People Powered Change – UnLtd: Big Venture Challenge
This week we’ve been publishing guest blogs from projects we funded 12 months ago under the banner People Powered Change. Today we hear from UnLtd’s Dan Lehner about their Big Venture Challenge.
A year ago, it was announced that UnLtd would deliver a three-year investment called Big Venture Challenge under BIG’s People Powered Change initiative. Big Venture Challenge (BVC) was designed with three core objectives:
- to support ambitious social entrepreneurs to scale up their impact
- to stimulate the early stage social investment marketplace
- to learn what it takes for social ventures to reach scale.
After months of intensive scouting and filtering we announced the 25 winners in October 2011 – those that we felt had the most potential to deliver impact at scale. Each of the winning entrepreneurs has access to an UnLtd Development Manager to help them diagnose major strategic challenges and to broker access to early-stage finance, business mentoring and powerful connections.
In addition, the BVC winners can apply for £50,000 or £100,000 match funding grants if they attract loan or equity from co-investors. The purpose of the programme, and the match-funding in particular, is to attract new investors to the sector, plugging the gap in early-stage high-risk capital.
So what has happened so far? One of the most pleasing discoveries is the level of interest in the cohort from co-investors who are new to the social venture sector and how quickly they have been drawn to the sector. In the first 6 months:
- Over £1m of co-investment has been lined up by ten of the winners to apply for our match-funding
- 75 percent of this co-investment is from investors who are new to the social venture sector including 13 Angels who have never made a social investment before
- 70 percent of the co-investment is equity and 30 percent is loan
In contrast, during the two years prior to the BVC, UnLtd’s work on investment readiness (via UnLtd Advantage) saw only 8 percent of the money raised for social entrepreneurs as equity and the deals involved no angel investors at all. So we know how hard it is to attract early stage high risk capital.
Whilst this is obviously a tremendous result, it does mean we are already over-subscribed for our match-funding. Of the ten applications for match-funding only six have been approved. This has sometimes led to challenging conversations with investors.
Our biggest challenge now is identifying new sources of match-funding to take advantage of the clear momentum building in our cohort and the wider marketplace.
Thankfully some of our ventures are sourcing investment without the need for match – and others are leveraging in much more investment than just that required for match.
We are learning that there are four key ingredients in our model that are attracting these new investors to invest at an early stage:
- The Filter: Extensive scouting to find high potential social entrepreneurs and rigorous due diligence to select the very best. Our ‘seal of approval’ gives investors confidence in the calibre of the ventures.
- The Support: Intensive, tailored support to prepare the selected social entrepreneurs for growth and investment. We have been proactive in identifying key barriers to growth and have worked together to tackle them.
- The Networks: Introductions to co-investors and strategic partners in public, private and social sector. Networking events and connections to key decision-makers have opened up growth opportunities.
- The Match Funding: A powerful magnet to de-risk investments, attracting new private investors to dip their toes in for the first time.
As the investment deals are closed, the really exciting work begins. Over the three-year programme we will be tracking how the impact delivered by our winners increases in line with their organisational growth – and how our support and the growth capital sourced affects this. We are committed to sharing our ongoing learning with the rest of the sector.
Interim Head of Ventures