Social Investment Business to help answer these questions as the British Council launches a Business and Investment Readiness pilot programme which will provide consultancy services to social enterprises in nine countries to help them to strengthen their organisational capacity, better measure and communicate their impact, and successfully bid for grant and investment funding.
What is Social Investment Business?
The Social Investment Business (SIB) is a pioneering UK social investment specialist. We support social enterprises through loans, grants and other financial products to help them do more of what they do best. Since 2002 we have disbursed over £380m in loans and grants to 1,100 organisations.
Our vision is to provide simple finance to extraordinary charities and social enterprises, and while to date we have worked solely in the UK, we see an emerging opportunity, and demand, to share our learning and know-how with partners across the world.
We were set up in 2002 and backed by £2m of government funding and have become a key partner for delivering public funds to the sector by way of social investment. Today, we manage the UK Cabinet Office’s £170m ‘Futurebuilders’ loan book, which is the largest in the sector.
In 2012 we partnered with a new social investment organisation, Social and Sustainable Capital (SASC), to raise private capital for social investment. Through this partnership we have helped create two new funds totalling £50m, drawing on capital from public, private and charitable funds.
Lessons learnt
Our experience, which is echoed by other social investors across the world, has taught us that there are many challenges to investing in social enterprises. Often organisations that come to us:
- Lack the financial skills to effectively manage an investment.
- Are overly optimistic when forecasting how much money they will make.
- Haven’t clearly established how they will pay the investment back.
- Have unengaged boards that fail to challenge the management team.
- Are overly reliant on a single product or service.
- Are not equipped to respond to change or ensure survival when times get tough.
What is investment readiness?
By working closely with social enterprises to overcome these issues we have developed an innovative investment readiness grant product that helps organisations raise the finance they need.
From 2012 to 2015 we delivered the UK Cabinet Office’s pilot Investment and Contract Readiness Fund (ICRF). This £14m fund provided grants of £50,000 – £150,000 to ambitious social enterprises seeking to scale up their operations and impact by raising investment or bidding for and winning contracts.
The ICRF did this by providing grants that were used to pay for specialist business support from expert consultants. The consultants helped social enterprises to apply for grants and develop an existing product or service that already was working and had the potential to scale. They focused on four key areas:
- Strengthening the business plan and financial model.
- Improving reporting and social impact measurement.
- Strengthening the organisation’s managerial and financial capability.
- Planning and structuring the investment deal or contract bid.
Critically, approval for grants was made by a panel of experienced investors who really understood what other investors would be looking for.
The ICRF programme demonstrated what targeted support can achieve. An independent evaluation identified that the first £4.5m of grants enabled 43 social enterprises to gain £117m in deals (contracts and investment).
SIB has since developed further investment readiness funds: the £10m Big Potential Breakthrough fund, which focuses on early stage social enterprises, the £10m Big Potential Advanced fund, which focuses on more mature social enterprises, and a pilot £1.5m Impact Readiness Fund, which is testing ways to drive up impact amongst social enterprises.
These funds are connecting more social enterprises with the rapidly growing impact investment market in the UK, and playing a fundamental role in developing the sector. This includes:
- Providing niche, specialist support to ambitious, high growth potential social enterprises that want to scale up their impact and operations and improve their financial, impact measurement and governance skills.
- Enabling social enterprises to identify and access impact investment and public sector contracts.
- Building the experience and track record of expert support providers by accrediting and managing their performance over the course of the programmes.
- Establishing best practice and collaboration between social investors involved in approving applications.
- Producing data, lessons and track record around investment readiness support where none existed before.
Rolling out investment readiness learning
SIB is now a market leader after developing and implementing over £35 million in investment readiness programmes and wants to support like-minded organisations abroad to set up their own investment readiness programmes.
We are interested in working with partners across the world to help prepare your social enterprises for social investment, and are delighted to be playing a part in helping the British Council deliver its Business and Investment Readiness programme for social enterprise. Watching successful social enterprises go from strength to strength is extremely rewarding. We want to see more of it happen across the world.
About the BiR programme
This programme aims to enhance the quality of support services for social enterprises in nine countries by matching UK support organisations with counterparts in those countries to provide consultancy services to local social enterprises. The British Council will offer grants to as many as nine selected UK based organisations to take part in the BIR programme in 2015-16 and is now calling for applications from UK support organisations able to provide such services overseas. Find out more.
Content on this page is paid for and provided by the British Council, sponsor of the international social enterprise hub
