social investment : what are the opportunities? dharisha mirando investment executive, caf...
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Social investment : what are the opportunities?
Dharisha MirandoInvestment Executive, CAF Venturesome
13th June 2013
Social investment recap
Social investment is the provision of capital for charities and social enterpriseso Working capitalo Financial resilienceo 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
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%
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 investeesWe can take high risks...but only if the investee can demonstrate a high social impact
Investment providers
CHARITABLE COMMERCIAL
LOW INVOLVEMENT
HIGH INVOLVEMENT
Impetus, PEF, etc
Charity Bank
Bridges Ventures
VENTURE PHILANTHROPY VENTURE CAPITAL
BANKSGRANTMAKERS
Big Issue Invest
Venturesome
Local investment funds, CDFIs
High street banks
Angel investors
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 products:
• Unsecured loans, underwriting, quasi-equity
• £25,000 to £350,000
• Repayable over 3-5 years
• Interest rate from 6.5%
Our criteria:
• UK registered organisation
• Minimum one year trading history
• Turnover from £70k
• Clear charitable purpose
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:o Measurement methodologyo Achievementso Beneficiary demographics & numberso What would have happened without this service?
How we work
No application form
Due diligence: o Past: history and track record, annual accountso Present: current activities, management team and
governance, management accountso Future: business plan and strategy, fundraising pipeline,
cashflow forecast
Face-to-face meeting
Independent investment committee
Regularly monitor loans
What do we look for?
What does investment readiness look like?
1. Don’t rely on the business plan
‘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
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
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
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
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
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
Please get in touch!
Dharisha [email protected] 123 249
www.venturesome.orgTwitter: @cafventuresomeBlog: http://caf-venturesome.tumblr.com