The sector needs a big financial player to bring transforming ideas to life

I started working in the sector almost exactly two years ago. In the very first week, I was struck by the passion and inventiveness of the people I met, and by the amazing effect of their work on the people that they help. In my first week, I visited three organisations across the country - a childcare centre run by a lady with a relentless determination that I will never forget, an unbelievably dynamic community enterprise whose activities range for employing and training local people to growing potatoes and a charity based in an old Victorian school that brought light to some of Sheffield’s most disadvantaged people.

But as quickly as I was touched by many of the organisations that we support, I became worried about how financially and organisationally weak, and therefore precarious, many of them are. And of course when third sector organisations fail, the people who really suffer are those who are no longer helped. The Adventure Capital Fund, one of the companies I run, combines money and expertise to build the capacity and sustainability of the third sector.

This offers a genuine remedy to these issues. However, two years ago, with only £15m to invest, we could only help a handful of organisations. It was obvious that we needed to support and finance far more third sector organisations – help thousands of them become financially strong and organisationally healthy so they can deliver changing and innovative services for the long term. But to help this many organisations, we knew we had to grow to build a big and powerful financial organisation that could make a difference to the sector as a whole.

Now, why is it important to be big? Why big and powerful, when they are such difficult concepts for the sector? Well, we think that we will only be able to make stuff happen at any sort of meaningful level if we are big. The third sector is full of brilliant ideas. What it lacks, certainly in the area of finance is an organisation that can bring some of these brilliant ideas to scale quickly.

That was two years ago, and many thousands of pages of terribly demanding and frankly, often quite irksome tender writing later, we come to the next chapter in this story. We are now big. In just two years we have grown from managing that £15m to managing a range of funds - ACF (the original fund) – a £15m fund to invest in community enterprise, Futurebuilders – a £215m fund to help third sector organisations win public sector contracts, the Social Enterprise Investment Fund (SEIF) – a £100m fund to help social enterprises deliver health and social care outcomes which we deliver with Partnerships UK, the Modernisation Fund – of which we deliver the £9.5m loan element, and most recently Communitybuilders - a £70m fund to develop community anchors delivered with the Community Alliance. In total these funds add up to £409m. They remain with their own distinct rules and individual criteria, but in essence involve investing in individual third sector organisations to help them do more good, in better ways, for the long term.

So now the story is up to date. What we have done now is to bring them under the umbrella of a single name – The Social Investment Business. The new business has four goals:

Goal 1 - bring billions of pounds into the sector. Everyone accepts that the sector lacks capital. New money must come in. This money cannot only come from Government for government money has its own requirements and can come and can go. So, we will try and bring it in from a variety of sources. A key part of this will be to make social investment, by which I mean investment for a financial as well as a social return, a mainstream activity. What is the goal? Well for everyone who invests £10, £1 goes into a form of social investment. An ambitious goal, but a goal that would produce enormous social good.

Goal 2 – help create large-scale third sector delivery. Why? Well, clearly we hope that third sector delivery will produce excellent outcomes. But the reasons go beyond this. Large third sector organisations could strengthen the sector’s strategic discussions with Government about its role, discussions that the private sector is so adept at having, a conversation that is crucial because spending cuts are coming. This a conversation we should be having right now. We should welcome, not be scared of, a set of organisations that can help do this. In a £120bn industry, there need to be large service deliverers having these strategic discussions with key commissioners.

Now, the need for large third sector delivery goes beyond simply excellent delivery and influence – there is another reason for creating a new generation of large, exciting and well known socially driven businesses. Beyond what they actually do it is important to have organisations that represent this movement in the public eye so that public can become excited about this type of enterprise, and when they come to their investment decisions, turn this excitement into investment into these type of organisations. Put simply, we must make the public at large excited about a new generation of socially driven enterprises.

Goal 3 - invest the money that we manage well into thousands of organisations so that thousands of lives are improved. Our core activity is investing into third sector organisations. We need to show how to do it well, at scale so that other funders will be increasingly attracted to follow.

Goal 4 – the sector is awash with innovative ideas that just need to be made real to make the sector financially stronger. For example social impact bonds as promoted by Social Finance, a Social Stock exchange etc. These and other ideas cannot remain simply as ideas. With our clout and money we will bring transforming ideas to the mainstream. 3SC - third sector consortium - is a good example of an idea that could not have been brought to life but through our involvement. Many of you have told me that you are worried by the move to fewer, larger contracts, and the fact that the prime contractors who tender for these contract are mainly private companies. You are worried that we, the third sector will become merely a sub contractor with small fees to fix intractable problems, little scope to build our own capacity and no ability to influence policy in areas in which we are expert. In response to, and to prevent this, we set up 3sc with the brilliant Eastside Consulting to bid for these large contracts for the third sector. 3SC is now a company into which 5 other partners have come – the National Youth Agency, CLINKS, QED, WELL UK and Sadeh Loh Housing Group.

This is not a new idea – the idea exists abroad, and people in the UK have been suggesting it for a long time, but no one had got it off the ground because no one had the scale or influence to make it happen. Putting The Social Investment Business’ shoulder behind it has meant that in the first month of its existence, the first day actually, it won the largest Future Jobs Fund single contract worth £20m, and it aims, and is in the process of trying to win billions of pounds of more contracts that would be exclusively delivered by the third sector.

A big ambition then, and an ambition that if realised will help do more, for more people, for longer, but an ambition that will not happen if we don’t work well with you. If there is one thing I want you to remember from this it is that we cannot do this without you. 300 organisations signed up to supply services to 3SC. 11 partners came forward to be part of 3SC. Without this participation, the idea and the contract would not exist.

In finishing, we will bring in more money, create large scale third sector delivery, invest our funds well and bring to life transforming ideas. I urge you to work with us to make this happen.

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