SPECIAL REPORT: Investors and NFPs are increasingly turning to social enterprises, or impact investing, as it is called.
Investors and NFPs are increasingly turning to social enterprises, or impact investing, as it is called.
By no means a recent development, social enterprises are becoming an increasingly popular vehicle for not-for-profit organisations to diversify funding.
Holyoake, for example, has added new revenue streams to its drug and alcohol support service, while youth engagement organisation Dismantle has launched a mobile bike mechanic business.
In addition, education facilities are providing a framework to facilitate the impact and effectiveness of social enterprises, including the University of Western Australia’s Centre for Social Impact, which was launched in 2011, and the national School for Social Entrepreneurs, which recently completed its inaugural Perth course.
Social Ventures Australia has also been active through its role as overseer of grants paid out from the state government’s $10 million Social Enterprise Fund.
All three bodies aim to give social entrepreneurs the skills needed to not only establish a sustainable organisation with meaningful social impact, but to also consider ways of generating revenue to fund social missions.
The increased activity in the social enterprise space has also piqued the interest of investors, attracted by the opportunity to make a return on a socially beneficial investment, which is termed ‘impact investing’.
Nothing new
The YMCA and St Vincent de Paul Society are examples of the long history of social enterprise in Australia.
The YMCA has leveraged off accommodation and recreation assets to fund its youth and community services, while the St Vincent de Paul Society WA takes half its annual revenue from sales through its charity shops.
Another example is Sanitarium, which was founded in 1898 as a ‘health and wellbeing’ company by the Seventh Day Adventist Church, with all profits recycled back into supporting church members.
The state government aimed to increase the number and effectiveness of social enterprises with its Social Enterprise Fund in 2010, which, by the end of December 2012 had paid out just under $3.5 million.
One recipient was Dismantle, which uses its bicycle machinery workshops to engage youth.
Dismantle used its $50,000 grant to launch its Bike Dr mobile bicycle mechanic service, which regularly visits cyclists in five office towers in Perth’s central business district.
Chief executive Lachy Ritchie told Business News the organisation realised it needed steady revenue to continue its flagship Bike Rescue Project, which aims to reconnect young people with training and employment.
“We learned pretty quickly that government funds are drying up and as a small start-up not for profit, competing against the big fish is really, really hard,” Mr Ritchie said.
Last month, the mobile service raised $8,500, which was invested back into the Bike Rescue Project.
“It’s not huge money, but what that means for us is that if we get three bikes on the road … and they’re all really busy, that will easily cover our organisation’s overheads and we won’t have to rely on a cent of government money,” Mr Ritchie said.
The Funding Network, a new form of investment body that pools funds from members in a giving circle-type arrangement, has also provided support to Dismantle.
The network recently held its first fundraising night, during which Dismantle was awarded just more than $10,000 in pledges from attendees.
Mr Ritchie said it was an example of the high level of support for the social enterprise space in Perth.
“Social enterprise is definitely a massive buzzword and a growth area,” he said.
“It has been around forever … but the term is really in-trend at the moment so there are more and more people jumping on the bandwagon.”
Diversification
Drug and alcohol support service Holyoake is another to benefit from a move into the provision of charged-for corporate wellness programs.
That program, and another training program, now account for 30 per cent of the organisation’s total revenue, with chief executive Angie Paskevicius hoping that figure will ultimately grow to 50 per cent.
Ms Paskevicius said Holyoake felt the need to diversify its funding away from government but didn’t want to go down the fundraising route.
“We’ve never been into fundraising so that’s not the path that we chose to go down; it’s a very competitive space and there are a lot of not for profits out there competing for the same fundraising dollar,” Ms Paskevicius said.
Increasing awareness
Social Ventures Australia WA director Jenna Palumbo said that, besides the government’s investment in the Social Enterprise Fund, there were several reasons social enterprises had become attractive.
“In some ways, having a slightly more challenging funding environment does spur innovation and different ways of doing things,” Ms Palumbo told Business News.
“The organisations themselves like the idea of being independent and not having to rely on grant funding and being able to have a lot more discretion over how they use their funding.”
Ms Palumbo said both the NFP sector and potential investors were becoming more aware of the potential of social enterprise.
“People are becoming more consistent in terms of how they’re using the terminology (and) there’s definitely a level of energy behind the sector at the moment,” she said.
Potential investors have also become more enthusiastic about funding social enterprises.
Co-founder of collaborative giving fund Meridian Global Foundation, Rueben Taylor, said social enterprises that could generate investor returns (impact investment) were particularly attractive.
“For me it’s the increased impact; if the money that we take not only produces a return to impact charities but actually funds a social enterprise or social venture, that will create its own jobs and impact,” he said.
“All of a sudden there’s a whole community created that wasn’t through the charitable donation, but actually through an enterprise, which then becomes sustainable in its own right.”
The School for Social Entrepreneurs has just completed its first Accelerator Program, which aims to equip people with the skills necessary for a successful social enterprise.
Chair of the national organisation, Paul Bide, said intermediaries such as Social Ventures Australia had done much of the work to develop the social enterprise sector, but the time was also right for a different ways of delivering social outcomes.
“I think that people are searching for new ways to deliver social services and the fact that technology has enabled people to become more disruptive, just like it is in private enterprise, it’s just providing the opportunity for people to have a go more,” he said.
