A messy market for money | Good Finance

A messy market for money

Blog | 6 June 2018

While there is plenty of research available on the demand from investors for social investment opportunities there’s far less knowledge and understanding of what charities and social enterprise want from the social investment market.

In 2015, I worked on a project called the Alternative Commission on Social Investment which was designed to start a discussion on how to make the social investment market more socially useful and more relevant to a wider range of charities and social enterprises.

Many charity and social enterprise leaders were involved in that project - being interviewed, sending in comments and ideas, and participating in roundtable discussions - but their voices were one part of a wider discussion also involving social investors, intermediaries and support organisations.

This year my social enterprise, Social Spider CIC, working with Common Capital’s Dan Gregory, launched the Social Investment Intelligence Network (SIIN). It’s an initiative funded by the Connect Fund that brings together a group of charity and social enterprise leaders from around the country to provide their perspectives on developments in the social investment market. It meets on a quarterly basis with a short report published after each meeting to reflect the discussions and provide timely information to the market.

For charity and social enterprise leaders - particularly those at an early stage - the decision about whether to seek social investment (and what kind of social investment to seek) involves understanding social investment in the context of everything else.

Our first report, published in April, explores panellists’ perspectives on a broad range of topics related to the social investment and, in doing so, touches on one of the key challenges that Good Finance is seeking to tackle.

The notes of panel’s initial discussion of the overall ‘Investment Climate’ for charities and social enterprises reflect that: “Members also agreed that the market for investment is still messy and difficult to navigate. There is no roadmap, leaving charities and social enterprises to blindly find their own way through”.

This statement is not specifically a reflection of panellists’ views about the Good Finance website and connected offline support - it reflects the experience of many social enterprises when considering possible sources of finance in a general sense.

There’s a massive range of potential sources of money to consider: from start-up grants to crowdfunding, investment from friends and family to bank loans. Alongside that, there’s the need to consider how far to prioritise finding more money to spend over just doing some work that doesn’t require you to spend any money up front but may generate trading income.

It’s important to understand social investment in the context of other options.

For charity and social enterprise leaders - particularly those at an early stage - the decision about whether to seek social investment (and what kind of social investment to seek) involves understanding social investment in the context of everything else.

The questions this raises for Good Finance is to what extent an initiative aiming to help charities and social enterprises navigate the social investment market can also help charities and social enterprises to answer the question: “what should I do next?”

It’s important to understand social investment in the context of other options, but there are loads of other options affected by a wide range of specific factors; a website that attempted to act as an interactive guide to all of them, is unlikely to be a useful guide to any of them.

Despite the obvious potential for confusion, there’s a logical position that Good Finance should be aiming to fill: in a situation where a charity or social enterprise leader has a hypothesis that taking on some money that will need to be repaid at some point may be useful option for them, Good Finance can help them find out whether or not it is.

The Good Finance diagnostic tool can help some of those leaders work out if that hypothesis is definitely wrong and - via the investor directory - help some others work out which social investment options are more likely to be useful than others.

This time next year, SIIN panellists may still feel the wider market for finance is messy and navigate but, if Good Finance is successful, they may feel that the social investment market is leading the way in explaining how its offer fits into that wider landscape of possible options. Either way, the SIIN will be sure to let you know.

By David Floyd, Managing Director and Founder, Social Spider CIC

Last updated
7 June 2018