Peter Bazalgette’s piece in The Independent (Wednesday 10 June 2015) about the Arts Impact Fund has got a lot of people talking about Social Investment, Social Enterprises and the role they might play in the future of arts fundraising. So what are they and how might they work for you?
Social Investment is a form of loan (or repayable finance) available for organisations (generally charities or Social Enterprises) providing a social benefit or working for the public good. Investors are looking for a social return as well as a financial one – crudely put, the greater the amount of social benefit you can demonstrate the lower the rate of interest you are likely to pay on the loan. The rates are typically less than the market rate, making this an attractive option for organisations looking to fill a funding gap or to finance activity that is likely to make a profit in the future.
Social Investments have been used in other parts of the UK charity sector for a few years – in 2012 Investing for Good worked with Scope to secure a £2million investment to help the disability charity develop and expand its network of charity shops. Earlier this year it was reported that the same company is working with Shakespeare’s Globe to take a bond to market to raise capital for an exciting new library, archive and research complex on the Southbank site. It is believed this is the first time this type of finance has been used for a UK arts organisation but the launch of the Arts Impact Fund ensures it won’t be the last.
A Social Enterprise is an organisation run as a commercial entity but where the overall aim is to achieve a social, community or environmental aim. In some cases the Social Enterprise might actively work to deliver that aim. In others, it might generate profit that is transferred to the charity. (The Green Room at the National Theatre is an example of this – so every pint of delicious craft beer I drink there is supporting the arts. That’s what I call a Win-Win!)
(Live Works Development in Newcastle)
Social Enterprises aren’t new – indeed, many arts organisations have had trading subsidiaries and commercial arms for a long time. Undoubtedly the arts and culture sector’s trailblazer in this field is Jim Beirne, Chief Executive at Live Theatre in Newcastle. Ten years ago, Jim and the team at Live Theatre drew up plans for four Social Enterprises that had the potential to generate income to support the Theatre’s work. Three of them are now up and running – a gastro-pub (recently awarded a Michelin guide Bib Gourmand), a website providing paid-for training and advice for playwrights and an incubator space for Small-Medium creative businesses. The gastro-pub alone generates enough income to sponsor one Live Theatre production each year, with staff posts and education work also supported by their current Social Enterprise programme.
The fourth (and most daring) scheme, Live Works, is due to open this summer –a £10million development on the Quayside comprising commercial office space, a public park and a writing centre for young people. The plan is that the new enterprise, along with the three existing schemes will generate over £500,000 each year for the Theatre and, given their successful track record to date, you wouldn’t bet against them achieving that.
So there is clearly potential for arts organisations taking a Social Enterprise approach. However, it relies on your organisation having a number of skills and resources, not least:
Time: As I mentioned, Live Theatre first started planning their four Social Enterprises ten years ago. This might be an extreme example, but setting up a Social Enterprise is unlikely to be an option if you are looking for a quick win. Even smaller projects take time to carefully plan and to develop before you start seeing a return.
(Social Investment has a quicker turnaround, at least when it comes to taking a bond to market. However, there is a lot of work that needs to be done first. In particular, most Social Investors will need detailed business plans so there is a lot of groundwork to do before you can apply.)
Opportunity: Having said you need time, a number of Social Enterprises have come about because an opportunity presented itself. For example, Tyneside Cinema (yes, Newcastle again!) were able to take advantage of a shop unit becoming available underneath their building, buying the space and turning it into a profit-making bar.
Initial capital: As with almost any profit making company they also take investment. Social Investment is an obvious source of funding for Social Enterprises and the Arts Impact Fund is one example. More traditional funders, such as the Esmée Fairbairn Foundation, are also taking a keen interest in this model.
However, when I spoke to Jim Beirne recently he was keen to stress the importance of having a mixed funding model – you need both Social Investment and grant support with one leveraging the other. For that reason it is reassuring to hear Peter Bazalgette acknowledge that ACE’s interest in Social Investment is complementary to, rather than a replacement for, grant support.
Entrepreneurship – The arts sector is full of creative, innovative people doing creative, innovative things. The people that will really make an impact in this space are the people that are able to really think outside the box (or, if you have to think in a box, make sure it is Ansoff 4!). For some funders or investors you might get bonus points if you can make your Social Enterprise also fit with your organisation’s key mission (as with Live Theatre’s playwriting website), although this is not a requirement.
Social Enterprises aren’t without their risk. Perhaps the irony of the timing of Peter Bazalgette’s article hasn’t been lost on the staff at the Arches in Glasgow. It came the day after the venue announced it was going into administration. The venue’s funding model included over 50% of their income coming from running club nights. When the licensing board curtailed it’s licensed hours the Board was left with no choice but to close. While you may feel that the Arches aren’t strictly a Social Enterprise, it does serve to highlight the challenges and red tape associated with running a commercial business.
Social Investment and Social Enterprise models won’t be appropriate for everybody. But while this is certainly not the silver bullet many organisations will be hoping for there is certainly potential here and it is clear to see why ACE are taking this seriously. In particular, Social Investment and Social Enterprise are unlikely to be affected by the perceived London v Regional imbalance – in fact, it seems to me that organisations in smaller towns and cities are at an advantage here.
Similarly, while bigger organisations might have the time and resource available to develop this, I think it will be the smaller organisations that are flexible enough to respond to this opportunity.
The line that stood out for me most in Peter Bazalgette’s article was his recognition of the “flair and commercial nous” that the arts and culture sector has shown in responding to continued reductions in ACE and local authority funding. This is undoubtedly true. For that reason, I can’t wait to see what exciting initiatives emerge from the first round of funding from the Arts Impact Fund.
(Live Theatre aren’t the only people working in this space. I’d love to hear your examples of organisations using innovative Social Investment and Social Enterprise models – my contact details are below!)
Fundraising Consultant, The Management Centre (=mc)
Co-Leader, The National Arts Fundraising School