Did you know that beyond our grant making work, we also provide social investment to organisations with social impact aims for Londoners? With around £15 million of social investment commitments already, we are flexible as to the size and type of investments made and the financial returns we ask.
Here our Grants Manager Ugo Ikokwu talks about the importance of exploring different funding models for social entrepreneurs, and shares some of the Trust’s priorities for its social investment funding stream with a look at the success of our current investee Well Grounded Jobs.
Social entrepreneurs are driven by a passion and desire to improve the systems and lives of the most disadvantaged in society.
If you are a charity or social enterprise that is serious about creating change, then introduction to revenue options needs to be a top priority – whether it comes from grants, trading income (sales), contracts, or a traditional bank or investor.
There is no black and white approach to negotiating the funding landscape because every organisation has its own set of constraints and potential opportunities, as well as a unique vision for growth.
Additionally, funding considerations are compounded by the fact there are different types of legal structures that social enterprises can constitute as. This is particularly important because certain legal structures determine the types of capital available to the social enterprise / charity and some funders have a preference for supporting either non-profit or for-profit entities.
When weighing the options, you as a charity or social enterprise must think about how aligned potential funders are with your vision for change and what strategic support funders can offer you beyond financing. For example, social investors, trusts and foundations typically have a specific focus and work in a particular geography or area of impact. Moreover, any type or source of finance comes with its own set of commitments and timelines.
In working towards change through social enterprise, it is critical that you consider developing a sustainable funding model that can enable tangible social impact on a meaningful scale
Following a review of our social investment strategy in July 2020, one of our social investment priorities is to use concessionary social investment to help move frontline organisations and enterprises that are tackling poverty and inequality towards longer-term sustainability. We are also keen to support pioneering projects and social enterprises that can offer new ways to tackle issues around poverty and inequality.
In October 2020 Trustees agreed a revenue participation model of investment. This idea was developed as a key strand of the Trust’s social investment strategy -specifically addressing the needs of entrepreneurial grantees that value low-cost, flexible investment.
In September 2021 we made our first investment into an organisation called Well Grounded Jobs CIC (WGJ), a social enterprise that works to harness the potential of local talent with a pathway into, and progression through, employment in the coffee industry. It supports unemployed beneficiaries who have a range of complex needs (including neurodiversity, mental health issues, and refugee status).
Founded in January 2016 in Islington, it is now a pan-London service, welcoming trainees to its virtual and face to face programmes from across the capital. It has two central Coffee Training Academies across Camden and Tower Hamlets where most of the face-to-face activity is delivered.
WGJ delivers a range of into-work programmes, alongside a professional development and coaching service. The into-work programmes consists of:
- Technical training and accreditation - with the Speciality Coffee Association
- Work placements - with 120 partnership employers ranging from hospitality venues in banks, to local independent coffee shops
- Coaching and mentorship – to ensure trainees have a trusted person to talk to, working through any barriers to accessing and sustaining employment
- Employability and wellbeing support – an in-depth employment programme, including mock interviews and CV-writing sessions
- Signposting – Trainees are connected with specialist support services to overcome barriers to progression, e.g., mental health support
This is a unique form of financing, often referred to as quasi-equity or revenue participation / sharing agreement, which takes qualities from both debt and equity capital. The structure can vary, but the distinguishing feature is that repayments are linked to the future financial performance of the organisation. In other words; when the organisation generates higher income, the repayments of the loan are higher.
This form of investment takes on the same win-win incentives of a normal equity investment but does not rely on an "exit” for us as a social investor to see a sustainable return on our investment.
It also provides benefits for both investors and entrepreneurs. From the investor’s side, it allows them to develop their capital in impactful companies that aren’t necessarily able to show a clear path to "exit". For entrepreneurs, it provides the opportunity to align investors with the best interests of the enterprise, since they will only receive a return when the company does well. For both sides, this financing solution is a flexible alternative to the long-term commitment of a debt or straight-equity deal.
With the success of investees like WGJ, we are keen to find more opportunities to support organisations that act on the social issues of our city whilst developing a financially sustainable enterprise. If you are part of a social enterprise that could benefit from our model of social investment, we invite you to learn more about our social investment programme and to consider getting in touch about an application.
28 January 2022