Ever wondered what might happen if your social enterprise was a real business?

If you’ve ever wondered what might happen if your social enterprise was a real business with real investors. This is what might happen. I don’t think this is what’s technically described as a ‘hostile takeover’ but Call Brittania founder, Karen Darby, certainly received some very forceful advice from Bridges Ventures and Big Issue Invest (BII).

As someone who knows nothing whatsoever about the call centre business, I’m not going question the investors’ judgment – either in pushing Darby out or in investing in the first place – but I think this result should causes us to look again at where big money ‘social investment’ fits into the investment world as a whole.

There’s a couple of telling quotes here:

This, from BII’s director of investments Ed Siegel, is probably not intended to be as wryly comical as it comes across: “When BII makes an investment we typically seek an active role in the business – normally as part of a well-functioning board – in order to ensure that the agreed social and financial objectives are achieved. In the vast majority of instances the support and guidance we offer is very welcome.

I struggle to imagine a situation where the ‘advice’ that seems to have been given to Karen Darby in this instance: ‘we think you’re the wrong person for the job, please sod off or we’ll turn off the money taps and your company will go bust’ would be very welcome. As mentioned above, though, that’s not to suggest that I have an informed opinion on whether or not that advice was correct.

Lacking the inadvertent humour but with a clearer message is this from Call Britannia chair Sarah Anderson, one of the non-exec directors who helped to show Darby the door: “People who own businesses who look to other people to risk their money have to take account of what other people say to them, especially after they’ve chosen to recruit people as non-executive directors who have an enormous amount of experience.”

That’s the reality of taking on equity investment from people who aren’t your friends and family.

I certainly sympathise with Karen Darby position as a social entrepreneur who’s had her business taken away from her but – in terms of the bigger picture – the ‘Battle for Call Brittania’ may not be a bad thing for the development of social investment in the UK. It gives social entrepreneurs thinking about taking on (relatively) big money equity stakes a very clear illustration of the reality of the world they’re stepping into. Whether or not this specific decision is the correct one, maybe it’s a sign that our social investment business is growing up.

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4 responses to “Ever wondered what might happen if your social enterprise was a real business?

  1. Pingback: Tweets that mention Ever wondered what might happen if your social enterprise was a real business? « Beanbags and Bullsh!t -- Topsy.com

  2. David, I could claim to know a little of the industry since it spawned from the outsourcing frenzy that began when I was in the IT business of the 1980s. As with most production, the incentive to maximise returns sought cheaper labour overseas. In the wake of the economic crisis, public pressure was on bringing opportunity back to the UK. BT for one began onshoring call centre jobs back fron India. Call Britannia positioned itself to take advantage of this change.

    It was as I understand it, not so much a social enterprise as a business deployed in an economically deprived community to create employment opportunity. I read nothing for example about it re-investing surplus revenue and when announced in the Guardian, they’d taken the rather defensive stance of not allowing public comments.

    Our social enterprise was a business and remains a business, but what we understood from the beginning is that venture capital would dilute the social impact, in that for a relatively small amount of seed capital, one might expect to return a disproportionately large percentage of profit. It was incompatible with our profit-for-purpose ethos then and for the community interest companies which came along with similar dividend limiting principles.

    We’d been seeking seed capital ourselves in 2004 for a business plan to generate £100 million onward investment in social enterprise, via CDFIs. As a guarantee company we’d have nothing to offer the venture capitalists anyway.

    Rather than posting a link I’ll refer you to Axiom news where my colleague and CEO offers a view on limiting dividend distribution to protect social objective. It was written more in the context of the SKS microfinance debate.

    There’s no doubt as far as I’m concerned that a conventional business can be redirected to focus on a social issue, as we have done to create impact in Eastern Europe.

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  3. beanbagsandbullsh1t

    Jeff,

    I think you’re point about the potential for venture capital to dilute social impact is an interesting one.

    Hypothetically, venture capital investment might create problems – as it would for any business social or otherwise – because of the need to generate big profits quickly rather than growing sustainably.

    From the limited information we have, I don’t get the impression that was the issue for Call Brittania – I think the investors thought their actions were necessary to ensure the survival of the company rather than to extract large dividends from it (at least, at this stage).

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  4. Pingback: Call Britannia Bust-up; Social Investment Implications : Social Business Blog

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