Readying Social Enterprises for Investment Part One: The Impact of Cohort-Based Capability Building Programs
In the second piece for our Stories of Impact series celebrating 10 years of Social Impact Hub, we explore the vital role of tailored capability building programs in supporting social enterprises to grow and prepare for future impact investment.
Navigating the complex terrain of growth and sustainability is a daunting task for many social enterprises. From securing funding to expanding their reach and footprint, these organisations often find themselves grappling with numerous obstacles – particularly when it comes to scaling their impact and accessing the neccessary capital to do so. Having provided impact investment readiness assistance to social enterprises for many years, we have an intimate understanding of the unique challenges faced in finding expertise and accessing appropriate capital to scale. In several instances, enterprises are unsure about the right type of capital for their stage of growth, and other times, enterprises are unsure how to prepare for the capital raising process or actually secure capital. Conversely, investors looking to invest for positive social or environmental impact as well as financial return are challenged with finding high quality deal flow.
Capability Building Programs as a Remedy
Recognising this critical need for support, we developed the Scaling Impact program in 2019, aiming to bridge the gap by providing much-needed guidance and resources to social enterprises at a pivotal stage in their development. Following a national roadshow with EY educating social entrepreneurs about how to secure the right capital at the right time, the program officially began in 2020, with the generous support of the Sidney Myer Fund, the Department of Industry, Innovation & Science, EY, Seventh Street Ventures, the Yarranabbe Foundation & the English Family Foundation.
What is capability building? It refers to the process of developing and enhancing the skills, knowledge, and resources of individuals or organisations to achieve their goals effectively and sustainably. The program included 1:1 mentoring, expert masterclasses, an Impact Investment Readiness Diagnostic, tailored advisory, investment pitch coaching, tools and resources, culminating in a public showcase to hundreds of investors, sector leaders, mentors and community supporters.
The Impact of Tailored, Cohort-Based Support
The positive correlation between participation in the accelerator program and a consistent increase in revenue over a period of 18 months, despite a temporary interruption due to the COVID-19 pandemic.
When thoughtfully designed and successfully executed, the impact of capability building programs can be profound. By offering tailored advisory services, mentorship, and educational initiatives via cohort-based programs to build the organisational capability of social enterprises, initiatives like Scaling Impact help these organisations overcome hurdles and unlock their full potential. From refining their business models to enhancing their investment readiness, participating enterprises reported significant improvements across all areas, paving the way for sustainable growth and increased social impact.
Several Scaling Impact enterprises have secured vital investment capital following the program, enabling them to expand their operations and reach a wider audience. Between 2020 and 2022, Scaling Impact supported 24 social entrepreneurs to scale, three of whom have raised impact investment with the support of Social Impact Hub to the value of $2.265m, while an an additional five enterprises are raising approximately another $4.74m. Such success stories underscore the transformative power of tailored capability building support programs, demonstrating the tangible benefits they bring to the social enterprise ecosystem.
“Scaling Impact was incredibly rigorous, effective and supportive in helping prepare Green Collect for its next phase of scaling. We had access to the expertise and services of dedicated staff and practitioners who offered incredible insights and encouragement throughout the program. We were able to undertake work that we would not otherwise have had capacity to do, and that will greatly deepen the impact of the enterprise into the future.”
Scaling Impact Cohort Two
At the same time, it's important to remember that the benefits of such a program is not just measured in funding secured; it's about building a robust foundation for sustainable growth, innovation, and impact. By enhancing their investment readiness, social enterprises can better navigate the complex landscape of social entrepreneurship, unlocking new opportunities for impact and ensuring their contributions to societal wellbeing are both significant and enduring.
Case Study: Matchmaking Umbo with the Right Capital at the Right Time
Social enterprise Umbo reduces the barrier of entry for occupational therapy and speech pathology services by providing services online, whilst drastically reducing wait times for patients to access support. To support Umbo on their investment readiness journey, the organisation's growth plans and pathways were identified as part of the Scaling Impact accelerator, followed by clarifying their funding gap.
Following an introduction to Fortis River at the accelerator pitch evening, the social enterprise investor invested $200,000 to ramp up Umbo's ability to scale, onboard more clients and clinicians, and cut wait times significantly down for more families:
“We were really lucky to find amazing investors through the Social impact Hub... We’d really struggled to find investors that were interested in social impact prior to that.”
— Weh Yeoh | Umbo
Checkout the video below for perspectives on the capital raise from both Umbo's CEO Weh Yeoh and Fortis River's Chris Murdoch.
Where to Next for Support?
The first three years of Scaling Impact came during a fascinating time for social enterprise in Australia. Marked by the development of a national social enterprise strategy, to Brisbane hosting the Social Enterprise World Forum, there is little doubt of the considerable momentum of the social enterprise movement.
If we recognise that the default way of doing business needs to change to genuinely address social and environmental problems, an accelerator like Scaling Impact is crucial in nurturing the growth of social enterprises and purpose-driven startups, preparing them for future impact investment. Testament to this, is the inclusion of funding for social enterprises in the 2023 Federal Budget, in particular funding for the Social Enterprise Development Initiative and the Outcomes Fund.
As a proven one-of-a-kind program, Scaling Impact has played a key role in supporting organisations to build their capability to access capital, and build the pipeline of investment-ready enterprises. Notably, several accelerator alumni took the natural transitionary step from the program to successfully secure an Impact Investment Ready Growth Grant, funded by the Sector Readiness Fund, which enabled us to provide further support on their journey.
Being a cohort-based program, pipeline-building accelerators like Scaling Impact are reliant on ongoing philanthropic and government funding to deliver the education and peer support that builds the investment-readiness of enterprises.