Social Investment Scotland

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Social Investment Scotland Do Social Ventures
need Investment Capital ? 8th November
2005 Scott Anderson


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proposal outline

• the social venture market in Scotland
• the patient capital gap
• possible fund structure
• types of investment
• potential investors

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the social venture market in Scotland

• what types of social venture could be supported
  with investment capital?
• how large is the market across Scotland (and the
  UK as a whole?
• to what extent are the potential targets
  investment ready?

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what do we mean by social venture?
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the patient capital gap

• what sources of finance are available currently?
• is the need for additional types of risk capital
  actual rather than perceived?
• to what extent has any gap in funding been
  influenced by the developing market for loan
  finance and the recent launch of Futurebuilders
  Scotland?

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possible fund structure

• what type of vehicle could be best placed to
  provide this risk capital?
• what options are available?

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types of investment

• what form should the investment products take?
• shouldnt we differentiate between equity,
  equity-like, and patient capital?
• what investment mix should the fund target to
  meet its objectives

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equity-like capital

• investors share in risk and returns greater
  success resulting in higher financial and social
  returns
• investors provide management expertise and hands
  on involvement
• long term engagement
• expected returns in the range of 5 - 30
• example subordinated debt with royalty payments
  that rise with revenue

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patient capital

• long term in nature
• lengthy interest and capital holidays are
  available
• sub-market financial return in the range from
  -50 to 10
• usually structured as either debt (partially
  recoverable loan) or long term grant with no
  explicit exit strategy

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types of potential investor

• what types of investor would invest to subscribe
  the fund capital?
• what is the investment proposition?
• what balance needs to be struck between financial
  and social returns on investment?

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possible next steps

• estimate development costs and timetable
• undertake more detailed market research
• develop the product set
• prepare financial projections and fund prospectus
• launch

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the NIKE approach
Just Do It!