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£3m fund closes after one £320,000 deal

9 July 2010
Triodos UK managing director Charles Middleton

'Our experience was mainly not finding the number of social enterprises that were ready for, and had the appetite for, equity'

 

Triodos UK managing director Charles Middleton (pictured)

A £3m Triodos fund set up to invest equity venture capital in social enterprises has closed after two years and only one £320,000 deal.

Triodos UK managing director Charles Middleton said the bank had not found the appetite for equity that it expected, or enough social enterprises in a strong enough position to take on equity.

‘The recession is having an impact,’ said Middleton. ‘But our experience was mainly not finding the number of social enterprises that were ready for, and had the appetite for, equity.’

Middleton compared the difficulties Triodos faced in providing equity to social entrepreneurs to the same difficulties it faced many years ago in convincing charities to take on debt.

‘Entrepreneurs have to be comfortable with letting go that sense of control and ownership which is not easy to do and we have to respect that,’ said Middleton.

He also urged the government’s proposed Big Society Bank to play a role in helping to get social enterprises investment ready.

‘We come across this persistent theme of investment readiness being an issue,’ said Middleton. ‘That’s why you hear many people agreeing that the Big Society Bank should have some funds available for addressing investment readiness.’

Middleton stressed that Triodos’s lending to social enterprises remained strong with record levels of lending to the charity and social enterprise market.

‘On the lending side we have £120m loaned out to what we define as charities and social enterprises, and if you add the commitments we’ve made, but which have not yet been drawn down, it’s more like £220m,’ he said.

Middleton said closing the Triodos Social Enterprise Fund was a ‘very difficult’ decision and came only after the investment team had tried ‘very hard’.

He pointed to the fact that other venture capital funds for social enterprises, which had been set up after the Triodos launch, had ended up combining equity-like investments with loans.

‘We didn’t think there was any point in using this fund to do debt,’ he said.

‘In the end it was fairer on investors for them to have the money back and to use it in a way that would make a positive impact. I think it’s important that we tried.’

 Middleton added that if the experience helped to throw the spotlight on the issue of investment readiness then that was a positive outcome.

He said that Triodos would be keeping a close eye on the market to see when the time was right to re-launch an equity fund for social enterprises.

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Comments

A missed opportunity

That's a pity because I'd not known about it. Triodos was approached back in 2004 when we had a business plan for community broadband service which invested profit in CDFIs. It was rejected by them as it was by coop funding at the time because we were a Guarantee Company not a charity. CICs had yet to be invented.

That led to us switching our focus back to Eastern Europe and after 6 years there are the beginnings of some interest in for profit business with social objectives.

It's not coming from the UK however, where the 'different church' mentality prevails.

Jeff Mowatt
People-Centered Economic Development

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