Social investment : what are the opportunities?

1. Social investment : what are the opportunities? Dharisha Mirando Investment Executive, CAF Venturesome 13th June 2013

2. Social investment recap • Social investment is the provision of capital for charities and social enterprises • Working capital • Financial resilience • Growth or development • Few charities are able to create a surplus that can be set aside as reserves • Not a replacement for grant funding • A resilient charity should have a range of revenue and capital income: e.g. grants, contracts, trading income and loans

3. Who are we? • £12m of philanthropic capital • Our investors are grantmaking trusts, institutional foundations, and HNWIs. • We recycle our funds as much as possible. • 11 year track record: over £30m to 360 charities and social enterprises • Default rate < 7%

4. What does this mean for charities? Our philanthropic investors have no expectation of positive returns, which means: • We do not have to pass the cost of capital onto our investees • We can take high risks • ...but only if the investee can demonstrate a high social impact

5. Investment providers HIGH INVOLVEMENT VENTUREPHILANTHROPY Bridges Ventures VENTURE CAPITAL Impetus, PEF, etc Angel investors Big Issue Invest Venturesome COMMERCIAL CHARITABLE Local investment funds, CDFIs Charity Bank High street banks GRANTMAKERS BANKS LOW INVOLVEMENT

6. CAF Venturesome – What we offer • Unsecured finance that is not available from mainstream banks • High financial risk in return for high social impact • A mix of low risk (bridging finance, working capital) and high risk (for growth, development, rescue) facilities Our criteria: • UK registered organisation • Minimum one year trading history • Turnover from £70k • Clear charitable purpose Our products: • Unsecured loans, underwriting, quasi-equity • £25,000 to £350,000 • Repayable over 3-5 years • Interest rate from 6.5%

7. What you need to access social investment? • Business plan • Management accounts • Annual accounts • Cash flow forecast • Social investors look for social returns, so… • …It’s important be able to clearly articulate your social impact: • Measurement methodology • Achievements • Beneficiary demographics & numbers • What would have happened without this service?

8. How we work • No application form • Due diligence: • Past: history and track record, annual accounts • Present: current activities, management team and governance, management accounts • Future: business plan and strategy, fundraising pipeline, cashflow forecast • Face-to-face meeting • Independent investment committee • Regularly monitor loans

9. What do we look for? • What does investment readiness look like?

10. ‘We’ve made mistakes in the past, but don’t worry about that because it’s the future that matters’ We understand where we went wrong We recognise failure and learn from our mistakes We’ve developed ways to mitigate against future risks ‘A consultant came up with this business plan, they did the numbers so don’t ask me too much about that’ Lots of people have been involved in getting us to this point There’s strong ownership from the Board Staff are really enthused 1. Don’t rely on the business plan

11. 2. Grants are not the enemy • ‘Grants seem like a lot of hard work so we thought we’d do this instead’ • We’re looking to diversify our income to become a more resilient organisation • In five years’ time, this is where this plan takes us • We’re clear on what financial and social success would look like • Here are the potential trade-offs • This is how we’re going to track progress

12. 3. The Big Bang only happened once • ‘This time next year, we’ll be millionaires’ • We know this will take time • We’ve identified the potential pitfalls • Here’s how we’re mitigating the risk and staggering investment • Scenario planning • We have thought of contingency plans • Here are plans B, C and D

13. Working capital case study Investment for cashflow support Provides a safe haven for the Deaf community of Walsall and enables them to access a number of social activities. • Forecast a cashflow deficit due to a temporary loss of contract income • CAF Venturesome provided a £35,000 unsecured loan • Working closely with trustees and management to improve operations and governance

14. Development capital case study Investment in trading operations Supports people with mobility disabilities around the world • Needed investment to scale-up its manufacture and sale of high-quality low-cost wheelchairs • CAF Venturesome provided tailored investment: part loan, part quasi-equity totalling £200,000 • Worked with senior team to improve financial management

15. Growth capital case study Investment in capital project for growth Supports people with mental disabilities in Scotland by providing employment opportunities • Needed investment for a capital project to enable social enterprise expansion • CAF Venturesome provided a £225,000 standby facility, as part of a mezzanine package • The work will be completed this summer

16. Please get in touch! Dharisha Mirando dmirando@cafonline.org 03000 123 249 www.venturesome.org Twitter: @cafventuresome Blog: http://caf-venturesome.tumblr.com