Bulider Capital Event
The "Builder Capital" event, held at Mazars, the accountants, near Tower Bridge in London on Thursday 10 July, probably heralded the dawn of a new reality for Social Investment. Helen Heap and Robbie Davison launched their new pamphlet "The Investible Social Entrepreneur: Introducing Builder Capital”.
Their Builder Capital model acknowledges:
“the need for time and patient funding during a social enterprise’s early years. The model then says that by investing the right amount of risk capital at an early stage of development, the entrepreneur/enterprise is freed up from the serial grant funding, and is thus able to fully concentrate on trading”.
In other words, the social return comes first. A financial return might only come in later years.
On the size of the UK Social Investment market, one paragraph on page 54 says it all:
“Taking the UK as a whole that probably means the Builder Capital market is worth around £50-£60mn per annum, approximately 25% of the current market size for social finance.
“We expect those who are successful in persuading investors to back them will secure Builder Capital amounts of somewhere between £250,000 and £2mn each”.
No one attending Helen and Robbie’s launch meeting last Thursday argued against their projection of total UK Social Investment being only £200mn to £240mn. There was also a general acceptance that any growth beyond this size will need much handholding, mentoring and subsidy.
In November 2011 “Lighting the Touchpaper” by Boston Consulting Group forecast a total UK Social Investment demand of £650mn. In April 2012 “The First Billion : A Forecast of Social Investment Demand” by Boston Consulting Group and Big Society Capital projected £750mn by 2015 – with £3bn to be injected by Big Society Capital. In July 2012, “Investment Readiness in the UK” by ClearlySo, New Philanthropy Capital and Big Lottery again forecast £3bn, despite massive evidence from its own survey of 7,240 organisations of major difficulties preventing the uptake of Social Investment.
Last Thursday’s London event showed what a difference a year makes. Perhaps it was the harsh reality in May 2014 from Big Society Capital’s 2013 Annual Report, showing on page 41 that last year only £13.1mn was drawn down – by Social Investment Financial Intermediaries, not beneficiaries?
The London event was almost a year to the day after Helen and Robbie’s launch in the same building of their first pamphlet “Can Social Finance meet Social Need?” Those attending the July 2013 event were harangued with far-fetched projections that the UK Social Investment Market would grow to at least £1.5bn by 2015 and £3bn beyond that. 2013 was the year of the Prime Minister’s G8 Social Investment Summit, attended by social and philanthropic investors round the world, followed with equal media hype by a Social Impact event in Washington DC. In 2013 Social Investment was still on a rising curve.
A source of confusion in many of these far-fetched projections is their conflation of the total capital demand from all organisations which proclaim a social purpose (including loans, grants and equity) with the much smaller proportion of that total demand which might perhaps be met from Social Investment.
Helen’s presentation showed that Builder Capital might involve 7 to 10 years investment – a similar period taken by Big Society Capital to develop its own concept of Social Investment Capital. But BSC now has a salary bill of £1.8mn.
Robbie made an impassioned plea about the need for longer term investment so that organisations like Can Cook could pursue market opportunities which were obviously and easily accessible. There was a need for new capital to match the scale of the social entrepreneur’s ideas and vision.
Last Thursday it was equally significant that Caroline Mason, now Chief Executive of Esmee Fairbairn and formerly CEO of Big Society Capital, acknowledged that until the language of Social Investment changed, Foundations like hers would find this inhibiting. It was no good looking for a “silver bullet” to make Social Investment work. Neither was “ultra patient capital” a longer term viable model. Above all, she was adamant that much Third Sector activity could only be grant funded, including activity for which investment in social enterprise would not be appropriate.
Danyal Sattar from Big Society Capital even apologised for his delivery at last year’s event. He now recognised that more of BSC’s future activity would need to be localised and delivered with others.
So yesterday’s London event was worthwhile attending – if only to show that London and the South East might now be starting to catch up with what many in Scotland have been saying for long time – that Social Investment isn’t for us. We should now argue more loudly that investment in structures like Senscot’s proposed Scottish Community Bank represents a more effective use of public funding.
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