Philanthropic donations were previously the major, if not the only, source of funds for a growing social enterprise. As the field of social enterprise has gained credibility and therefore scale, funding sources that can ensure not only the financial sustainability but also the growth in impact of social enterprises have increased in terms of number of funders and size of financing.
“Social Investment” or “Impact Investment”, as this form of financing is often called, represents an important complement to grants or government subsidies. Social investors typically invest in organizations with a strong social change mission, who generate an income, but are not yet considered commercially attractive.
“Social Investment” or “Impact Investment”, as this form of financing is often called, represents an important complement to grants or government subsidies. Social investors typically invest in organizations with a strong social change mission, who generate an income, but are not yet considered commercially attractive.
Paradoxically, while successful social entrepreneurs with proven track records face a chronic lack of capital, social investors say the deal opportunities are limited. However, it is more than a simple market inefficiency or matching problem that must be solved. In many cases when social investors and social enterprises do no transact, it is because the skills and expertise required to achieve the objective are not understood. The best of intentions on both sides cannot prevent deals from failing.
The authors of this manual believe that while the problem is multi-faceted, one concrete step forward it to create better information and understanding among both parties that can bring the market together. First, better understanding of the social investment space is needed on both ends. Second, rigorous and mutually agreed upon metrics that will facilitate the social investment transactions and deal flow are imperative.
Social entrepreneurs have already sought out to address the most pressing problems facing societies today. The goal of this manual is to alleviate an additional challenge to the social entrepreneurs, by having a mutually compatible approach for social entrepreneurs and social investors.
The social investors providing this money include specialist banks, individuals, and charitable trusts, as well as organisations and funds that have been specifically set up to make social investments. Each has different motivations but what all social investors have in common is:
They expect to get their money back, often with interest ⦁ They want to see positive social change take place as a result of their investment
Social investment is not a grant or a donation. It is money provided to enable your organisation to generate more income or be more effective: growing your business, putting in place better systems, doing more social good, and repaying the investment in the process.