by Louisa Mitchell, John Kingston, and Emilie Goodall, Venturesome; September 2008.
This article is essential reading for those seeking to better understand the emerging social investment marketplace. In a nutshell, social investment aims to achieve both social and financial returns. Laden with case studies from the UK, the authors argue that social impact organisations are most effective when they strategically target social investors instead of becoming caught in the vicious cycle of short-term fundraising. Mitchell, Kingston, and Goodall delineate seven organisational models ranging from those that are purely grant dependant to completely commercial ones:
- Charity with fundraised/grant income
- Charity with “on mission” trading/contracting
- Social benefit enterprise
- Social purpose business
- Socially responsible business
- Business generating profits for charitable spend
- Commercial enterprise
The authors offer a pragmatic approach to capital planning that taps into social investment right across the spectrum. They say that organisations must clarify their financial needs: separating working capital requirements for day-to-day expenditures from their growth capital needs for strategic development. Then, with a clear picture of funding demands, organisations can proceed to target the right pool of investors.
Critics of this article may point out that the case studies cited have overwhelmingly positive investment returns. With tumultuous times in the global financial markets, a question may be raised over how the social sector will deal with the downturn. Perhaps the answer to this question will be the focus of the next installment.
For more information on Venturesome see: www.cafonline.org