Social enterprises must move towards ‘investment-readiness’
Social enterprises must move towards ‘investment-readiness' to meet demand and opportunity, says CAN
Thursday 11th November 2010 - Social enterprises must commit to becoming investment-ready if they are to attract greater capital, scale up and meet current demand for their services, warns social enterprise support organisation, CAN.
Research findings, released today by CAN, found that of 15 different industries where social enterprises operate, grant represents between 94% - 96% of funds available. It found significant need for a hybrid of grant/loan alongside management intervention to help growth and stimulate more investment opportunities.
"There is a gaping hole between investors' requirements and the reality of where most social enterprises are, but the opportunities are massive," says Andrew Croft, Chief Executive of CAN. "Social enterprises must become more finance-savvy and see investment as the route to growth. Equally the grant funding community must create more innovative ways to invest that move social enterprises towards investment and financial independence."
He adds:
"Investment-readiness is the single biggest barrier to growth for social enterprise, where it is not present. It restricts both a confidence in, and a greater flow of capital into, the market. It also perpetuates a culture of grant dependency. Becoming investment ready can be a long and difficult journey but social enterprises face unprecedented opportunity for growth. The journey towards investment must start now."
The CAN research analysed UK industries where social enterprises operate, including healthcare (notably services supporting people with physical disabilities, services for elderly people and mental health support), education, transport, retail and employment. The study used 20 different metrics to gauge growth potential in each area including competition, government support and potential for management capacity-building. CAN found that:
- many of the industries where social enterprises operate are ill-defined
- social enterprises struggle to understand investors' needs
- sound and robust reporting on social, environmental and economic benefit (to attract investment) is a challenge.
CAN believes the key is matching management intervention alongside a combination of grant and loan. "UK social enterprise is a world leader. Harnessing that talent whilst supporting social enterprise towards debt will reap massive rewards, but it won't happen overnight. Funders must focus on innovation and scale alongside financial and mission performance - whilst boards and management teams in social enterprises must commit to reducing reliance on grant. That means sound business and financial planning, managing performance, measuring and reporting on impact, understanding the market and also the needs of the investor community."
Croft adds: "The fact the Triodos bank prematurely closed its social enterprise fund shows how few social enterprises are strong enough to take on equity. Grant plays a critical role in supporting organisations whose mission restricts an ability to be enterprising. For the rest of us, investment must support our enterprising and ultimately our social missions."
CAN's own Breakthrough venture philanthropy fund, launched in 2005, matches grant alongside intensive and measured management support, with significant results. From 2005 to 2010 the average revenue growth of the portfolio social enterprises is 24% whilst the social impact has risen, on average, by 28% per annum. Breakthrough is now open to a range of investors of funds and business expertise.
CAN's growth programmes focus on helping organisations move towards greater sustainability and scale. Its CAN Engage programmes lever business skills from corporate partners to support business projects in social enterprise focusing on core business needs like marketing and sales, research and development, finance and legals. Breakthrough works with established social enterprises preparing for investment and significant scale. CAN's Social Return on Investment (SROI) services helps organisations evidence their social and economic benefit.
Andrew Croft will be chairing a panel on scaling up social enterprise entitled ‘Doing more of what you do well' at the forthcoming Good Deals Social Investment Conference on 16 November.
For more information on investing in Breakthrough visit www.breakthroughfund.org.uk
ENDS
More information from Anne Nicholls, CAN Press Office Tel: 020 7250 8046. Mobile: 07973 491439. Email: a.nicholls@can-online.org.uk
or Kate Markey, Deputy Chief Executive Tel: 020 7250 8060. Email: k.markey@can-online.org.uk
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Notes to Editors
Breakthrough was founded in 2005 by CAN with initial funding from Permira private equity firm. Breakthrough has to date invested almost 3 million euros in cash and 2 million in in-kind time in established and scalable social enterprises. The fund provides a powerful combination of capital and intensive management intervention to help its portfolio organisations overcome barriers to growth and maximise their social and environmental impact. Additional funds were raised in 2008. The programme is now open to a wide range of investors. CAN's SROI work helps organisations move towards investment-readiness. CAN's SROI service helps social enterprises and charities measure and report their social and economic impact. CAN Engage matches business projects in social enterprises with executives from the corporate sector as part of leadership programmes. CAN also secures mentors, volunteers and training from the private and public sectors to hep support growth in charities and social enterprises. CAN Mezzanine provides high-quality affordable office space for social enterprises and charities. To date the award-winning CAN Mezzanine houses 120+ organisations across its portfolio. It provides events and training to support their growth and fosters collaboration and trading opportunities between its customers. |