Impact Finance Lab 2020

The Impact Finance Lab 2020 prepared the involvement of investment capital into social enterprises in addition to supporting communication and cross-sector collaboration. The program strengthened the strategic thinking and commitment of the participating organisations to the impact assessment also succeeding in transferring and acquiring a business approach. After the program social enterprises continue their activities along an implementation plan. The chance to involve investors in the future is increased by the products developed in the program such as product concepts, pitches, presentations created for investors and business plans. It is also important to mention that the information available about the other sector has also been increased as a result of the cross-sector collaboration. The development of skills required to build and run a social enterprise is another impact of the program.


Changes

Social enterprises designed projects in the program which are suitable for involving investor capital. However, the participants were often uncertain about the feasibility of their ideas. They did not see clearly whether the program they imagined is viable from an investor’s perspective and what steps could lead them to the goal. The Social Finance Initiative managed to eliminate this uncertainty and the participating organisations now typically work along an implementation plan. The successful implementation of the program and the chance to involve investors is increased by the products developed in the program such as product concepts, pitches, presentations created for investors and business plans.

These products could not have been created without strengthening strategic thinking. All these required systemic thinking and revision of organisational objectives, activities and achievements. Strengthening strategic thinking also facilitated more successful business communication.

As a colleague from a social enterprise put it “now we can see what we want and why” and consequently “we have learnt to dare communicate it bravely and specifically”.

In line with strengthening strategic thinking, commitment to impact assessment also became stronger. Some relevant results of the questionnaires filled before and after the program are presented in the following diagram. Although the number of elements is very low (n=4), the data reflect the opinion of all the social enterprises participating in the program. In spite of the low number of elements, the change of averages allow for conclusions regarding the direction of change.

The program had good outcomes in terms of the development of skills. The number of organisations considering themselves as capable of building social enterprises has increased (before: 1 organisation 🡪 after: 3 organisations).  By the end of the program, two organisations assessed that they were completely capable of operating a social enterprise (other two organisations selected “partly” as the answer). None of the organisations was so confident regarding their on skills and knowledge at the beginning of the program.

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Under the Social Finance Initiative stakeholders representing business / investor and NGO values and approach worked together. The information available about the other sector has also been increased as a result of the cross-sector collaboration. This insight made acquiring a business approach easier for social enterprises. The stakeholders understood why business planning allowing for growth is important, what the significance of identifying the problem is, what is required to ensure corporate operation or why thinking about target groups and positioning is important. The organisations and experts from the business sector also contributed to the change of attitudes who supported the participating social enterprises in pro-bono services.

All this contributed to the social enterprises’ understanding what expectations an investor and a sponsored organisation might have towards each other. Some relevant results of the questionnaires filled before and after the program are presented in the following diagram (the questions were answered by all social enterprises participating in the program).


Mechanism of change

The representatives of social enterprises and the suppliers of finance regularly met in the program and the latter supported the process in the role of mentors.

According to the feedbacks, this model was really productive and inspiring.

According to the assessment of social enterprises, stakeholders from the business sector coming from outside and not knowing the given organisation could provide a lot of constructive criticism and suggestions. All this strengthened motivation, involvement and commitment. Representatives of several social enterprises emphasised: the mentors came from the business sector however they were also open to social problems. All this strengthened the legitimation of the mentors

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In order to achieve the social impacts named above, the work culture of social enterprises also had to be developed. Several mentors indicated that the project attitude of participating organisations was strengthened in the Social Finance Initiative; previously not specified tasks and responsibilities were identified, managerial tasks were delegated, deadlines were recorded and persons in charge for the tasks were named in memos of the meeting. All this made working together easier and more successful.

External experts also had to be involved in order to achieve the changes. Experts and companies representing the business sector provided the social enterprises with various and very useful services pro-bono.


Lessons learnt

Although social enterprises joined the program aiming to involve investors, achieving the “investment-ready” level was not a realistic objective of the Social Finance Initiative. According to the mentors supporting the process, it took (too) much time before social enterprises became capable of thinking business-like. Moreover, due to the shortage of time the issue of social impact could not have been sufficiently surveyed - although building this field into the operation of organisations would be indispensable from the perspective of involving investors.

As we previously emphasised: the collaboration of mentors and social enterprises was productive and inspiring. It is also worth mentioning: the different approaches, the shortage of knowledge in social enterprises (e.g. what is an investment, what is a donation, advantages of impact assessment, way of improving capacities, etc.) and the shortage of knowledge in the business sector (e.g. characteristics and difficulties of operation in NGOs), made collaboration more difficult and slowed the fulfilment of specific tasks. In addition to the lack of knowledge, the lack of project attitude and strategic thinking are also worth naming among the impeding factors.

As someone said: “Professional knowledge is missing, what objectives may be set, what is it that can be done and achieved in terms of business and impact. Often there are no examples in front of us, what way, in what time and in what steps can something be achieved."

Some participants thought: the collaboration of social enterprises and the investors supporting them may be hindered by the problem of harmonising economic expectations and social benefit. That is, harm to social objectives may be caused if an investor focuses too much on financial return. According to some social enterprises, it may be another risk if the control of the founder is reduced because of the financial investment resulting in fulfilling the original ideas to a lesser extent.

The model itself, i.e. that social enterprises are mentored by stakeholders from the business sector, proved to be successful. Personal relations were established, cross-sector information flow took place, attitudes were successfully formed and social enterprises made a significant step forward in terms of involving investors and developing business plans.

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