‘DIY Social Investment’ is an initiative created by Flip Finance to enable social enterprises and charities to create their own social investment opportunities and to offer them directly to people. It is aimed at social organisations seeking repayable finance – particularly in the range of £5,000 to £150,000 – who are unable to raise investment via other routes, and / or want to raise investment on their own terms. It has been developed in response to the gap between supply and demand in social investment and additionally seeks to provide information for and signpost interest from individual investors.
The story so far
Background and context
Significant numbers of social enterprises and charities in the UK are seeking repayable investment to help them achieve positive social change but many find that the UK social investment market is not offering them the size of investment they need, on the terms they need it. Social organisations are mostly small and looking for small amounts of money (median turnover £151,000 median amount sought £60,000), while most social investment is large and secured (63% at least partly secured and average size £466,063). Equally, there is an unmet demand for cheap, risky, long term growth finance < £100,000.
In recent years new tools, processes and incentives have become available that make it easier for organisations to raise investment directly from people, without the assistance of intermediary social investors (e.g. Big Issue Invest, Resonance and CAF Venturesome) through which investments in small organisations are often too costly for the investee, commercially unviable for the social investor or both. These new tools include community shares, Social Investment Tax Relief (SITR), crowdfunding (debt and / or equity-based) via established platforms as well as other means such as Community Interest Company (CIC) share offers. However, these approaches aren’t widely adopted yet because organisations are either unaware of them or feel unable to use these approaches.
Designing and developing DIY Social Investment
Between September 2015 and September 2016, Flip Finance prototyped the ‘DIY Social Investment’ initiative with a network of organisations and individuals. This mainly happened through our monthly Sprints, in which we brought social enterprises and charities together with ‘DIY’ social investment practitioners – including those who’d successfully raised their own investment through community shares, SITR or crowdfunding – as well as people with expertise in business development, marketing and comms and social enterprise support.
Over the seven Sprints focussed on DIY Social Investment, we developed a process that enables social enterprises and charities to understand what ‘DIY’ social investment is, decide if it’s useful for their organisation and come up with an action plan of what they could do to create their own deals. The initiative we’ve created builds on and helps to connect organisations to existing resources that are out there, supports an approach and a decision-making process – it doesn’t sell a product – and draws on the peer expertise and experiences of people running social organisations.
Initiatives and activity around the following areas are needed:
- Building awareness of the idea of DIY Social Investment – Community Shares, SITR, crowdfunding etc – among organisations as a potential option for them.
- Enabling organisations to better understand their finance needs and decide whether and how some form of DIY Social Investment is suited to meeting those needs.
- Supporting organisations to create and promote DIY Social Investment offer for themselves by connecting to sources of professional and peer support.
Such action would need to be particularly aimed at organisations seeking investment in the range of £5,000 to £150,000 who want to create their own social investment opportunities and to offer them directly to people.