The Voluntary, Charity and Social Enterprise (VCSE) sector engages with disadvantaged communities to help tackle urgent issues such as poor education, unemployment, ill health and lack of skills. Although many VCSEs are nascent, they are ambitious in devising innovative and promising solutions to overcome these problems. However, VCSEs often can lack the required human resources, expert guidance or capital to implement new projects or technologies.
External support, such as that provided by CAN Invest, can have a significant impact on the performance of VCSEs. This support, in the form of finance and mentoring, not only helps the VCSEs deliver the desired impact but it also secures the long-term viability of the projects.
Recognising the opportunity to contribute to this underserved sector, we invested in the Early Intervention Fund launched by CAN Invest with UBS in September 2015. The fund aims to help VCSEs accelerate their impact on young people (0-24yrs) in East London’s communities.
The £1m Fund comprising £500,000 from Funding London, £450,000 from UBS and £50,000 from CAN Invest provides unsecured loans in the range between £5,000 to £100,000 at a maximum interest rate of 4%. This offers VCSEs the opportunity to pilot new projects and scale their operations without introducing unmanageable strain on their cash flows, whilst safely ‘testing the waters’ of the emerging social investment market.
So far, the Fund has already committed £678,745 in 12 projects.
Supporting companies beyond finance…
The Fund supports projects that are led by innovation to tackle challenging social problems. Before approving a loan, the team ensure that tangible measurable impacts are defined and measured throughout the life of the loan. The CAN team assists the companies in several ways:
In some cases, the fund managers are already working closely with these companies to identify the gaps which can be covered through finance and support. In the instance of Big Creative Training, which delivers work-based learning programmes in the creative industries with a focus on 16-19 year olds, Andrew Croft (the Chief Executive of CAN Invest) had already been providing advice and mentoring the organisation on their capital raising to acquire land and build a new education campus.
They were experiencing short term cash flow pressures in financing two of their programmes:
Although local authorities had allocated budgets to fund 1:1 learner support, individual applications had to be made and signed off which led to a delay between submission and payment from local authorities. The experience was similar with apprenticeship providers.
When Big Creative Training applied to the Fund, the panel approved an initial £50,000 loan to support the organisation’s cash flow needs. It also offered social impact measurement support from the CAN Invest team to help prioritise resources and support future contract and funding applications.
Subsequently, Big Creative Training applied for £100,000 of growth finance to increase student capacity at their training centre and to make it more conducive for creative industries education delivery. The Fund recognised that the cash flow situation with two live loans would be tight and agreed to disburse the loan once the first loan was repaid, thereby helping the organisation maintain a sound financial structure. The company was able to repay the first loan early and subsequently received the second loan.
So far in the journey
While it is early to measure the social impact generated by the Fund’s companies, in the period from April’15 to September ’16, the Fund has helped generate the following results:
Impact on individuals supported by the companies:
Impact generated within the portfolio companies:
At Funding London, we are delighted to see these positive results and even more excited to see the greater social impact that will be made possible by our investee companies.
*A Theory of Change is a diagram that explains how a programme has an impact on its beneficiaries. It outlines all the things that a programme does for of its beneficiaries, the ultimate impact that it aims to have on them, and all the separate outcomes that lead or contribute to that impact. Source: Nesta