Access, the Foundation for Social Investment was created in 2015 to help more charities and social enterprises use the tool of social investment to become more resilient. The foundation uses its grant money in two key ways: to fund grant and support programmes that help charities and social enterprises to develop their enterprise ideas and build capacity to take on investment, funded by a £60m spend-down endowment from government; and to blend grant money into social investment funds, allowing those funds to make smaller unsecured loans and take more risk, funded through £22m from the National Lottery Community Fund and £10m from dormant accounts. In delivering these programmes, the question for Access is how we make this grant "subsidy" work as effectively and efficiently as possible.
In this first piece reflecting on what we are learning, here are three lessons from our capacity-building work. The first is that all charity and social enterprise leaders want their organisations to be more resilient, but only a minority are at a point where social investment is the obvious next step. Many more are thinking about diversifying income streams, however, and enterprise models are currently the key driver for growth in the sector.
Realising this, in 2018 we pivoted our strategy away from building capacity to take on investment towards helping organisations to develop earned income models and become more enterprising. Our Enterprise Development Programme works in sub-sectors, such as homelessness, with existing infrastructure organisations, such as Homeless Link. Starting the conversation with diversifying income through enterprise, and not with social investment and all the preconceptions that come with it, opens many more doors.
Second, there can be an inherent contradiction in using grant as a tool to stimulate enterprising behaviour, so aligning incentives in the design of programmes is essential. We haven’t always got this right.
In the first year of our EDP pilots we offered two grant products: a feasibility grant of about £10,000 and a larger development grant of up to £50,000. Unexpectedly, we tended to have stronger applications for the smaller grant amounts. This might be because there was less incentive for organisations that were seeking grants to support their income to try their luck at applying for the programme.
Fortunately, in seeking to better align incentives there is lots of evidence, both positive and less so, from which to draw. For example, we are exploring innovations such as match trading, developed by the School for Social Entrepreneurs, to better incentivise enterprise development grants.
Conversely, our Reach Fund, run by Social Investment Business, builds on the experience of previous "investment readiness" programmes, but is deliberately designed to be different. The programme places the relationship between the charity or social enterprise and the prospective investor – known as the "access point" – at its heart. By not widely promoting the Reach Fund as a grant programme but focusing the referrals through social investors, we have been able to support organisations that are serious about taking on loans. Through having responsibility for a nominal budget for grants, the investor is incentivised only to refer organisations for grants they are serious about supporting. By shaping the investment-readiness plan with the investor, the charity or social enterprise is able to be focused on the work they undertake and, if necessary, can give a tight brief to a consultant. By not having an approved-provider list of consultants, the programme has driven down the cost of external support while not compromising quality. And, crucially, the charities and social enterprises have felt in control of the process.
Finally, the "who" is as important as the "what" in social investment. Access has a small staff team, so all of our work is delivered with partners. Having a fixed life means that if there is to be a legacy of our work it needs to live on in other organisations. Finding partners with which we are aligned, our fellow travellers both now and in the long term, is not always easy. Sometimes we haven’t realised that we are not heading in the same direction until it’s too late, and sometimes the best partnerships arrive with a good dose of luck.
We have been trying to figure out how to better identify and develop these strategic delivery partnerships, and we still have much to learn. When we go through formal tendering processes to commission services, we have been trying to give more weight to our values of being a network leader and long-term aspirations, and not just define a specification. We are also shifting to an ongoing process for identifying future partners and not just doing this at one point in the year. Part of network leadership means seeking to be a node, not a hub, so existing partners can be best placed to help identify new ones. This might be the best way for the ecosystem we are part of to sustain once Access is gone.
Seb Elsworth is the chief executive of Access, a foundation that helps to widen access to social investment for charities and social enterprises