How to Attract Investment to Your Social Enterprise
Wednesday, April 13, 2011
By Saba Salman
The social investment sector won a recent boost with the launch of the Big Venture Challenge fund, launched by UnLtd and the Big Lottery Fund, and with another £10m of government cash for the Social Enterprise Investment Fund that supports NHS-spin off social enterprises.
These developments, announced at last week’s Voice11 conference, will help organisations scale up for more public service delivery.
Yet for every enterprise that grows through a mixed palette of investment and management support, there is the business thwarted by a seemingly impenetrable wall of investment options. . One barrier to accessing investment can be a lack of awareness about options combined with a cultural tendency to rely on piecemeal grants.
According to a 2007 Warwick Business School report, 65% of social enterprises use commercial funding compared to 80% of for-profit businesses. Meanwhile, 71% of social enterprises use grants compared to 6% of mainstream businesses. This challenge is reflected in the government’s recently published strategy, Growing the social investment market: a vision and strategy, which highlights the lack of so-called “investment readiness” among social organisations.
Sue Peters, managing director of investment at the Social Investment Business, stresses the importance of a diverse funding base. Peters, whose organisation runs the Social Enterprise Investment Fund, adds: “Don’t put all your eggs in one basket – look for multiple incomes streams. With start-ups, for example, people would ask for funding based on one contract and that makes it very high risk because even a three-year contract isn’t a long period.”