Social Investment “Angels” – a gap that needs filling!

There seems to be growing acceptance in the UK that social business lacks investment to be able to compete at scale on a level playing field with the private sector. Over the last year there has also, it seems, been a slow but growing consensus that social business needs the equivalent of mainstream angel investment to be able to operate at scale in some sectors – especially where social investors don’t have the scale themselves!
This is especially the case in the critical sectors of sustainability and health where opportunities often have an entry floor in the range £10-100M. With forestry, biomass farming, or growing sustainable food at scale circa £5M, large community energy projects at £20M, sustainable housing or retro-fit/refurbishment sites at £20M+, and everything from GP Surgeries and local cottage hospitals to supported accommodation in the health sector – it is imperative that these essential developments are not left for global business to suck the value out of communities.
This has been noticed and commented upon by leading social entrepreneurs – as well as potential investors. There are, of course, fields of operation where it is possible to grow slowly without such investment strategies; and it is totally irrelevant to most small to medium local social enterprises – which still represent the vast majority of social economic activity in the UK. Yet it will be lamentable if organisations who are ready and able to go to scale and compete with the private sector are unable to do so.
Gone are the days when social enterprise was seen as that small and fluffy thing in the corner; with growth of around 10% and rapidly heading for 10% of UK GDP according to some figures, social enterprise is suddenly attracting the interest of a lot of serious investors. So it should! Social enterprise represents a better risk statistically than private sector organisations, and often works in sectors that are contractually very sound – if somewhat conservative in nature.
In order to provide a response to this demand from potential investors and social business, The Innovation Consortium CIC has been working with Trudy Thompson, Bricks and Bread CIC, for the last year to leverage mainstream investment into sustainability. Bricks and Bread (Investment) is a new social enterprise investment model founded to work directly with mainstream investment houses and investors to grow and fund sustainable business at scale; it will be formally announced at the RSA event at Hub Westminster on 7th March, and followed later in the month by a launch for investors in the city. Bricks and Bread (Investment) is not a social investment intermediary. It will fund projects directly – similar to mainstream investment “angel” approaches. It will only work with sustainability businesses; initially either using the Bricks and Bread social franchise model, or with trusted partners.
The aim is to act as a funnel for finance houses and individual investors providing:
·         positive engagement with a wide network in the sustainability sector
·         sustainability expertise filtering the best sustainability projects
·         quality management input and entrepreneurship throughout the life of the projects
Above all, the objective will be to support organisations to go to scale and to ensure that they have structures fit for investment.
What the new organisation won’t be doing is imposing ridiculous and time consuming public sector style bidding processes. If you have an idea you will be able to connect directly with experienced social entrepreneurs with long and successful track records in scaling up business. They will provide the help you need at the earliest stage with your initial proposal, and continue to provide expertise and support for any project eventually funded.
The project has already attracted considerable attention among leading investors, many of whom are offering to recommend or provide direct support. Given that I have been banging on about this issue for over 5 years, it’s seems that the investment gap I experienced in my own work in frontline social enterprise and, more objectively, in my research at Cambridge, is about to be addressed – it feels like quite a change in the offing. And though £100M may sound a lot to some, it’s only a start – I can think immediately of four projects that could spend it all! There is opportunity to attain large scale social and environmental impact; produce modest surpluses and provide a solid, fair and equitable return for investors.

Posted on February 16, 2012

Posted by charles