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Learnings From Big Venture Challenge: Part 1 - Attracting New Investors
It is now 4 months since we announced the Big Venture Challenge winners. A lot has happened in this short space of time and we are just coming up for air to reflect on where we’re at and what we’ve learnt.
In a nutshell, Big Venture Challenge is a competitive programme to help ambitious social entrepreneurs reach scale by providing access to the right people, resources and investment. We received 638 applications and filtered them down to 25 winners. We are providing these 25 winners with intensive support for 3 years plus access to match funding. We have £700K of match funding which is split into 10 x £50K and 2 x £100K grants, designed to leverage in loan or equity from co-investors. The purpose is to plug the funding gap in early stage high risk capital and stimulate the seed investment market for growing social ventures.
So what has happened so far? The most surprising result is the level of interest from investors who are new to the social venture sector. In the first 4 months:
Over £1m of co-investment has been lined up by ten of the winners to apply for our match-funding – so our £700K match fund is already completely oversubscribed
75% of this co-investment is from investors who are new to the social venture sector including 13 Angels who have never made a social investment before
70% of the co-investment is equity and 30% is loan
How does this compare to the previous two years? It is a stark contrast. Prior to the Big Venture Challenge, we ran the UnLtd Advantage investment readiness programme. During this two year period, we did not attract one single Angel investor and only 8% of investment raised was equity with 54% loan and 38% grant. It was a funding desert in terms of access to early stage high risk capital or interest from new investors – very few deals were happening.
So why has there been such a dramatic change in only 4 months? Our view is that the Big Venture Challenge provides two key elements that make the difference:
1) The Filter – investors like the fact that we have filtered 638 applications and come up with a list of the best 25 social entrepreneurs for them to look at.
2) The Match – obviously investors like the opportunity to double the impact of their money by co-investing alongside a matching grant.
These two factors seem to have provided a significant stimulus, enabling conversations to happen between social entrepreneurs and investors at a much early stage and enabling investors to dip their toes in the social sector for the first time.
We only have £700K of match funding so we have had to make some tough decisions on allocating it. So far we have approved five of the co-investment deals totalling £800K of growth capital (£320K match grant / £580K co-investors) with two further deals in the closing stages as well as new co-investors lining up to back further deals for later in the Spring. We will not be able to meet all the demand from co-investors so we are urgently looking to raise additional match funds to keep pace with the momentum and levels of interest.
As the investment deals are closed, the really exciting work of scaling up the ventures begins. We are determined that this programme should not just be about securing investment, but rather about creating impact at scale. The great news is we are already seeing signs of real growth and considerable impact being delivered on the ground: our cohort are winning contracts, launching new products and services, building their teams and transforming the lives of many thousands of people.
Selected highlights from the last four months include:
Beyond Youth reduces re-offending by delivering therapeutic interventions in prisons and they have just secured their first franchise operation.
Elixir Foundation, a recycling company working with marginalised and vulnerable people, has been chosen as national partner for the new Communtiy Payback scheme.
Moodscope, an online platform for helping people manage depression has recorded its 850,000th mood score, and won the Dept of Health contest for ‘Best Health Apps’.
Sports Traider has opened another two retail stores for recycled sports equipment, using profits for grassroots sports provision for young people.
Ripplez delivers support for teenage mothers and has opened their first satellite operation employing 4 nurses and reaching 100 more families.
Under the Stars has delivered inclusive night club events for 1200 disabled people.
London Early Years Foundation has cared for over 1000 children in the last quarter.
Reds10 has employed 40 new apprentices.
Over the 3 year programme we will be tracking how the impact delivered by our winners increases in line with their organisational growth – and how our support and the growth capital affects this. We are committed to sharing our ongoing learning with the rest of the sector. For now though, a big ‘congratulations’ to the BVC cohort for setting such a pace at the start of the programme!