Social Investment Explained Andrew Croft C.E. CAN

Transcription

1 Social Investment Explained Andrew Croft C.E. CAN 1

2 Investor Provider Co-founder Strategic Partner Practitioner 2

3 CAN s Investment Journey Raised 19M of commercial debt M refinance to acquire a property portfolio valued today in excess of 22M Raised 3m venture philanthropy for CAN Breakthrough Manage 1.5M grant /loan community investment fund Co-raised 100M Milennium Award Fund and created UnLtd Consulted on the Social Investment Wholesale Bank now Big Society Capital Impact measurement consultancy Social Investment Finance Intermediary SIFI

4 Types of Finance As many types as there are needs: Asset backed Working capital / Payment by Results / Cashflow Infrastructure / Personnel investment Growth / expansion capital (new / more activities) Research and development Start up costs Reserves

5 Types of Funder Market by funder Commercial Transaction 55bn* Social Finance 150M* Market 750M 2015 Grant Transaction 13bn* Trust +* 3bn individual giving.

6 Types of Investment Different types of capital... Source: Derived from CAF Venturesome (2008), Quasi Equity. 6

7 Types of Funds 1. Grant (philanthropy) is usually for a specific reason Typically low risk for recipient unless clawback provisions apply Can require high level of potentially onerous reporting Usually finite period 2. Venture philanthropy. No cost! Significant intervention in the organisation and scrutiny High expectations 3. Equity (shares) Low risk for recipient. Investor shares risk Usually more expensive long term as they also share in upside Some legal entities are restricted on ability to issue shares Some intervention which can be significant

8 Types of Funds 4. Debt. There are numerous types of debt instruments Asset backed debt is less expensive and easier to raise Senior debt has a first charge over assets and is usually less expensive Mezzanine debt takes a place behind first or second charge holders and finances gaps usually at a higher price Bridging finance usually short term gap finance for asset acquisition & expensive Unsecured loan is usually expensive and used for cashflow / working capital Quasi Equity is a debt instrument that behaves like equity sharing risk rather than demanding fixed interest. 5. Venture capital Private investment funds harnessed usually for specific types of industry / sector where the investor has core competencies. Usually high intervention Will be driven by own requirement (exit, new fund,, other portfolio considerations)

9 Types of Funds 6. Crowdfunding. Small funds from many rather than large from few Easier to do today due to electronic platforms Work well for football clubs / community items etc Bonds particularly Social Impact bonds Will finance today s interventions for future performance Agreed and set criteria Usually 3 parties. Customer (gov), financier & delivery agent 8. Government guarantees 75% loan guarantees as a stimulus to the banking world

10 Attracting Finance Have a robust business plan: Market analysis / contract detail Cash flow Breakeven point Debt management / historical performance Once investment is made HIT ALL MAJOR MILESTONES! Make yourself attractive to investors What social value do you create? Quality of your team Your covenant and track record for financial sustainability

11 Sources of finance 1. Banks. Banks need to lend deposits to secure income. Even in the crisis more prudent ethical banks have funds. Triodos bank, Unity bank and Co-operative Bank 2. Mainstream banks have government guarantee schemes which they are using to make loans 3. Factoring companies. Typically more expensive but they will finance invoices (future income) at an agreed discount rate. 5. Asset lease companies finance equipment freeing cashflow. There may also be some beneficial VAT implications. It can move liabilities off balance sheet strengthening the accounts

12 165m of UK social investment deals in 2011 Boston Consulting Group forecast: 750m in 2015 Social Investment Growth Source: BCG (2012), The First Billion. 12

13 6m Next Steps(Wholesale) The social investment landscape Biz Support Grant Patient Capital 95m - 600m (Wholesale) Loan / Debt / Equity Olympic Legacy Programme 10m Contract & Investment Readiness Fund 10m 50m (Wholesale) Social Innovation Pioneers 10m Building 20m market Social Action infrastructure Fund Social venture intermediaries New specialist vehicles New instruments 8m 10m (Wholesale) 100k p.a. 13 5m

14 SI The Investor POV Due Diligence Financial Instrument Reporting & audit

15 Measuring Impact in SE s The state of thought and practice in the UK Roundtable with Providers, Investors, Grant Funders and Impact Measurement Providers Additional interviews + research Four key themes: Organisational Strategy and Intervention Market Context and Policy Dynamics Different Commissioning Drivers Emerging Social Investment Landscape Sectors: Offender management Health & Social Care Education and Youth Services

16 Social Investment an example 5m Social Impact Bond Duration: % 13% financial return if achieve min. 7.5% reduction in re-offending by 3,000 short-term (ex)prisoners 16

17 The longest journey begins with the first step Ancient Chinese proverb