Seb Elsworth: The data shows a trend towards smaller social investment deals

And an extensive range of case studies explain how such investment can help to grow earned income

Seb Elsworth (Photograph: Claudia Leisinger)
Seb Elsworth (Photograph: Claudia Leisinger)

One of the criticisms that has been levelled at social investment is that it feels confusing and hard to navigate. Much has been done over the past few years to try to address this, not least the development of Good Finance to help charities and social enterprises understand what different social investors offer.

Another key development has been the publication of more data about the actual deals that are being done. Twice a year Big Society Capital publishes details of social investment deals made across the UK through the data visualisation tool Tableau, based on submissions from the social investors BSC supports and a number of others who voluntarily provide data.

There are more than 3,500 deals listed, worth more than £2bn. They cover a whole range, from thousands of simple loans to multi-hundred-million-pound charity bonds and housing initiatives for vulnerable people. It is worth spending some time playing with the data.

A few trends strike me, and they highlight the importance of blended finance in social investment.

Unsurprisingly, both the number of deals and the value of social investment reported has been increasing year on year over the past few years.

But the number of deals has been rising at a faster rate than the overall value of them, suggesting that the average deal size is falling.

This is driven by the increase in blended finance available in the market, significantly through the Growth Fund, supported by both the National Lottery Community Fund and BSC, aimed at providing smaller-scale unsecured loans. (It is possible to toggle the data to see Growth Fund deals in isolation.)

This blended approach now accounts for a significant part of the social investment landscape and there is strong demand for this sort of smaller finance. In 2018 the Growth Fund was responsible for 29 per cent of all social investment deals made (and 36 per cent of all those involving BSC money).

This blending allows for deals to be much smaller. In 2018 the average size of investments excluding those made through the Growth Fund was £1.3m, with a median of £250,000. The average size of Growth Fund loans (excluding any grant element) was £57,000, with a median of £40,000.

In fact, when you exclude the Growth Fund from the data the average deal size has been going up each year before that, from £862,000 in 2013 to £1m in 2017, so blended finance is making deals smaller against a trend moving in the opposite direction.

This is obviously interesting for people like me, but access to this sort of information is also useful for charities and social enterprises that are thinking about taking on investment. It shows the thousands of organisations, just like them, who have made that leap and the terms on which they have done it.

Click on one and the data starts to come to life. Coupled with in-depth stories such as those of Intraquest or Sow The City, and the extensive range of case studies on Good Finance, these real examples explain how investment can help grow earned income and support resilience in the sector.

However, there are still gaps in the picture.

The BSC data-set has fields that are unassigned. We don’t yet have a clear picture of patterns in the revenue models underpinning the organisations taking on investment. Not all investors mean the same thing by the same definitions. Standardisation is a challenge.

A number of initiatives are under way to continue to improve the data standards, many supported by the Connect Fund. They are building on lessons learned from the process of developing the 360Giving Standard for grant-making.

These initiatives include developing shared data standards for social investment and better developing the mechanics of sharing data across the industry.

The Social Investment Business is leading on this agenda, including addressing some of the more knotty issues, such as how data is owned. Individual social investors can also benefit from improved systems to manage their own data. Singlify is one initiative designed to address this, again supported by the Connect Fund.

There is a long way to go to make the most of the data in the sector, including how data platforms really start to make sense of the impact of the charities and social enterprises supported through taking on investment.

But for organisations thinking about taking on an investment, there is already lots to work with. Dive in and find someone just like you with a social investment story to tell.

Seb Elsworth is the chief executive of Access, a foundation that helps to widen access to social investment for charities and social enterprises

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