Dan Gregory Chief Officers Feb 2011


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Dan Gregory Chief Officers Feb 2011

  1. 1. Local Partnerships The DH Social Enterprise Investment Fund, case study and lessons learned
  2. 2. Background <ul><li>Capital, finance, investment vs. revenue, funding, income </li></ul><ul><li>(debt, grants, equity) (grants, contracts, fees) </li></ul><ul><li>Investment need to respond to / be tailored appropriately to the potential for income generation. E.g. you only lend to someone if they can afford to repay. And you should only borrow to invest for the future. </li></ul><ul><li>So what is the potential for revenue generation? In other words, what is the ‘state of the market’…? </li></ul>
  3. 3. Case study: The market for community health services <ul><li>Immature commissioning </li></ul><ul><li>Uncertain future commissioning landscape </li></ul><ul><li>Cuts </li></ul><ul><li>Provider side dominated by state providers but opening up </li></ul><ul><li>Payment by results? </li></ul><ul><li>Comparison with youth services? </li></ul>
  4. 4. The Social Enterprise Investment Fund <ul><li>£100m fund </li></ul><ul><ul><li>To support the delivery by social enterprises of innovative health and social care services and products; </li></ul></ul><ul><ul><li>To provide start-up funding and longer term investment to emerging and existing social enterprises in the health and social care sector with a view to securing their sustainability. </li></ul></ul><ul><ul><li>For the SEIF to become financially sustainable through returns on non-grant investments and through leverage of funds from external investors. </li></ul></ul><ul><li>For emerging and existing social enterprises </li></ul>
  5. 5. SEIF investment policy – the theory <ul><li>Viable but not bankable </li></ul><ul><li>Products </li></ul><ul><ul><li>Business development grants </li></ul></ul><ul><ul><li>Loans </li></ul></ul><ul><ul><li>Grants </li></ul></ul><ul><ul><li>Convertible grants </li></ul></ul><ul><ul><li>Quasi-equity </li></ul></ul><ul><ul><li>Guarantees </li></ul></ul><ul><ul><li>Equity </li></ul></ul><ul><li>Co-investment </li></ul>
  6. 6. SEIF – challenges in practice <ul><li>Politics </li></ul><ul><li>EYF </li></ul><ul><li>Perverse incentives for fund manager and Department: </li></ul><ul><ul><li>co-finance </li></ul></ul><ul><ul><li>fund sustainability </li></ul></ul><ul><ul><li>Innovation </li></ul></ul><ul><ul><li>products </li></ul></ul><ul><li>Investment approach vs. programme model </li></ul>
  7. 7. A youth sector spin-out fund? <ul><li>NESTA call for proposals </li></ul><ul><li>Proposal: </li></ul><ul><ul><li>to use BSB capital to attract co-investment into a sustainable fund, which will provide financial support to youth services which wish to spin-out of the local public sector into viable social enterprises. </li></ul></ul>
  8. 8. What is the opportunity? <ul><li>To provide the financial means to catalyse, nurture and support the spin-out of youth services from the local public sector, into viable social enterprises. </li></ul><ul><li>To accord with an overall national and local policy direction , a move to a plurality of local services provision, moving services closer to the communities who rely on them. </li></ul><ul><li>To focus on youth services in particular, an area of national and local priority where there is evidenced demand for alternative means of delivery. </li></ul><ul><li>To leverage BSB capital by attracting co-investment into a fund which will provide the financial support for local youth services to spin-out into social enterprises. </li></ul><ul><li>To fill a gap in the market , fledgling spin-outs are typically un-bankable but spinning-out takes both human and financial resources. </li></ul>
  9. 9. Who will invest and how? Big Society Fund? Bank? (quasi-) equity Nesta f HSBC? CFS? Debt Commercial Lenders e Bridges? Baxi? (quasi-) equity Social VC d CAN? SFCT? Grant Social Investors c Local Authority? Grant Public sector b Staff and community? Equity Stakeholders a Example Investment Investor
  10. 10. Questions <ul><li>Does this investment model respond to / is it tailored appropriately to the potential for income generation? </li></ul><ul><li>Could this offer an opportunity to create a social investment fund for the youth sector? </li></ul><ul><li>Market dynamics particular to the youth sector: </li></ul><ul><ul><li>Already mixed market of provision? </li></ul></ul><ul><ul><li>Asset rich, cash poor? </li></ul></ul><ul><ul><li>Untapped potential for social enterprise models? </li></ul></ul>