Social ventures can only apply to the fund in partnership with approved advisers without exception.

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1 Created About the Fund What is the Investment and Contract Readiness Fund (ICR)? The ICR is a three year 10 million fund, being delivered on behalf of the Office for Civil Society that aims to ensure social ventures are better equipped to secure new forms of investment and compete for public service contracts. It will provide grants to social ventures that have the potential for high growth and deliver positive social impact for the purchase of investment and/or contract readiness support. The ICR Fund also has an important role to play in developing the social investment market as for the first time a group of the leading social investors in the country have been brought together to help shape the programme so that the likelihood of organisations successfully attracting investment after they have had support is maximised. Social ventures can only apply to the fund in partnership with approved advisers without exception. What will the fund offer? The ICR fund will offer grants of between 50k and 150k to purchase specialised investment and contract readiness support and to cover some of the costs of putting the investment/contract readiness plan into action in the social venture itself. The fund is focused on enabling social ventures to access specialist support from an approved investment/contract readiness provider with a track record in supporting social ventures to secure social investment to be an integral and necessary part of the funding package. When will it be launched? The Investment and Contract Readiness (ICR) Fund will be open for applications by the end of April The ICRF is running a prototyping period from launch to end of July The fund will be closed 1 These documents are subject to change and may be superseded by later updates. The ICRF is running a prototyping period from launch to end of July The fund will be closed to applications in August 2012 and reopen with amended/updated forms and guidance in September

2 to applications in August 2012 and reopen with amended/updated forms and guidance in September How many awards will be made? We want to make around 130 awards over the three year fund. Which means we hope to find ventures to support in year one, in year two, and in year three to match the distribution of funds available. Is it grants or loans? This is a currently a grant fund. However, the Investor Panel reserve the right to make offers based on at least partially repayable grants depending on successfully raising capital in the future. The Investor Panel, the Social Investment Business and the Office for Civil Society recognise that many ambitious social ventures need assistance and advice to access investment. The aim of the fund is to meet the costs of this assistance as well as attract new providers on investment and contract readiness and raise the overall standard of investment and contract readiness services. Key elements of the Fund What is the role of the social investors involved? This fund puts investors at the heart of the process because as providers of investment they both understand what investment ready ventures look like and have a keen business driven interest in ensuring social ventures with the greatest chances of success secure this support. An Investors Panel has been established, chaired by Big Society Capital, which will drive programme design, decision making, and the selection of the social ventures who will receive the grant and define the standards of approved advisory support providers plus opportunities for other investors to be involved. Who are the social investors involved? To date the social investors involved are Big Society Capital, Big Issue Invest, Big Lottery Fund, Bridges Ventures, CAF Venturesome, Deutsche Bank, Esmée Fairbairn Foundation, The FSE Group, NESTA, Panahpur, NatWest, Triodos Bank and The Social Investment Business. 2

3 Why is it focused on social ventures with the potential for high growth? The aims of the fund are to enable more social ventures to secure more social investment and to increase the number of social ventures who are able to compete for and win public service contracts. We have developed a model in which the fund will act as a catalyst to create a step-change in the amount of social investment the sector is able to access and the volume of contracts won. The fund is targeted on helping social ventures raise significant levels of capital of 500k upwards or secure contracts of 1million plus. About the role of investment/contract readiness providers (ICR providers) and the approval process What is the role of the investment/contract readiness providers? The ICR Fund recognises that ventures often need quality, specialised and experienced support to get investment and contract ready. As a result, the Fund is designed to provide significant resources to meet the costs of these specialist inputs as well as the incremental/additional internal costs to the venture of raising its game in readiness for investment. The fund will enable providers to support ventures from their existing network (or new ones) to deliver a confident, but effective investment or contract readiness plan. Investment and contract readiness providers will support, guide and assist social ventures to develop realistic proposals to become investment/contract ready. Providers will partner with a social venture in order to submit an application, including working together on an investment/contract readiness plan with milestones which will form the basis of applications. What will be needed in an application to become an investment/contract readiness provider for the Fund? As applications to the Fund must be made with an approved ICR provider, the first step is to seek out and approve a number of specialist providers that have a strong record in delivering investment readiness or contract readiness services. All ICR provider approval applications are reviewed by the Investor Panel and include four key areas: 1. A description of skills, experience and track record 2. Four references from ventures and funders/investors/commissioners the provider has worked with on ICR. 3

4 3. Financial history and performance 4. Areas of expertise References should be from at least three businesses/social enterprises/charities/right to provide that have received business support or professional services from the Provider within the last two years. At least one venture reference should be for investment or contract readiness services and should include details of the services provided, the investment/contract targets and achievements and timescale. One further reference from a funder, investor or commissioner the adviser has worked with in the last two years (other than TSIB). Referees can (but are not required to) use the reference template. However all references should be submitted on headed paper and include contact details for a named person. How will the investment/contract providers be approved? 1. The Social Investment Business will establish an applicant s eligibility, completeness and veracity and contact references. 2. The Investor Panel will review the application in detail for discussion and then approve, decline or request further information. 3. The ICR provider may be required to make a short presentation and Q&A to the panel before discussion/decision. 4. Unsuccessful applications for approval will be given feedback and invited to reapply if feedback has been addressed. How can ventures find suitable investment/contract readiness providers to apply with? Once approved, providers will be listed on the ICRF fund website and We hope a significant number of ventures that are most likely to secure support will be found through the providers own networks. The ICRF is encouraging providers to locate ventures from their existing (and entering) network to apply. 4

5 How will quality of providers be maintained and performance monitored? The key method for maintaining an overview of quality will be the progress of supported ventures in their investment and contract readiness programmes. The Investor Panel will periodically review the portfolio and performance of the ventures with in it. Approved providers will be asked to notify the ICRF of any changes in key personnel. What happens when the investor Panel approves a provider application? TSIB will ask providers to review and sign a participating provider agreement confirming permission to publish details on the microsite, an undertaking to ensure that applying ventures are aware of State Aids de minimus rules and the declaration, a commitment to notify TSIB within one month of any changes in key personnel and a commitment to support successful social ventures fulfil their reporting obligations to the Fund. About the Social Venture application, selection and award process Who can apply? Social ventures that tackle social problems are financially sustainable and want to scale up (including registered charities, social enterprises, community and voluntary organisations, social businesses, charities and mutual s) are welcome to apply. The fund will support ventures that want to raise at least 500,000 and/or secure contracts of 1million or more. Social ventures must apply with an approved investment/contract readiness provider with whom they have developed their investment/contract readiness plan. The aim of the ICR Fund is to help social ventures access social investment from social investors, or bid for and win Government contracts. As such we envisage social ventures to be delivering a cross section of social goods. These ventures might be tackling social problems and or enhancing or improving lives, communities or areas. The work of the ICR Fund is to help build the deal pipeline of social ventures that can confidently seek finance from social investors or apply to run significant Government contracts. As a result, the Fund is not able to support new or emerging social finance intermediaries. 5

6 How do ventures find ICR providers? There will be a full list of approved ICRF providers as they become available. The Social Investment Business is not able to make individual or general recommendations. What can the money be spent on? The social venture will be able to spend their grant on external investment/contract readiness support and internal costs. A venture may want to work with several investment/contract readiness providers during the course of their investment/contract readiness plan, but they must apply with a lead, approved ICR provider. A venture s internal costs for executing their ICR programme are also eligible for support. This may be additional staffing to deliver the investment/contract readiness programme and manage the relationship with the advisory support provider or for other fixed costs relating to the programme. The fund does not provide working capital or cover the costs of general overheads. The budget to meet costs to the social venture should be no more than 40% of the total funding requested, unless there is a clear case outlined in the application that the success of the investment and contract readiness plan is contingent on more than 40% of the total grant funding requested being spent on implementation of the plan by the social venture. The fund expects to make awards for investment and contract readiness plans of anywhere between three and 18 months, broken down into a minimum of three monthly stages. Payments from the fund are therefore expected to be made in three month tranches in advance, after the initial payments subsequent tranches will be triggered by achieving milestones outlined (and agreed on award) in the ICR plan which forms a key part of the application. What will be needed in an application? Applications are designed to help social ventures show case how they could develop their business to deliver growth and social value. The ICRF is specifically intended to support ventures to get ready to take investment or secure contracts. After establishing some eligibility criteria the basis for the applications therefore centres on three key areas: 1. Current assessment of venture potential and current barriers to securing investment or contracts 2. An analysis of future investment needs 6

7 3. An investment/contract readiness plan that shows how the venture and ICR provider have developed a plan of activities that will enable them to work together to move the venture from their current position to investment or contract readiness. The plan is supported by a budget detailing the costs of the activities (for both the social venture and the ICR provider) and a time plan with key milestones to help both the venture and the ICRF understand and monitor progress. Applications must be submitted by a venture in partnership with an (already) approved ICR provider. The application should be viewed to all intents and purposes as a joint application although the ICR Fund will formally contract with the venture. Ventures will be asked to submit information across nine section: Section A: Eligibility criteria Section B: Key details Section C: About the social venture Section D: Development and Investment Needs Section E: Investment/contract readiness plan Section F: Supporting information Section G: State Aid Section H: Contact and Social Venture Details Section I: Supporting Information How will successful projects be selected? 1. The Social Investment Business will establish an applicant s eligibility, completeness and veracity. 2. The Investor Panel will review the application in detail for discussion and then decline, approve or request further information. 3. The lead ICR provider may be required to make a short presentation and Q&A to the panel before discussion/decision. 4. Unsuccessful applicants will be given feedback and invited to reapply if feedback has been addressed. 7

8 5. Successful venture applicants will receive a phased grant offer enabling them to independently contract the services described in the investment/contract readiness plan from one or several ICF providers. 6. Successful applicants will be asked to submit short reports against milestones together with monthly management accounts/p&l at least every quarter. If after any quarterly report ventures encounter challenges meeting milestones, reporting is likely to become more frequent. 7. If ventures consistently encounter difficulties achieving their investment goals the Investor Panel may decide to re-structure or cease further financial support. How will progress be monitored and reported? The ICRF Investor Panel will receive regular portfolio reports on the progress of social venture investment and contract readiness plans based on milestone reporting. The Investor Panel expects to operate a traffic light approach to the ventures in the portfolio: green and no or light touch for those completely or mainly maintaining progress against plan amber with the likelihood of more frequent reporting and monitoring for those encountering some difficulties, and red for those with deep, persistent or continuing challenges. Awards may be withdrawn for those consistently unable to maintain progress who are flagged red. When will payment instalments be made? The first disbursement will be made on completion of preconditions (some additional condition may also be set by the panel). Monthly management accounts to be submitted on a quarterly basis. Further disbursements will be made on condition that the social venture has progressed against the agreed milestones How do the repayable awards work? From April 2013, all investment readiness awards over 75,000 will be subject to repayment clauses. 1. Applied to investment readiness grants, not contract readiness grants 2. Applied to investment readiness grants over 75,000 8

9 3. Amount repayable = 25% of the total grant 4. Repayable amount capped at 3.5% of the amount raised 5. The repayable elements becomes payable when investment is raised and received by the venture. It is repayable in one tranche at raise. 6. The repayability condition may be waived if a sufficiently strong case is made in support of the application that the amount or the liability would significantly impair the ability of the venture to raise investment. 7. The repayability condition may be waived or only applied to a proportion of the ICRF grant. 8. The liability to repay is time limited for 3 years from the grant signature date. 9. From 1 April 2013, ICRF will require a condition of contingency on raising investment in the contract between provider and venture which should be at least equal to 10% of the provider income agreed in the ICRF budget (but may be more) 10. Executed by seeking a warrant from both the venture and provider that a contingent arrangement fulfilling these conditions is in place 11. In order to prevent applications being skewed towards contract readiness plans, contract readiness grants will be capped at 75,000 from applications received after 1 April 2013 unless a specific and well-made case is made in the application. 12. The Investor Panel will retain the right to apply repayable elements to contract readiness plans 13. From 1 April 2013, the ICRF will create an incentive award for volume of investment secured. Any provider that helps one or several ventures secure investment of 5m or more in the 12 month period from 1 April 2013 till 31 March 2014 will receive an additional 50,000 bonus award. Definitions of Fund terms What is investment readiness? Investment readiness signifies that a social venture has the capacity and capability to seek and utilise investment. There are a number of elements that help to make a social venture investment ready: 9

10 Effective leadership Business planning and strategy Finance Governance Policy and procedures What is contract readiness? Contract readiness signifies that a social venture has the capacity and capability to bid for and manage service delivery contracts. The elements that help make a social venture contract ready are very similar to those which make a social venture investment ready: Effective leadership Business planning and strategy Finance Governance Policy and procedures. How do you define the potential for High Growth? Potential for High Growth is a social venture that has ambition and plans to be able to utilise 500k upwards of social investment to increase their capacity to transform and delivery public services. What is a social venture? We define social ventures as organisations that: Tackle social problems like obesity, educational disadvantage, poverty or health. The best make a significant social impact not just in breadth that is, reaching a significant number of people but also in depth, effecting a significant improvement in the quality of life of people who have significant needs. 10

11 Are financially sustainable thanks to revenues which come from paying customers, from governments, from charitable sources or from individual supporters (like Ebbsfleet United, a football club bought by 26,000 supporters, each paying 35 in 2008). We include ventures that distribute their profits or reinvest them. The best social ventures use business models that make the most of scarce public and philanthropic money, either through using a mix of grants, donations and income from paying customers, or from using considerable pro-bono, in-kind and volunteer support. Aim to scale what works, through the growth of an organisation or through helping others to replicate their ideas and adapt them to their surroundings. Our previous research has pointed to a range of different methods for doing so from organisational growth, through franchising and federations, to licensing and looser diffusion. Some of these involve scaling up the metaphor taken from manufacturing. Others are better understood as more organic, graft and grow or scaling out, with ideas adapting as they spread, rather than growing in a single form. From Young Foundation s Growing Social Ventures (2011) 11