Investment – show me the moneyMay 20th, 2012 3 comments

Most entrepreneurs and new enterprises will need an injection of cash at some stage. This might be seed money of just a few thousand pounds, funding to cover start-up costs like buying some office equipment or much larger investment to cover the cost of, for example, renewable energy infrastructure.

 

Our research shows that there’s not necessarily a shortage of investment cash out there, but that the same four things generally get in the way of an enterprise getting the money it needs, when it needs it. Through the REconomy Project, the Transition Network is looking for ways to address these issues and gaps, and help ensure that the right finance is available at the right level, and at the right time, for the emerging Transition Enterprises.

 

The common issues

 

1. Lack of investment readiness – the enterprise often doesn’t understand what is needed to successfully engage with a potential investor.

2. Lack of independent advice and knowledge sharing to help an enterprise become investment-ready.

3. Lack of financial knowledge, e.g. understanding the difference between debt and equity, and that choice of legal entity type can then restrict type of investment options.

To address these first three, we would look to include some investment-readiness support in our potential coaching programme and School for Social/Transition Enterpreneurs training. We’ll also try to help explore  how this best built into local mentoring support. Other organisations also offer help with investment-readiness.

4. Lack of appropriate finance on offer – few finance offers are designed to suit the social enterprise market e.g. the need for ‘patient’ capital that offers returns over a longer period.

To help remove this barrier, we are trying to understand the investment needs of Transition Enterprises, and then map out who might be the best provider in each case. We also looking at whether the Transition Network wants to set up its own ‘investors network’, to whom investment-ready Transition Enterprises can be introduced.

We might also partner with an appropriate-minded social investment fund manager, for those investors who don’t want to choose their own investments, but are happy to have someone do this for them. This work is underway and we will share the results here as they emerge.

 

OK, back to the burning question, where can you go for cash today?

 

This is hard to answer simply, as it depends how much you need, what for and what stage you are at. Are you wanting a loan or are you happy to issue shares? It might also depend on where you live. And at the risk of being repetitive, it depends how investment-ready you are. We hope to develop a diagnostic tool that can help you find the right sort of finance to meet your needs, but this is a way off yet (if you can help with this, please let us know).

Meanwhile, there’s a range of individuals and organisations  that offer investment to start-ups and existing businesses, though mostly aimed at traditional business models. Often people start financing their enterprise by using their own money, or borrowing from family and friends.

There’s an increasing number of platforms for crowd-funding that offer opportunities to donate to, or invest in, new businesses or projects.

Then there’s local credit unions, (here’s a guide to setting up a credit union), angel investor networks, traditional bank loans and specialised investors.

Some enterprises are using community bond and share issues, that use the savings of the local community to help finance new Transition Enterprises like OVESCo in Lewes. Others like Bath & West Community Energy are accessing finance from corporations as well as individuals. Micro-finance is becoming a more viable option for some.

Some sector-specific loan funds are emerging such as The Community Generation Fund, which funds community-owned renewable energy infrastructure – you can register your interest for future rounds on their website.

The Community Development Finance Association help enterprises that are struggling to get finance from banks or loan companies.  The Community Action Network helps with investment readiness and introductions to investors.

Some of the organisations listed in Help for entrepreneurs from other organisations also offer access to funding and investment for social enterprise in particular, such as ClearlySo and UnLtd.

There are lots of other investment organisations out there. We are still exploring this area and how best to support you, so please let us know what you need and what you would recommend to others.

 

Credits:Image source: 20 Pound Notes by freedigitalphotos

 

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Tags   Funding  Investment  Investment readiness

3 Comments

1. 

   Matthew Slater

   May 24, 2012 at 4:51 pm · Reply

   Insofar as investment can be spent within the commuunities, scarce money is not needed. Any person or group can issue as much credit as it can guarantee to redeem, and the credit can be circulated around the the local economy just as transtion pounds are supposed to.

   This can happen either in individual transition towns, or across the whole movement. It’s not complex or risky, but it does need to be a collective decision in order to be a success.

2. 

   Jay Tompt

   November 1, 2012 at 4:24 pm · Reply

   There’s two more source of start up capital that should be included. One is crowdfunding. Now that Kickstarter has expanded in the UK, the buzz around crowdfunding is mainstream news. There are UK based crowdfunding platforms like BuzzBnk.org and PeopleFund.it.

   Another source to be noted is non-financial forms of capital, such as expertise, workspace, access to networks, referral, etc. In the context of community-oriented ventures, these pathways also serve to develop a culture of community investment in its broadest sense.

   • 

     Fiona Ward

     November 22, 2012 at 11:22 am · Reply

     Thanks Jay – just added the crowdfunding information from Josef.