Investment

Guiding social enterprise: the Investment & Contract Readiness Fund

By: Information Daily Staff Writer
Published: Tuesday, April 22, 2014 - 08:00 GMT Jump to Comments

The social investment market is growing strongly, and the Investment and Contract Readiness Fund is helping sector newcomers to access the specialist support they need to grow.

In order to successfully attract investment to scale up their activities, social ventures must demonstrate that they can create both social and financial returns. This often requires the development of new business models and detailed plans in order to convince outside investors to stump up the money.

Social enterprises are increasingly being contracted to deliver public services. 28 per cent worked for the public sector in 2011/12, according to Cabinet Office figures. Winning contracts to deliver public services can be challenging for social ventures, especially if they have little or no experience of successfully bidding for such contracts.

They often need support to develop proposals, legal and contracting advice and business planning support. Contracts may also generate requirements for working capital or other financing needs, which ventures may have to raise on the social investment market.

Many ventures, however, have been either unwilling or unable to pay for support to raise investment or win contracts. Providers of support have often been small organisations that found it difficult to expand in an uncertain market.

The Investment and Contract Readiness Fund (ICRF), then, is a three-year £10 million fund, managed by the Social Investment Business on behalf of the Office for Civil Society.

It aims to ensure that charities, social enterprises and other social ventures with high growth potential are better equipped to secure new forms of investment and compete for public service contracts.

Ambitious social ventures looking to raise at least £500,000 in investment or win a £1 million contract can apply for grants of £50,000 to £150,000 to purchase specialist support. Some 40 approved providers offer a range of professional services, including law, financial management, corporate finance and public service commissioning.

Ventures develop applications with the support of these providers, who help ensure their proposals to become investment or contract ready are realistic.

It is the first fund of its kind anywhere in the world and confirms the UK as the world’s most advanced and innovative social investment market.

Eight organisations supported by the ICRF have already raised investment or won contracts worth nearly £35 million, including the Consortium of Voluntary Adoption Agencies and Empower in Sunderland.

The fund is open to ventures based in England. It is intended to demonstrate what can be achieved with significant flows of investment to social ventures, and create quality deal flow for impact investors.

It opened for applications in May 2012 and had received 213 applications by December 2013, roughly split between investment readiness and contract readiness proposals.

The Boston Consulting Group has reviewed the initiative, finding evidence that it had made a “significant and positive impact” in the improvement of ventures’ capabilities. They called the £35 million investment made “impressive”, as well as in line with expectations.

Ventures also self-reported benefits, claiming significant increases in their skills and knowledge as a result of the help they had received. 70 per cent thought they would need less external support in the future, and all felt confident in their ability to approach legal issues compared with just 25 per cent before receiving support.

The review did, however, highlight some areas where improvements could be made. The report recommended improving feedback from the panel to applicants, enhancing the contract readiness experience of the panel, and improving the predictability of the fund.

In response, the Cabinet Office and the Social Investment Business already plan to make more data available on providers’ performance and to publish additional guidance on what the fund looks for, as well as common mistakes made by applicants.

Photo credit: www.LendingMemo.com

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