venturesome - access to capital 0911

8/8/2019 Venturesome - Access to Capital 0911

http://slidepdf.com/reader/full/venturesome-access-to-capital-0911 1/38

Venturesome - Access to capital

Paul Cheng

Investment Manager, Venturesome

The text in this document may be reproduced free of charge providing that it is reproduced accurately and not used in a misleading context. The

material must be acknowledged as Venturesome copyright and the title of the document specified.



Income/revenue is distinct from capital

Income / revenue

covers the costs of expenditure of ongoing work

(service provision, projects etc)

suppliers of income = PURCHASERS of your work

Capital

money and other resources that enable you to deliver

your service / project / work

capital funders = INVESTORS in your organisation



Charities need a capital base

Capital base is required for:

1. Working capital

2. Financial resilience

3. Growth or development

Few charities are able to create a surplus that can

be set aside as reserves

Emerging supply of capital for charities and socialenterprise



Mad money – the irrational world of charity finance

Surpluses are bad

Cash is restricted

Price does not have to cover costs

Marginal costs of growth can be ignored Overhead is a luxury and a distraction



The social investment market: risk / return

Low Financial Risk

Impac t In ves tmen t

Property / working capital Development capital

C o m me rc ia l re t u r n s

VS Bridging

Fund

VS Development

Fund

Classical grant making

(-100%)

Reduced financial

return

compensated by

social impact

High Financial Risk

Loss of capital

compensated by

social impact



Venturesome provides capital funding

Since 2002, we have offered £16m to over 200

small- and medium-sized charities

Provide capital investment in the form of unsecured

loans, underwriting and equity-like investments To date, 96% of funds have been recycled, to be

reinvested

Nearly nine out of ten organisations have achieved

or outperformed initial capacity building aims



Helping individual charities – what we offer

1. Working capital to cover cash flow fluctuations

2. Development capital – ‘hard’ and ‘soft’

3. Pre-funding of fundraising – bridging loan

4. Underwriting – standby facilities



Main financial mechanisms used by Venturesome

Underwriting / standby facilities

undertaking to provide financing for a particular project if

budgeted income does not materialise

Unsecured loans

No security required on the charity’s assets

Equity and quasi-equity

the return the funder receives is linked to the financialsuccess of the venture



Matching financial mechanisms to funding needs




Secured loan

Standby

Facility

Overdraft Unsecured

Loan

Patient

Capital Quasi-equity

Equity

Grant

HIGH

CHANCE OFREPAYMENT

LOW

CHANCE OFREPAYMENT




Secured loan

Standby

Facility

Overdraft Unsecured

Loan

Patient


Equity

Grant

HIGH

CHANCE OFREPAYMENT

LOW

CHANCE OFREPAYMENT

LOW RISK HIGH RISK Property/Asset

purchase

(mortgage) Cashflow

bridging Pre-funding

Capital

Fundraising Higher risk

working

capital

Development

Capital




Secured loan

Standby

Facility

Overdraft Unsecured

Loan

Patient


Equity

Grant

HIGH

CHANCE OFREPAYMENT

LOW

CHANCE OFREPAYMENT

LOW RISK HIGH RISK Property/Asset

purchase

(mortgage)

Cashflow

bridgingPre-funding

Capital

Fundraising Higher risk

working

capital)

Development

Capital




Unsecured

Loan

Overdraft

Quasi-equity

Equity

Grant

Pre-funding

capital

fundraising

Higher risk

working capitalDevelopment

capital

Standby

Facility

LOW RISK HIGHRISK

Property/Asset

purchase(mortgage)

Appropriate Funding

(correlation)

Patient

Capital

Secured loan

Cashflow

bridging

LOW

CHANCE OFREPAYMENT

HIGH

CHANCE OFREPAYMENT



Charity or business?



What is

“social enterprise”?



Model 1

“Profit Generator”



Model 2

“Trade off financial and social returns”



Model 3

“Lock-step”



The investor universe

+ 8%




+ 8%

Market-rate return




+ 8%0%

Market-rate return




+ 8%0%

Market-rate returnCapital-protected




- 100% + 8%0%

Capital-protected Market-rate return




- 100% + 8%0%

Capital-protected Market-rate returnGrant-makers




- 100% + 8%0%


- 15%




- 100% + 8%0%


- 15%

?



Ingredients for success

IDEAS

PEOPLE FINANCE



Effectiveness vs Efficiency

QUALITY

ACCESS COST



The challenges to unlocking capital

Changing the grant-making mindset





Creating guarantee funds






Using subordinated debt







Creating retail social investment products







Creating retail social investment products Exploring the negative return spectrum







Creating retail social investment products Exploring the negative return spectrum

The emergence of a new financial services

industry around social enterprises



Helps manage timing of income/expenditure

1. Working capital

Beat On average income matched expenditure, but income typically ‘lumpy’

while expenditure remained fixed

Venturesome underwrote reserves using a standby facility to help

manage uncertainty

St Peters Church Undertaking major refurbishment work requiring £1.6m fundraising

campaign Helped structure fundraising approach to enable the church to proceed

with its plans, providing £200,000 to pay builders ahead of futurefundraising income



Helps manage rainy days

2. Financial resilience

Bedford Creative Arts

Local educational charity had to move offices at short notice, at the same

time as experiencing uncertainty around key funding streams

Venturesome provided a £20,000 financial safety net for a year to help

the charity through uncertain times

Global Links Initiative

Small charity managing international network connecting social

entrepreneurs

Venturesome provided a financial bridge to legacy income, protecting thework while future plans were reviewed



Enables investment in your organisation

3. Growth or development

Book Aid International

The charity wished to invest in a door-to-door fundraising campaign to

diversify income streams, but couldn’t risk all its reserves in doing so

Venturesome underwrote reserves enabling the charity to investsuccessfully

Charity Technology Trust (CTT)

Transitioning from grant-dependency to a more diversified income,

including trading

Provided £50,000 of equity-like investment, with Venturesome and CTTsharing the risk associated with the new trading arm



Contact details:

Paul Cheng

[email protected]

03000 123 256

www.venturesome.org

venturesome - access to capital 0911

Documents