Readying Social Enterprises for Investment Part Two: The Impact of Tailored Capability Building Support
Building off the previous Stories of Impact article exploring our work readying social enterprises for investment, this third piece explores our work as a leading provider in the Impact Investment Ready Growth Grant (IIRGG) program, and how this government-funded support enabled us to help social enterprises raise $23.7m.
Since 2014, we've been helping social enterprises define and focus on the impact they aim to achieve, and develop the strategies and actions to make it happen. Raising, impact investment is a key strategy for enterprises, with this allocation of capital for good supporting growth and scaling efforts. Through our numerous paid and funded advisory support projects over the last 10 years (get to know our Scaling Impact accelerator program, explored in story two), we have extensive experience helping social enterprises prepare for, and raise, impact investment.
Funded Capability Building Support: The Impact Investment Ready Growth Grants
Recognising the potential for impact investing to change the way Australia addresses social issues, as well as the important role that access to capital plays in delivering better outcomes for people and communities, the Department of Social Services' Sector Readiness Fund (SRF) funded the IIRGG program from 2018 to 2023.
Providing up to $140,000 to impact businesses and mission-driven organisations, the IIRGG funded business, financial, legal and other capabilities to build investment readiness and successfully raise capital to ultimately scale the impact delivered. A review of the program by an independent assessor found that the benefits to disadvantaged Australians, supported by grant recipients, was many multiples of the grant funds, which totalled $6.03m distributed to 76 social enterprises. This follows on from the $1.75 million in grants awarded to 29 social enterprises during the funding of the grant program by National Australia Bank (from 2015 to 2017). Impact that can be attributed to the SRF has two main components:
(1) Direct benefit to Australians experiencing disadvantage and
(2) building the social impact investment ecosystem.
To highlight the impact the IIRGG had, we share some stories of the social enterprises we supported, including AbilityMade, Dismantle, Fruit2Work and Xceptional; highlighting their journey from growth grant recipient, to successfully raising capital, to growing and scaling their impact.
Dismantle
Dismantle tackles youth disadvantage by empowering young people to reach their full potential through innovative services and programs. Their initiative, ReNew Property Maintenance (ReNew), is a social enterprise that creates job opportunities and skills training for young people from marginalised backgrounds. To execute on Renew’s growth plan and maximise impact, the organisation identified the need to raise capital and, with an IIRGG of $, we worked with Dismantle on their impact investment readiness journey, and coordinated a multi-stage blended capital raise.
In addition to a $300,000 grant from Westpac Foundation, an existing grant partner, ReNew successfully raised $250,000 in low-cost debt from five Perth-based foundations and $500,000 of philanthropy from Paul Ramsay Foundation. ReNew also secured $340,000 of equipment finance for a fleet of nine vehicles, tools and equipment. The capital will enable ReNew to scale in response to its existing pipeline of demand for its services, tender for and execute on contracts currently beyond its reach, and employ an additional five work crews (50 young people).
“It’s quite hard to get grants for social enterprise trade, and so we looked to impact investment and have been lucky enough to work with Social Impact Hub to get our investment projections and everything in order to take to potential investors.”
Preparing Xceptional for the right investment
Technology service social enterprise Xceptional offers meaningful employment opportunities via a digital job platform for people with autism, harnessing their strengths to provide software testing to tech companies, government, start-ups and scale-ups to name a few.
With our support, Xceptional secured an IIRGG of $70,000, which we used to build on their business model; developing a strong financial model, theory of change framework and robust investment memorandum, allowing them to search for investors with shared values. With the backing of Impact Investment Group (IIG), Xceptional secured $100,000 in equity and $500,000 through a loan vehicle which incentivises businesses to grow their social impact.This $600,000 represented an 8.5-fold leverage.
“We’ve been working with the Social Impact Hub since the beginning of Xceptional’s journey. The Social Impact Hub has been really helpful in our impact investing readiness... to go through the process of financial modelling, connecting with investors and then raising $600,000 of investment to help Xceptional expand and grow.”
AbilityMade
AbilityMade uses a purpose-built instantaneous 3D scanner to custom make lower-limb orthotics for people with a disability. With the support of an IIRGG of $139,700, we developed a theory of change and impact measurement framework, crucial to securing additional investors. The framework allows AbilityMade to measure their patient experience including waiting times, manufacturing turn-around times and the cost of equipment, allowing them to clearly articulate their impact. We also provided financial modelling and a competitor analysis, legal advice, preparation of rhe investment case and investor documentation, as well as facilitated introductions to impact investors.
This business support helped AbilityMade raise a $500,000 seed investment round and a priced equity round of almost $1m, representing an 11-fold leverage.
“Social Impact Hub helped us navigate the complexities of raising impact investment and provided us with the confidence to grow our impact!”
The IIRGG proved the effectiveness of tailored capability building support to help organisations grow their impact, and in many cases secure impact investment. Whilst the program has now finished, the Social Enterprise Development Initiative (SEDI) will commence shortly, building on the lessons of the IIRGG program to support social enterprises.
Apply for SEDI: Up to $120,000 Capability-Building Grants
Last year, the Australian Government announced a significant initiative to bolster the growth of the social enterprise sector. The Social Enterprise Development Initiative (SEDI) has $6 million in capability building funding, with grants of up to $120,000 available to eligible social enterprises. To be administered by Impact Investing Australia, SEDI aims to enhance the capability of social enterprises, enabling them to demonstrate and expand their social impact. The grants will be targeted towards supporting social enterprises to be more effective and efficient in demonstrating and increasing social impact for the vulnerable individuals and communities they exist to support. Grants can be used to purchase business and impact capability building services from intermediaries such as Social Impact Hub. These services can include growth planning, financial modelling, evaluation and impact measurement, and other business services. SEDI will not just be focused on securing impact investment; it will also support the growth and impact of social enterprises more broadly.