A scoail investment note from the frontline: two news papers – close big society capical (BSC) and give the money away.


Staying balanced when writing about social investment is difficult as a leader of a social enterprise – it remains largely irrelevant to anyone involved in tackling poverty or anyone with the ambition/business model to scale. For a decade or so, report after report has been produced promising ‘things can/will only get better’ – but it never has, and whilst the same old same olds preside over it and remain trusted to put it right…it never will.

I say this against the backdrop of two new reports which have appeared talking about the failure of social investment. One written by a Tory MP (here) is explicit in its criticisms and ideas. The other, meant only as some sort of historic commentary (here) never quite goes there with any criticism, but is nevertheless talking up failure throughout.

Both papers got me thinking, hence this note, and both stirred up (again) a real sense that the only real beneficiaries in this very expensive game, have been the so-called wholesaler/intermediary types, who mostly sit in the South, involving themselves in a leadership-money-go-round, self-served by their proximity to each other.

This note is critical of social finance/investment environments – but in being critical, I make no negative reference to the Key Fund, who I would argue is the only true social investor in the England. All of the others I’ve met (and I’ve met lots) are manufactured out of an ideal that they know best, they would rather tell than listen, always talk returns and struggle with all things social. Engage with these intermediary types and you learn quite quickly that outside of their ‘balance sheet bullshiting’ and spurious requests for ‘more information’ they know very little at all about the social ills rampant across the UK and care even less for the solutions.

In their paper Daggers et al talk definition, which is a good place to start.

Social Finance is = Low risk, debt driven products, limited in value and scope and looking for short term returns. This is the dominant money model social enterprises face up to. It is also what most wrongly call social investment.

Social Investment is = At risk, patient money able to add significant capacity to the enterprise. Returns are factored longer term. This money is not available.

To contextualise this note – the company I lead is 14 years old, has managed social finance in and out, created (with a colleague) our own social investment model and raised funds within that model. We are also adept at raising grant as part of the necessary funding cocktail. This year we turned over £1.5m, returned a £100k+ profit. We are a good food business with production capacity to scale up to 3x our current output. We have a defined market with a value of £25m each year, just in our region and in being ready to scale, we have set up a company in partnership with a local authority and housing association. Yet social finance does not fit for us and as social investment does not exist for us – so what is the point of it all and what could change? More of this later.

The two papers:

Moving the social investment debate on, the most useful of the two papers is the paper written by Tory MP Gareth Davies. The bit I’m interested in is his sub-optimal critique of BSC which is correct, but still more than a little generous to BSC. However, his commentary that BSC money should be opened up to SME’s is wrong and indicates why the mismanagement of the social investment marketplace by BSC and its intermediary levers has left the social enterprise sector vulnerable to a private sector shake down. Also, he talks of giving BSC a larger part of the pie to manage and make it more complex – really! This the entity that has done more to hold back the social sector than any other body I’ve come across in my career. The BSC money was intended to shape and grow the social investment/enterprise sector – it hasn’t done so, and the same money is now in the gaze of a Tory MP who see the mess BSC have created as an opportunity to expand its reference towards the private sector – who can blame him?

The Daggers paper reads well, it’s a useful travelogue of the social investment journey so far. Providing a lot of detail, it does feel like a paper that could have been written 5 years ago; meaning nothing has changed – so what is its value in 2021? Probably its real value is to set out in detail, albeit not intentionally, the true failure of the social investment model and the incredibly weak position it is in going forward, with no discernible leadership and no obvious sense of what is trying to be achieved. This has been a constant for years and now the poor leadership, poor strategy and poor delivery is coming home to roost, and I think the paper helps dig this out

One criticism of the paper is who the authors chose to consult to write it. It appears only those only those who reside inside the M25 have the knowledge to comment, as if all the social investment output and consequences started and end there – it’s an approach that declares a mindset unhelpful to moving the problem on.

Big Society Capital:

A few years ago, I sat in a London gathering of social investment/enterprise types wherein one current CEO of a prominent intermediary said about social enterprise ‘You are shit and you know you are’ applying the words to a well-known football chant.  He had a point to make and I am sure he thought he had made it. So, with a similar point to make, let me return his sentiment. Most of the so-called social investment wholesale/intermediary chain have products that ‘are shit and they know they are’, making them irrelevant to most who would require their services. The head of this irrelevant snake is BSC, who for years have promised, huffed and puffed and simply not delivered.

Overpaid as staff group, always underperforming and now described as sub-optimal – you’ve got to wonder about their value.

BSC was of course to be saved by introducing a CEO supposedly better linked to the social enterprise sector – things were going to change. This was written around the time the tenure of the same CEO coming to an end. Put simply, he did nothing different to his predecessor and left without providing any discernible benefit to the sector. Then when his sinking ship sailed on – no one wanted the job, so after a while, they appoint from within, appointing someone who had been responsible for strategy/marketing of the previous ship and all its irrelevance. Chosen (again) to improve things, the new(ish) CEO has been in the post for 18 months – allowing for his stand-in stint. It appears their internal management practice is to promote people to their own ‘levels of incompetence’ wherein each exchange of leadership leads exactly nowhere else. As an example, and to press home the problem in the clearest terms, have a read of what he has come up with after 18 months…more of the same, who would have thought it? It’s nothing more than a lifeless strategy, told in a lifeless interview about the intentions of lifeless organisation hellbent on naval gazing and sticking to its right-wing-so-called-social agenda. Oops, must remember not to get political, but as I said at the start, staying balanced is oh so difficult when confronted by the improper intentions of an organisation unfit for purpose.

To be clear, none of the so-called strategy would be of benefit to what I do, and the money needed to do it. Maybe (again) we should give him/them the benefit of the doubt, but for how long?  And maybe whilst we wait, there needs to be an alternative plan in place and should nothing happen (again), the plan could be to put BSC and the rest of us, out of their/our misery.

Those intermediary types and the Key Fund:

On my social investment travels, I’ve met some good people…people with sound advice and who want help move ideas forward. Others though, and here I will qualify…most, were/are not up to the task, skill less to the task, with no idea of the social perspective of the enterprise model they were/are supposed to be helping to develop. It’s no wonder there is Tory interest in the way the money is being managed.

Meeting intermediaries has been a largely forgettable experience, with no recognisable method of assessment or risk management to follow, it’s wholly hit and miss, with inconsistency being the dominant process style. Our most recent experience was without doubt tone of the most disappointing. The intermediary was making stuff up as they went along, didn’t really have any money to spend, and had no sense of what they wanted. It told me, yet again, for all the investor/intermediary talk of things are improving, it was/is complete nonsense.

Which brings me to my support of the Key Fund and what makes them different. Up front they are an investor of ours and have been with us from the start. Led by someone/ a board willing to support risk, get stuck in and understand the issues and supported by a team who want to understand both the social and the financial. In 15 years of looking for social investment, they are the only investor that has ever tried to meet us half-way – and I thank them for that.

It’s a shame, others don’t look to share their approach, learn from their experience, but then they are up North and far removed from the epicentre of failure discussed here and in the two papers I’ve referred to earlier.

So where too next?

The point of social finance is to add short term debt support to social enterprises, sometimes mixed with a bit of grant. On some levels it works and works well, but it’s not about supporting scale, that is the work of social investment.

Scale in the social enterprise world is a peculiar thing, the ambition of most, the reality of too few and this is all too often to do with the shape of the money on offer. For so long, the social investment world has tried the mirror the mainstream investment markets, always talking up ‘Deal Flow’ – the potential of £billions being available sometime soon – see the latest BSC article referenced earlier for the latest meaningless attempt. They are always talking big and it’s just not true. They were all saying the same stuff 10 years ago and the money in the system, for what it is worth, is as naïve as it was 10 years ago – so why are we still trusting most of the same people/organisations to address the money problem the sector has – they have had long enough.

Social enterprise is in a precarious position, politically insignificant, part of a dysfunctional national structure and in the regions, at the behest of whatever grant funding regimes it can access – it all needs a re-boot. Sure, there are plenty starting up and lots more fighting to stay alive. But start-ups and all the others, need good money to establish themselves and grow and for over a decade the money has been far from good, and the social enterprise movement has stagnated or even gone backwards. This should be a concern and those who can, should use their position to bring about a change to the money and how it is being administered. Experience tells me however, nothing will change and those who can, will use their position to retrench and, on the outside, what we will see as practitioners is the same tired money offers, dressed up in some emperor’s new clothes. They have been doing it for years and with the same characters in the same or similar places of power – expect nothing different anytime soon.

My interest is in the social investment element of money model – the part that is not here yet, but oh so necessary, if we are to see more social enterprises scale up. I want to grow a social business that uses good food to change how people eat and look after themselves – it is a massive issue with a massive market. At the sharp end, this approach manifests itself in stopping people’s hunger, so to finish…an example to ponder.

There are now more people hungry in the UK than the combined populations of Scotland and Wales.

As BSC and their intermediary chums pretend to offer ‘social’ money, good people are starving – And here is the rub – none of their wholesale-intermediary-so-called-social-money is structured or offered in such a way to be able to tackle something socially dire as hunger – even when there is a massive marketplace to trade with.

BSC is a ship that’s sunk, an empty vessel, the same goes for most of the linked intermediaries. Best thing to do is close them all, stop the all the social investment hyperbole and retune the money into community-based initiatives (not SME’s). Some of it may get wasted, but not at the scale it is now and, I would bet it would produce significantly more long-term social impact administered that way.

Then we can all start again, afresh, no-doubt skint and looking for funds, but without the distraction of the same old playbook that has held the sector back for the past decade.

See you in a couple of years, probably writing the same stuff, about the same stuff.

Robbie Davison: The views expressed here are my own.