A session exploring how using capital helps diversify income streams, in time of economic pressure.

1. Social investment: five case studies
May 2011
Rob Hodgkinson, Investment Executive, Venturesome
Casey Lord, Investment Analyst, Venturesome

2. Revenue is distinct from capital
Income / revenue
Covers the costs of expenditure of ongoing work (service
provision, projects etc.)
Suppliers of income = purchasers of charities’ work
Capital
Money and other resources that enable organisations to
deliver their service / project / work
Capital funders = investors in organisations

3. Charities require access to capital
Charities are undercapitalised
Funding is primarily available in the form of revenue /
income funding
Few organisations are able to create a surplus that could
then be set aside as reserves
Charities require access to external capital in a
variety of forms and from a range of sources

4. What Venturesome offers
Bridging finance
Pre-funding of fundraising
Working capital
Growth capital

5. Bridging finance
Forecast cash shortfall, typically due to grant
payment in arrears
Similar to an overdraft facility; unsecured loan
Facility remains undrawn in many cases
Repaid in one tranche upon payment of the
committed grant

6. Bridging finance: cashflow excluding facility
25,000
20,000
15,000
10,000
5,000
-
1 2 3 4 5 6 7 8 9 10 11 12
(5,000)
(10,000)
(15,000)
(20,000)
(25,000)

7. Case study: The Andrew Lees Trust
The Andrew Lees Trust manages
programmes in Madagascar aimed at
educating and empowering local
communities
Required funding to complete the
community radio programme and drought
mitigation programme ahead of final EU
grant payments
Venturesome provided an £85,000
bridging loan to underpin cashflow
Full loan and interest repaid upon receipt
of the EU grant payment

8. Pre-funding of fundraising
Enables charities and social enterprises to start capital
expenditure programmes immediately and fundraise at
a later date
Strong fundraising team and pipeline is required
Eliminates risk of contract costs increasing
Unsecured loan
Repaid upon receipt of fundraising income

9. Pre-funding of fundraising: cashflow
excluding facility
20,000
10,000
-
1 2 3 4 5 6 7 8 9 10 11 12
(10,000)
(20,000)
(30,000)
(40,000)
(50,000)
(60,000)

10. Case study: Wollaston Association of Youth
WAY is a collaboration of three youth
organisations in the village of
Wollaston, established to develop a
more suitable building
WAY already raised £170,000 for the
project from a community share issue
and from the County Council
Venturesome provided a £75,000
facility to proceed with the building
project during the summer months
WAY will repay with future fundraising
income

11. Working capital
Forecast cashflow shortfall, typically due to
contractual payment in arrears
Similar to factoring
Unsecured loan
Repaid in equal monthly instalments over 3-5
years

12. Working capital: cashflow excluding facility
30,000
25,000
20,000
15,000
10,000
5,000
-
1 2 3 4 5 6 7 8 9 10 11 12
(5,000)
(10,000)

13. Case study: Fairtrade Foundation
Fairtrade Foundation grown rapidly
since launch
Significant working capital
requirement to pay for certification
costs ahead of income, particularly
with large contracts with Cadbury and
Nestle
Approached Venturesome for a
working capital facility
Fully repaid Venturesome loan at end
of facility

14. Growth capital
Organisation has demonstrated proof-of-concept and
been trading for at least twelve months
Capital requirement to fuel next stage of growth;
unsecured loan
Typically earned income
More onerous social impact indicators
Repaid in equal monthly instalments over 3-5 years

15. Case study: FareShare
FareShare is a national charity that
redistributes quality surplus food
from the food and drink industry to
organisations working with
vulnerable people in the community
Venturesome provided a £50,000
working capital loan to FareShare in
2008. This has now been fully repaid
FareShare later approached
Venturesome for a £200,000 facility
to expand the number of depots
across the UK

16. Quasi-equity
High growth potential organisations
Substitute for equity in trading charities
Revenue Participation Agreement: Venturesome
earns percentage of future revenue
Target IRR of 10%; maximum of 2.0x initial
investment

17. Quasi-equity: income profile
500,000
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
-
1 2 3 4 5 6 7 8 9 10 11 12
Total income Venturesome income

18. Case study: Global Action Plan
GAP works for the protection and
improvement of the environment through
practical activities
Two previous Venturesome facilities
which were repaid in full
In November 2007, Venturesome invested
£75,000 as quasi-equity to double
turnover in five years
Venturesome paid over £60,000 with four
years of future income remaining

19. Venturesome key facts
Since 2002, we have offered £20m to some 270
small- and medium-sized charities
Cumulative default rate of less than 5%
We are currently managing a £10m fund for 14
investors
We learn from our investment in charities, and
share this learning with the wider social investment
market. See our publications at
www.venturesome.org

20. Contact information
Rob Hodgkinson, Investment Executive
Email: rhodgkinson@cafonline.org
Phone: 03000 123 225
Casey Lord, Investment Analyst
Email: clord@cafonline.org
Phone: 03000 123 279