Nesta launches £17.5m risk-capital social investment fund

Matt Mead, a director of Nesta Impact Investments, says most of the investment will be in the shape of equity or 'quasi-equity'

Matt Mead
Matt Mead

The social innovation charity Nesta has launched a £17.5m social investment fund that will make investments of between £150,000 and £2.5m in social sector organisations.

Nesta Impact Investments will provide ‘risk-capital’ investments, in which the fund shares some of the risk with the investee. It will invest in charities, social enterprises and for-profit organisations with social missions; and in organisations working in Nesta’s core areas of interest: health and wellbeing for an ageing population, education and employability for young people, and sustainable communities.

Nesta has set itself a target of raising a further £7.5m to invest over the next 18 months. Matt Mead, one of the directors of the fund, said he was confident it would be able to raise the funds in the next year.

Mead said that the majority of investments would be in equity – taking a share in the business – or ‘quasi-equity’, a type of investment used with charities that cannot sell shares, but where the investor’s return is based on the profit or turnover of the charity, rather than a fixed amount, as is the case with a loan.

He said the fund was working with both charities and for-profit businesses. "We’re seeing not-for-profit organisations come forward with good propositions," he said. "We’re seeing charities that aspire to rapid growth and which we’re confident will offer good rates of return."

Nesta has also launched a new evidence framework called Standards of Evidence – it will ask those organisations it funds to use it to demonstrate their social impact.

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