Capitalising on social investment

Capitalising on social investment

Financing took an optimistic stance on the prospects for social investment in the UK. The question is: how can social entrepreneurs take advantage of this?

There are increasing numbers of interesting opportunities emerging from the social enterprise sector, and there is a vibrant market of social intermediaries who bring these interests together. This offers plenty of reasons for optimism, in spite of a dampened UK economy.

So how can social enterprises ‘capitalise’ on the potential investor interest? There are a few things they can do:

Firstly, “do the appropriate homework” about the type of investor that would best suit your investment needs. This is an important ‘partnership’ and most social entrepreneurs rightly give great importance to the role of the investor, to understand the mission, provide direction as well as capital. In many cases the final product may well be designed collaboratively between investor, intermediary and investee.

Secondly, the social entrepreneur needs to make herself as attractive as possible to an investor. This requires showing clarity from the potential investee over the revenue stream(s), and the related cash-flows.

And thirdly, social enterprises should clarify and advertise any tax breaks which could apply to an investor. Seeking advice on different schemes and identifying the potential that tax considerations can play, in particular for individual investors, can be highly influential.

Many of the difficulties that social enterprises face when looking to raise start up, or scale up capital apply to the mainstream commercial sector as well. They need to provide robust revenue models with clarity over expected rates of financial return. Additionally, social enterprises need to provide analysis to back up the story that the social mission might provide. It might be double the work, but it could be worth the effort if it generates returns, both financial and social!