Building the market: Putting social entrepreneurs at the heart of social investment
Social investment is so often led by the market and the needs of the investor, rarely the needs of the entrepreneur. So how do we establish a more supportive and inclusive market for social entrepreneurs wishing to access investment?
As the UK social investment market matures and grows, social investors face the ongoing challenge of meeting investees’ needs, both in terms of providing the right products and engaging effectively with social entrepreneurs.
This session, hosted by UnLtd, saw three social entrepreneurs explaining their journey through the world of investment and offering reflections on the process.
The first, who runs a tea company working with refugees, had funded the development of their organisation through a mix of grants and investment. This included personal investment, a business loan from a mainstream bank and three lots of funding from UnLtd. Their experience of talking to social investors was that the discussions didn’t seem to focus much on the social impact side of things, prompting the thought that, “Maybe refugees isn’t the flavour of the month.”
The second, who runs an organisation providing careers support, talked about the need for investment to be offered on flexible terms. He’d had difficulties with investors who wanted to tie the business into long-term finance when, at the time, he needed investment over a shorter period. The major investment success for the organisation had been securing a loan to match support from UnLtd’s Big Venture Challenge.
The third entrepreneur, whose organisation provides behavioural mentors in schools, had received three social investments – ranging from £15k to £115k – from two social investors (one of whom had invested twice). Despite this success she agreed that, in discussions with social investors, social impact had not seemed to be the priority: “I still to this day have never been asked for anything more than outputs from investors: how many kids have you worked with?”
Questions from the floor prompted further exploration of the investee experience. One of the entrepreneurs noted that while support programmes such as Big Venture Challenge had previously been very investment focused – with participants feeling like they were in a competition to see who could raise the most – UnLtd and other support providers were now recognising that investment shouldn’t be ‘over-glamourised’.
Another investee reflected that social investors had taken a big gamble on them when making their initial investment: “I don’t know if I would’ve given money to me as a 20 year-old”.
A collective burst of ire was directed at impact measurement consultants funded by support providers and investment readiness programmes. One entrepreneur said they had been encouraged to take advice to develop “complicated measurement systems that are not useful at all” and that once the consultants had left, “all of that advice has been put in the bin”. The entrepreneurs were focused on measuring impact but all had developed their own methods of doing so which were relevant to their beneficiaries and customers.
The session rounded up with a discussion on how social investors are or aren’t funded to support social entrepreneurs through the investment process. This included acknowledgement of the thin margins that social investors have to operate on – alongside an explanation of the funding available via the Access funded scheme, Reach Fund.
Avoid prioritising investment for its own sake.
Make sure impact measurement support is relevant to organisations’ needs.
Both social investors and support schemes should develop flexible models for engaging with social entrepreneurs.