GMCVO, the voluntary, community and social enterprise (VCSE) sector support organisation for Greater Manchester share their journey to becoming a social investor.
"When Access – The Foundation for Social Investment launched an open call for the Growth Fund in 2015, we saw it as an opportunity to grow social enterprise both strategically and practically and decided to apply for it."
Ian Taylor, Director of Development, GMCVO
GMCVO's role as the city-region VCSE infrastructure organisation is to look at trends and challenges and find ways to strengthen the sector. Like elsewhere, traditional funding for charitable activity was decreasing. And we saw the link between trading income and the social impact that social enterprise generates and identified this as something to grow.
As Director of Development (and a former director of a social enterprise) I lead our exploration into new areas. I’d read an EU report that introduced me to the concept of the ‘ecosystem’ essential for social enterprises to thrive along with local reports on the state of the social enterprise sector in Greater Manchester.
It was clear to us that before social enterprises could consider investment to grow, there needed to be the right conditions and a supportive environment in place. This would help to establish the idea of enterprise and trading to create and support the delivery of social impact.
Creating an ecosystem for social enterprise to thrive
We decided to concentrate on those elements of the ecosystem that we could contribute to. This included consulting with and organising events for social enterprises (including identifying the barriers to social investment for BME entrepreneurs), linking up social enterprise networks and creating the Greater Manchester Social Enterprise Network (GMSEN), a local directory of social enterprise support organisations. We also hosted start-up enterprise through our Greater Manchester AddVentures project and worked with Good Finance to host some Let’s Talk Good Finance events and then more recently a Good Finance Live.
A little investment goes a long way
The game-changer for me was our delivery of Lead the Change, an UnLtd programme of support and small ‘Try It’ and ‘Do It’ grants. The appetite of social entrepreneurs to offer peer support and encouragement to potential social entrepreneurs was uplifting and showed how a little investment went a long way. It also showed there is a compassionate alternative to the ‘Dragon’s Den’ style winners and losers.
All the participants appreciated the support and network connections offered, with a grant being a bonus. The grants enabled people to test out interest in their enterprise ideas, raised awareness of basic unmet need in communities and the potential social impact that could be achieved through trading.
Making the leap to becoming a social investor and being trusted
The next challenges were to find a way to make finance and specialist enterprise support more accessible and relevant. It was a bit of a leap from where we were to becoming a social investor but it seemed to make sense for a number of reasons:
- Most social enterprises in Greater Manchester are micro, so growth to becoming small would add up to a lot of jobs and social impact.
- Grants are harder to secure so where ethical trading is an option it should be encouraged.
- Gaps are opening up for impact-focussed enterprises who can experiment with different approaches to generate revenue. They are also able to address community needs, which the commercial world can’t exploit for profit and the public sector can’t afford to address.
Lastly, GMCVO has an enormous contacts list and is trusted by VCSE organisations – especially in terms of not investing if it would put the enterprise in danger.
When Access – The Foundation for Social Investment launched an open call for the Growth Fund in 2015, we saw it as an opportunity to grow social enterprise both strategically and practically and decided to apply for it.
Due diligence and the value of peer support
The Growth Fund application and due diligence process was every bit as robust as you would expect it to be, given that we would be using someone else’s money to invest. And we may not have been successful without mentoring and support from The Key Fund.
"It is in our character to achieve the improbable and take risks to do so. But knowing how big each risk has helped shape our programme."
Our social enterprises said they needed access to small amounts of investment. Access to Growth’s small investment is less than £150k, yet our enterprises defined small as less than £10k. The average repayable investment in our portfolio is £35k and reducing. The initial wave of enterprises had more developed ideas without access to the right investment so were confident in levels of borrowing.
A second, but much larger wave has required more specialist support to become resilient enterprises that will benefit from social investment. We are reaching those smaller or younger enterprises that are gaining confidence in social impact investing… cracked it!
Still learning and growing – next step: specialist support post-investment
The next stage of development for us is to add specialist support post-investment to the blended (part grant and part loan) model and to simplify the processes and language. We will be doing this in partnership with the Greater Manchester BME Network over the next year.
We are committed to developing flexibility in products and services that will establish the market for social impact investing and benefit social enterprises.
We recognise that infrastructure support has to change to match the changing needs of VCSE organisations who are our primary stakeholders. In response, GMCVO has become more of a development organisation and having a city-region profile at a time when metro-mayors are being introduced has helped us to do this.
Top tip if you’re considering becoming a social investor: buddy up!
If you’re thinking about becoming a social investor, I would recommend finding a Social Investor buddy to help you get to know just how much you don’t know, such as the technical aspects of credit under-writing and portfolio management. It is also different to grant giving in that there is a shorter queue and those in the pipeline may need additional support.
We have found it a rewarding challenge and have been amazed by the number of people willing to help our transition.
Finally, if you are asking yourself why you would become a social investor please take a look at our investee stories.