Breakthrough Tacking Social Enterprises Struggle to Scale up

BreakthroughMost social enterprises will struggle to scale-up from start-up stage, according to the findings of the Breakthrough initiative, a pioneering two-year social investment programme set-up and run by CAN and Permira. Launched in 2005, the initiative is designed to tackle the financial and management challenges inhibiting the growth of Social Enterprise.

Social Enterprise, businesses trading for a social purpose such as The Big Issue and the Eden Project, has been heralded by all political parties as Britain's new business success story. However, CAN, a leading social enterprise that deploys equity-like funds and management expertise provided by Permira, says that very few will realise their potential beyond local-level unless obstacles to their growth are removed.

The Breakthrough pilot has identified four primary growth barriers facing social enterprises which the Breakthrough initiative is striving to address:

  1. Lack of growth stimuli - lack of external stimuli to grow, such as competition and shareholder/market scrutiny, coupled with risk averse management
  2. Access to skilled resources - a lack of funds and the scarcity of professionals who have the experience to manage both the financial and social priorities of a growing business
  3. Confidence in Product or Service - social enterprises often underestimate the value of their product or service. In many cases consumers are prepared to pay a higher premium than social enterprises charge
  4. Appropriate finance - lack of access to long-term equity finance for growth as government grants they receive are often not suitable for longer-term planning of core business

The Breakthrough initiative was set up to address these obstacles. It provides strategic support and growth capital to selected and established social enterprises with the ambition and the potential to significantly scale up their business and maximise their social impact.

During the pilot, Breakthrough spent more than two months of working hours directly supporting the selected social enterprises. Breakthrough supported the social enterprises to tackle specific growth challenges they faced.  Overall the turnover of the social enterprises grew 20% per annum from 2005 - 2007 and their social impact grew faster at 40% per annum.

CAN and Permira launched Breakthrough I, its first investment fund, in June 2005. To date five social enterprises have received support: FareShare (www.fareshare.org.uk), Law For All (www.lawforall.org), Training For Life (www.trainingforlife.org), Green-Works (www.green-works.co.uk) and TimeBank (www.timebank.org.uk).

Commenting on the current situation and Breakthrough's ambitions Adele Blakebrough, CEO of CAN says: "The potential for social enterprises to be major drivers of social change in the UK remains huge. However, the reality is that this social change will not happen without investment in the right areas. The Government is focused on supporting start-ups rather than the more established social enterprises that have huge potential but are struggling to scale-up. Breakthrough was set up to address these issues and we are delighted that our efforts are now starting to make a real difference.

She adds: "I can't rest when I know that there are great solutions to problems which are only available if you happen to be lucky enough to live close by to one of these inspired social projects. The solutions exist, society needs them and we've got to commit to making them more widely available. I hope Breakthrough can contribute to making them bigger and better."

Damon Buffini, Managing Partner of Permira and member of the Breakthrough Advisory Panel, said: "We first got involved with Breakthrough because of the expertise of Adele Blakebrough and CAN. We found that there are many similarities with our day job where we back entrepreneurs, people with energy and vision. We found social entrepreneurs who do exactly the same thing but with a social context and that really had some resonance with our values and we were excited by that. Our people are involved in these enterprises and find it pretty rewarding.

"We are delighted by the impact of Breakthrough thus far but we recognise that it is still very early days. The findings from the Breakthrough I pilot have provided us with significant insights which will help us ensure that the next phase of investment is even more effective," he adds.

Phil Hope MP, Minister for the Third Sector says: "It is crucial for social enterprises to have access to the right kind of finance when they need and a full range of funding options available to them. The Breakthrough Fund is an innovative model that operates similarly to venture capital investment. It enables social enterprises to access this type of finance along with advice and guidance from established professionals

"I applaud the Breakthrough Social Investment Fund as a visionary innovation that will enable more social enterprises to flourish and improve the lives of countless people."

CAN and Permira will launch Breakthrough II, the second fund to invest more support in a greater number of social enterprises, on 30th October 2007. The full results of the Breakthrough study on social enterprise will be announced at the launch. The launch will take place at LSO St Luke's, Old Street, London (ticket only) following CAN's event Scaling Up Social Enterprise. Please visit CAN's website for more information. www.can-online.org.uk

Enquiries

For all press enquiries and interviews please contact:
Kate Markey [Communications Director for CAN]:  +44 (0) 20 7922 7761  /  +44 (0) 7738 195 503
k.markey@can-online.org.uk 

Notes to Editors

About CAN

Founded in 1998, CAN (formerly Community Action Network) was the vision of three innovators of social change. The founding partners were Andrew Mawson, Adele Blakebrough and Helen Taylor Thompson.

Today CAN is now recognised as one of the UK's leading organisations for the development, promotion and support of social entrepreneurs and social enterprises. It runs CAN Social Investment, leveraging business support from leading private sector companies, including Breakthrough with Permira. It also runs and replicates its own social enterprise - the award-winning CAN Mezzanine - shared office spaces for Third Sector organisations, currently housing more than 80 charities and social enterprises in sites in central London.

For more information visit:  www.can-online.org.uk

About Permira

Permira is a leading international private equity firm. The Permira Funds make long-term investments to transform the performance of businesses, helping management to realize new visions and build stronger and more sustainable organizations. Since 1985, the Permira Funds have completed over 180 private equity transactions.

More than 20% of Permira staff in the UK have worked on Breakthrough, and in July 2007 Permira renewed its contribution to the Breakthrough Fund until 2010.

For more information visit:  www.permira.com