Social Capital Partners: Investing in Social Enterprise St. Michaels College October 21, 2005

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Social Capital Partners Investing in Social
EnterpriseSt. Michaels CollegeOctober 21, 2005
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Agenda

1. About Social Capital Partners
2. The Context for Our Work
3. Our Work in Action
4. Roles You Can Play
5. Questions

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Our Mission
About SCP
Invest in social enterprises that employ people
from economically marginalized
communities Enable these organizations to grow
and succeed financially Support these
organizations to create improved social and
financial outcomes for employees Catalyze other
innovative financing models for social
initiatives
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How We Got Started
About SCP
2000 Bill Young leaves the private sector after
20 years as a successful executive and a
successful liquidity event 2001 Bill approaches
The Monitor Group to help him develop a
strategy to give back while still using his
business skills 2001 Non-profits and thought
leaders from across North America are
interviewed to identify areas where SCP can add
value 2001 Key tenets of the social enterprise
strategy are developed and SCP is born 2002
SCP runs a national business plan competition to
find its first social enterprise investment
Inner City Renovations
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What We Bring to the Table
About SCP

• 30 years of combined experience in the private
  sector as entrepreneurs, consultants, and senior
  managers
• Strategic partnerships (Monitor Group, RBC
  Capital Markets)

• Business Experience / Expertise

• Extensive social enterprise research in Canada
  and the US
• Hands-on social enterprise experience
• Hands-on experience with Social Return on
  Investment

• Social Enterprise Expertise

• One of the few Canadian sources of risk capital
• Backed by C10MM in initial funding by the
  founder
• Relationships with regional co-funders

• Appropriate Capital

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Our Investment Approach
About SCP
Using the principles of venture capital
To invest in high potential social enterprises
And create a network of successful enterprises
across Canada
That ultimately employ thousands of people

• Risk capital
• Deep engagement
• Management support

• Growth oriented
• Profitable
• Strong job creation per dollar invested

• Cross pollinate ideas and best practices
• Engage communities
• Make the concept mainstream

• Provide a positive alternative to social
  assistance
• Make long lasting changes in communities

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Results From Our Portfolio Companies
About SCP
Portfolio Company Revenue
Non-Target Employees
Portfolio Company Profits
Target Employees
Individual Portfolio Companies
Target Employees 260 Total Employees 400
Portfolio Company Revenue 10.6M Portfolio
Company Profit 600k
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Context Traditional Investment Lenses
We tend to think of investment through
traditional sector-based lenses . . .
Wealth Creation
Private Investment
?
Blended Outcomes
Government Funding
Charitable Donations
Civil Society
Social Safety Net
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Context The Need for Multiple Lenses
. . . but innovative solutions to social and
economic challenges may exist between these silos

• E.g.
• Sustainability and Conservation

Private Investment

• Inner-city economic development
• First Nations economic development

Charitable Donations
Government Funding

• Affordable housing

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Context Blended Returns Example
. . . and some ground breaking organizations
already defy these traditional views

• Joint venture of nonprofit housing corporations
  in Winnipeg
• Renovates run-down housing in the inner city
• Employs 10-15 low-income inner city residents,
  mostly Aboriginal Canadians
• Has revitalized dozens of homes and commercial
  buildings across the Winnipeg inner-city
• Generated nearly C1.5M in business revenue in
  2004 / 2005 but is struggling for profitability

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Context Blended Returns Example
However, these organizations often fall between
the cracks of traditional financing programs . . .
Investment Outcomes
Policy Outcomes
Charitable Outcomes

• Business generates revenue, strives for
  profitability and services loans
• However,
• Profitability and returns do not meet typical
  private investment hurdles

• Jobs are provided for those who might otherwise
  rely on social assistance
• However,
• Government is reluctant to support an
  organization that competes within the private
  sector

• Affordable housing is constructed and at-risk
  individuals receive job training
• However,
• ICR does not fit the traditional definition of a
  charity and cannot receive philanthropic gifts

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Context The Social Capital Market
In these cases we must set aside traditional
lenses and create hybrid financing mechanisms . .
.
Traditional Businesses
Social Enterprises
Traditional Charities
Blended Outcomes
Pure Social Outcomes
Pure Financial Outcomes
Hybrid Financing Vehicles are Required
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Our Work in Action Renaissance
Description
Hybrid Investment
Results

• Chain of second hand stores in Montréal
• Operate under the Fripe-Prix name
• Mission to integrate difficult to employ into the
  workforce

• C150k in 5 year subordinated debt at competitive
  rates
• C150k in equity capital
• Payback linked to performance

• Seventh store opened in fiscal 2004 with eight
  planned for fiscal 2005
• Expect C5M in store revenue and 700k in profit
  for fiscal 2005
• 200 employees (120 target)

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Our Work in Action Franchising
Description
Hybrid Investment
Results

• SCP provides unencumbered capital and business
  support for franchisee
• Franchisor provides its system and expertise
• Franchisee hires employees through YMCA job
  training programs and provides social support
  programs

• Unencumbered capital provided to franchisee who
  might not otherwise qualify
• Payback is linked to business cash flow
• Investment covenants include both financial and
  social requirements

• Actively developing partnerships with
• Two Men and a Truck
• Active Green Ross
• ServiceMaster Clean

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Our Work in Action Creating a Positive Cycle
And attracts new . . .
Social Investors
Develop . . .
Greater social returns
New Risk Capital Vehicles
Which creates. . .
Which encourage . . .
Risk taking and Innovation

• Entrepreneurial Solutions to Social Problems

And allow . . .
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What Role Can You Play?
Sponsorships and donations will always be
important but there are other creative ways to
make a difference . . .

• Can your CSR strategy include not only charitable
  giving but also investment in community projects?
  
• Affordable housing, sustainability projects, etc.
• Are there unique ways for your company to connect
  with community partners?
• Employment or training for those facing
  employment barriers?
• Are there opportunities to procure goods and
  services from community-based businesses?
• Turnaround Couriers (www.turnaroundcouriers.com)
• Social Purchasing Portal