More support needed for early-stage social enterprises

A new report from Impact Investing Australia says there is a clear gap in support for early-stage organisations 

Impact investing leaders are calling for the creation of a new organisation to help emerging social enterprises build capability at an early stage so they are ready to raise capital. 

A new report from Impact Investing Australia (IIA) has analysed the last six years of its Impact Investment Ready Growth Grant program, which is funded by the federal government’s Sector Readiness Fund (SRF).    

This program provides capacity building grants of up to $140,000 to help social enterprises secure investment capital to scale their impact.

The report said the program has successfully distributed $6.8 million in growth grant funding to 69 social enterprises, allowing for over $143 million to be raised in capital.

But it noted there was a clear gap in support for early-stage enterprises, with many applicants failing to qualify for the grant because they were not developed enough.

Sabina Curatolo, the acting CEO of IIA, told Pro Bono News that Australia needed to be able to support early-stage social enterprises before they were ready to raise commercial investment.  

“I think the report shows there’s still gaps in the market. Many of the applicants who come to us are still too early to be eligible to apply for the Sector Readiness Fund,” Curatolo said. 

“Another gap is that some applicants wanted to set up impact funds themselves so that they could invest in social enterprises, but the program doesn’t allow for that either.

“However, if you [could support] the different actors that were in the market, like intermediaries, then that’s a more holistic approach to building out the whole of the market.”

IIA wants to see a more holistic place that social enterprises can go to for support throughout their entire journey as an organisation.

To achieve this, the report recommended creating an organisation similar to the Access Social Investment Foundation in the UK. 

This foundation supports charities and social enterprises to sustain or increase their impact by improving their financial resilience and self-reliance.  

It was set up in England in 2015 by the UK Cabinet Office, the Big Lottery Fund (now the National Lottery Community Fund) and Big Society Capital. 

“The Australian version could similarly be a partnership between the government and philanthropy to create an organisation that funds and co-ordinates capacity building, early-stage investment and social investing infrastructure,” the report said.

“Importantly as an early-stage [social enterprise] wholesaler, Access is a co-ordinator of other sector actors rather than a replacement for them, hence building intermediation and sector collaboration and development. 

“We need this for Australia and the social impact it could create.”

IIA believes an Australian early-stage foundation could serve as a key piece of infrastructure for social enterprise development, by offering a combination of investment and grant capital delivered mainly through existing market intermediaries.

The organisation has also previously called for the creation of an Australian impact investing wholesaler, which they said would accelerate development and achieve scale for impact investing in the country.

IIA executive director Sally McCutchan told Pro Bono News an early-stage foundation would “fulfil many of the capacity building and finance needs… faced by social enterprises on their path to sustainability”.

Curatolo added that this would allow many social enterprises to scale – benefitting not only the sector, but Australia as a whole.

“A foundation of this nature would be a good step forward,” she said.

“Coupled with other market-building infrastructure, the impact investing market can contribute to a regenerative economy that serves all Australians.”