As Gordon Brown relaunches the Labour Party, it’s an exciting opportunity to trot out an old social enterprise sector truism. Labour’s mini-manfesto tells us that:
“Over the last decade we have seen providers of development capital moving further away from smaller investments and focusing on larger, leveraged transactions. For example, in 1998 one leading provider invested £908m in 600 companies at an average investment size of £1.5m. By 2007, it was investing £1.5bn in 62 companies with an average investment of £25m. This creates an issue for smaller firms or social enterprises with growth aspirations, especially as conventional bank finance may not match their risk profile and growth aspirations.”
The apparent solution to this problem is a new public-private equity fund. What I’m not clear about – and what is never communicated effectively in sector umbrella group pleas for more social enterprise investment finance – is who these social enterprise are who: (a) are unable to raise either bank loans or conventional investment or loans/investment from one of the many existing social enterprise finance schemes or grants and (b) actually have a business model that’s likely to generate a profit for investors.
What sort of things might these social enterprises be doing? Any suggestions?