Getting ready for social investment - Paul Davis, Charity Bank and Olof Williamson, NCVO

Paul Davis: Charity BankOlof Williamson: NCVO

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Getting Ready for Social Investment

a different bank for people who want a different world

Paul Davis

• Regional Director of Charity Bank, covering London and the South

• 20 years’ experience lending to businesses and now using that experience in the third sector.

• 10 years as treasurer of a local charity with revenues of about £100k pa and over £1m raised in grants.

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Charity Bank

Our vision - A world where social purpose organisations have the financial resources they need to create a better society for all.

Our mission - To attract share capital from social investors, take savings from socially conscious individuals and lend solely to social purpose organisations, and, as a result, be the most admired bank in the UK.

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Charity Bank

Established in 2002

Takes deposits from anyone

Lends only to charities, social enterprises and community groups

More than a 1,000 loans so far

Lends from £50,000 to £2,000,000 for up to 25 years

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Are social enterprises new?

A business model made of chocolate

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The Cadburys’ objectives

Reduce poverty

Treat people fairly

Run a successful business

(Sounds like a social enterprise to me!)

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What is a social enterprise?

There’s no legal definition…but the Government seems to go with…

An organisation that applies commercial strategies to maximize improvements in human and environmental well-being, rather than maximizing profits for external shareholders.

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What is social investment?

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Capital that gives social sector organisations the capacity to deliver returns

Capital: money invested

Capacity to deliver: enables fruitful activity

Returns: to the investor


Is there anybody out there?

No data currently exists on the overall stock of social investment

But…probably

£150m invested in 2011

£200m invested in 2012

Not a huge figure, but it is going the right way

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Is there anybody out there?

Finance gap according to NESTA £300m

Finance gap according to CDFA £1,000m

So if £200k was invested in 2012, there is something like £1 of investment available for every £4 demanded

So you had better look like you are in the top 25% of social enterprises!!!

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Who is getting the investment?

The five biggest recipient groups in the BSC report…

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Who are these investors?

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Banks

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Government

But the £350m quoted in the previous slide is from a few years ago and it has now all but dried up

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Trusts and foundations

Charitable foundations report that, even those with large endowments, often have small staff teams, which makes it difficult for them to get involved with social investment

The Esmée Fairbairn Foundation alone may be responsible for nearly half of all the social investment from this source

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Big Society Capital

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Big Society Capital gives only through

Social Investment Financial Intermediaries (SIFIs)

These are listed at

http://www.bigsocietycapital.com/finding-the-right-investment/

And these are probably the best ready source for social investment


Otherwise

Universities are leading the way for proactive social investment in the US. The UK Unis are following, but you probably need to be in a field that lights their lamps

Institutional investors are the key to scale with $90tn of capital, but apparently not much appetite

Individual “Angels” again, if you are in a sector that appeals to them and if you can find them!

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Financial investmentWhy do you need to get ready for it?

To present a compelling argument for why the social investor should put his money with you

To work out what you are prepared to pay

To make sure you have a suitable organisation

This means having a good business plan, which means you need to do some good planning

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Planning and proving you’ve planned

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“Ike” Eisenhower 1957

Plans are worthless, but planning is everything


Business plans

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Business plans

If you don’t have, maintain and use a business plan

You are not running a business

You are having an adventure

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Business plan light - the teaser

Saves everyone time

Divides investors into two camps:

• This looks right up my street – tell me more and• Sounds great, but it’s not for me

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Business plan – the full panoply

It proves you have thought about:

• The marketplace you are operating in

• Your products and their place in that market

• The competition

• Pricing and reward/return

• Whether you have the right people

• Your regulatory environment

• What might go wrong

• What might go right

• Everything the investor might think of

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At brass tacks level:

• What the investor will get while their money is in• How sure they can be of getting it back again

You need to show you are a sound business

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It must include – Section 1

• A clear front page• A good index• An introduction – perhaps re-use the short form• The proposal – what you want – key terms

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• What the organisation does now• What amazing things the organisation is going to do

once it gets the investor’s money• What the investor is going to get in return• The people – who you are – what you know – why

you are just the people for the job

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• All the dull stuff at the back:• Historic accounts, budgets, projections (base case and

stressed),

• Detailed terms for the investment

• Lists of your professional advisers, bank, etc

• Copy of the NDL if appropriate

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Business plan – essentials

• Tell a story – use plenty of pictures• Keep the narrative part clean and concise• Stick all the dull facts and figures in the back• Index it well• Be prepared to have several versions if you are

approaching different types of investor – the changes probably only need to be minor

• Be scrupulously honest and realistic but not over cautious

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Be the right type of organisation (Or at least know what you need to set up when the time comes)

A bog standard company (perhaps as a subsidiary)

Can issue shares, loan stock, borrow

Community Interest Company (CIC) limited by shares

Can do anything a purely commercial company can do (but with some limitations on dividend size)

Anything else

But can probably only borrow

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Prepare to put the hours in

Research

Keep checking developments

Networking

Events

Shoe leather

Chasing up

Have a Plan B

Keep smiling – you are doing good

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Paul DavisRegional Director – London and the [email protected] 07585 808309

The Charity Bank Ltd 194 High StreetTonbridgeTN9 1BE01732 774040 www.charitybank.org

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Economy & Finance

Getting ready for social investment - Paul Davis, Charity Bank and Olof Williamson, NCVO