3. It’s the right place and the right time
Today, arguably, the UK leads the world in social investment. Recent years have seen the development of the Community Development Financial Institutions (CDFI) sector and of Social Impact Bonds; as well as the launch of the Social Impact Investment Taskforce in 2013, which is designed to stimulate further development of the social impact investment market.
Organisations in the social investment and CDF sector are working with social entrepreneurs to create completely new ways of accessing and using capital. For example, they are developing vehicles that help provide the benefits of equity investment to organisations that can’t actually issue equity. There may well be a funding mechanism that is being launched now or is currently under development that turns out to be far better suited to the needs of your organisation than grants or conventional loan finance.
4. A problem with demand could create opportunities
The perception among some funders is that there are still insufficient investable ventures, few scaleable propositions, a lack of skilled leadership and risk appetite and an unwillingness to pay the true cost of capital. So despite the acknowledged gap, and the availability of capital, the number of social investments remains low, and some social entrepreneurs are still reluctant to consider this form of finance.
A decade ago the emerging world of social investment was conceived as radical and alternative. Increasingly the sector has become populated with people whose background is in investment banking and some of the culture, language and methodology is mimicked. This has led to an increased focus on big-ticket deals and innovative financial instruments, which is helping some organisations to grow much faster than could ever have been possible before.
5. It’s a good time to join the “revolution”
Social entrepreneurs need to take advice from organisations already working in this space, to find out how best to take advantage of those opportunities that do exist in what is still a new field. There is a danger of a clash of cultures – some people now working in social investment finance who have a financial services background are guided by a very different set of aims and assumptions to those prevalent among social entrepreneurs – but social investment really could help your organisation to work towards its goals by helping to create long-term financial sustainability. It isn’t always the right option – there is always a right time and place for grant finance – but you need to keep an open mind, says Bell. Ignoring this emerging field could mean your organisation misses out.