Transcript Title

Social Capital Partners:
Investing in Social Enterprise
St. Michaels College
October 21, 2005
1
Agenda
1.
About Social Capital Partners
2.
The Context for Our Work
3.
Our Work in Action
4.
Roles You Can Play
5.
Questions
2
About SCP
Our Mission
Invest
in social enterprises that employ people from
economically marginalized communities
Enable
these organizations to grow and succeed
financially
Support
these organizations to create improved
social and financial outcomes for employees
Catalyze
other innovative financing models for social
initiatives
3
About SCP
How We Got Started
2000
Bill Young leaves the private sector after 20 years as a
successful executive and a successful liquidity event
2001
Bill approaches The Monitor Group to help him develop a
strategy to “give back” while still using his business skills
2001
Non-profits and thought leaders from across North America
are interviewed to identify areas where SCP can add value
2001
Key tenets of the social enterprise strategy are developed
and SCP is “born”
2002
SCP runs a national business plan competition to find its first
social enterprise investment – Inner City Renovations
4
About SCP
What We Bring to the Table
Business
Experience /
Expertise
Social
Enterprise
Expertise
Appropriate
Capital

30 years of combined experience in the private sector as
entrepreneurs, consultants, and senior managers

Strategic partnerships (Monitor Group, RBC Capital Markets)

Extensive social enterprise research in Canada and the US

Hands-on social enterprise experience

Hands-on experience with Social Return on Investment

One of the few Canadian sources of risk capital

Backed by C$10MM in initial funding by the founder

Relationships with regional co-funders
5
About SCP
Our Investment Approach
Using the
principles of
venture capital
• Risk capital
• Deep
engagement
• Management
support
And create a
network of
successful
enterprises
across Canada
To invest in high
potential social
enterprises
• Growth
oriented
• Cross pollinate
ideas and best
practices
• Profitable
• Engage
communities
• Strong job
creation per
dollar invested
• Make the
concept
“mainstream”
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That ultimately
employ
thousands of
people
• Provide a
positive
alternative to
social
assistance
• Make long
lasting
changes in
communities
About SCP
Results From Our Portfolio Companies
$12,000
$10,000
Non-Target
Employees
Portfolio
Company
Revenue
$8,000
$6,000
Target
Employees
Portfolio
Company
Profits
$4,000
$2,000
$0
Individual Portfolio Companies
Target Employees: 260
Total Employees: 400
Portfolio Company Revenue: 10.6M
Portfolio Company Profit: 600k
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Context: Traditional Investment Lenses
We tend to think of investment through traditional sectorbased lenses . . .
Private
Investment
Wealth Creation
?
Blended
Outcomes
Government
Funding
Charitable
Donations
Social Safety Net
Civil Society
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Context: The Need for Multiple Lenses
. . . but innovative solutions to social and economic
challenges may exist between these silos
E.g.
• Sustainability and
Conservation
Private
Investment
Government
Funding
• Inner-city
economic
development
• First Nations
economic
development
Charitable
Donations
• Affordable
housing
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Context: Blended Returns Example
. . . and some ground breaking organizations already defy
these traditional views
 Joint
venture of nonprofit housing corporations in
Winnipeg
 Renovates
run-down housing in the inner city
 Employs
10-15 low-income inner city residents, mostly
Aboriginal Canadians
 Has
revitalized dozens of homes and commercial
buildings across the Winnipeg inner-city
 Generated
nearly C$1.5M in business revenue in 2004 /
2005 but is struggling for profitability
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Context: Blended Returns Example
However, these organizations often fall between the cracks
of traditional financing programs . . .
Investment Outcomes

Business generates
revenue, strives for
profitability and
services loans
However,

Profitability and
returns do not meet
typical private
investment hurdles
Policy Outcomes

Jobs are provided
for those who might
otherwise rely on
social assistance
However,

Charitable Outcomes

Affordable housing
is constructed and
at-risk individuals
receive job training
However,
Government is
reluctant to support
an organization that
competes within the
private sector
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
ICR does not fit the
traditional definition
of a charity and
cannot receive
philanthropic gifts
Context: The Social Capital Market
In these cases we must set aside traditional lenses and
create hybrid financing mechanisms . . .
Traditional
Charities
Social
Enterprises
Traditional
Businesses
Blended Outcomes
Pure
Social
Outcomes
Hybrid Financing
Vehicles are Required
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Pure
Financial
Outcomes
Our Work in Action: Renaissance
Description
Results
Hybrid Investment

Chain of second
hand stores in
Montréal

C$150k in 5 year
subordinated debt
at competitive rates

Operate under the
Fripe-Prix name

C$150k in equity
capital

Mission to integrate
difficult to employ
into the workforce

Payback linked to
performance
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
Seventh store
opened in fiscal
2004 with eight
planned for fiscal
2005

Expect C$5M in
store revenue and
700k in profit for
fiscal 2005

200 employees
(120 target)
Our Work in Action: Franchising
Description



SCP provides
unencumbered
capital and
business support
for franchisee

Franchisor provides
its system and
expertise

Payback is linked to
business cash flow

Investment
covenants include
both financial and
social requirements
Franchisee hires
employees through
YMCA job training
programs and
provides social
support programs
Results
Hybrid Investment
Unencumbered
capital provided to
franchisee who
might not otherwise
qualify
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
Actively developing
partnerships with
o
Two Men and a
Truck
o
Active Green &
Ross
o
ServiceMaster
Clean
Our Work in Action: Creating a Positive Cycle
And attracts
new . . .
Social Investors
Greater social
returns
Develop . . .
New Risk Capital
Vehicles
Which
creates. . .
Risk taking and
Innovation
Entrepreneurial
Solutions to
Social Problems
And allow . . .
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Which
encourage . . .
What Role Can You Play?
Sponsorships and donations will always be important but
there are other creative ways to make a difference . . .

Can your CSR strategy include not only charitable giving but also
investment in community projects?
– Affordable housing, sustainability projects, etc.

Are there unique ways for your company to connect with community
partners?
– Employment or training for those facing employment barriers?

Are there opportunities to procure goods and services from communitybased businesses?
– Turnaround Couriers (www.turnaroundcouriers.com)
– Social Purchasing Portal
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