Three emerging crowdfunding platforms, Ethex, ThinCats & Crowdfunder are joining forces to create a new entity, Big Society Capital, which will allow members of the public to invest directly in charitable causes and social enterprises.
Big Society Capital have secured a £10 million pound fund to match crowdfunded investments made by individuals into charities and social enterprises eligible for Social Investment Tax Relief (SITR), which allow private investors to save up to 30% on tax; from April 2017, younger charities and social enterprises will be able to raise up to £1.5 million through SITR.
The site will list eligible social sector organisations who are looking to raise debt and equity finance.
Big Society Capital, who will match all contributions made through the new investment platform, describe themselves as performing a dual role; as a champion of social causes the company helps increase awareness of the benefits of social investment, works with institutional and individual investors, trusts, charities and foundations to promote investment, and leverages social tools to measure the impact of such investment.
As investor, Big Society Capital will invest in social investment intermediaries, who will subsequently invest in charities and social enterprises to tackle social issues across the UK, such as homelessness, education, health and social care, income and financial inclusion, arts, conservation, employment and training, and criminal justice.
The company, based on New Fetter Lane, near St Pauls Cathedral, has outlined a vision for a social investment strategy that promotes “a vibrant, diverse, well capitalised and sustainable social investment market in the UK”.
Its four founding principles are independence – the company is neither controlled by the government, or by banks invested in the scheme whose shares are capped at 40%. Transparency, producing details of the financial and social impact of all of their investments. Self-sufficiency, covering operating costs and earning a small financial return to demonstrate the viability of the business, and as a Wholesaler, the company will deploy capital through finance intermediaries.
At the end of H1 2016 Big Society Capital say that total signed plus matched funding exceeded £772m, which consists of £273m of funding from Big Society Capital and £499m from co-investors, spread across more than 50 investments. Notable investments include ClearlySo, Impact ventures UK, NESTA Impact Investments, and SpaceHive, a crowdfunding platform for Civic projects.
Co-investors include UK charities and foundations (14%), Government agencies (12%), Social Bank deposits (12%), and international (10%).
To date, the company has drawn down £273m, 44% of which has been diverted to charities and social enterprises, 41% into property to help charitable service delivery, 5% social impact bonds, and 6% in management fees paid to intermediaries.
Currently, Big Society Capital is backing the Business Impact Challenge, launched in February this year, and aimed at helping companies develop social impact ideas with matched funding, raising awareness about SITRs through its GET IT scheme and pushing for public service reform across charities and social enterprises, local commissioners and outcomes contracts and social impact bonds.
Big Society Capital is run by a team of more than 40 with diverse backgrounds in the social, financial and business sectors.
Ben Warren, an Investment Associate at BSC, commented on the new platform;
“We hope that this initiative will help charities and social enterprises to find new routes to investment which could offer better value and engagement from their local community. Donation-based crowdfunding was the fastest growing model of alternative finance in 2015, and we are excited about the potential for this fund to create similar momentum in the social investment sector.”
Matt Fountain, the founder of social enterprise Freedom Bakery, which raised money via an SITR added:
“the fund is going to be a very powerful tool for communities and social enterprises to raise investment. The magic of crowdfunding in this way is that it will not only bring in much needed investment but will bring the public far closer to the causes they seek to support.”