Landmark social investment fund launches with £4.25m

The ‘equity-like' fund run by mission driven venture capital firm Bridges Ventures, will hope to help grow upto ten social enterprises and also provide an example of how equity-like investment can work for social enterprises.

The launch event will take place at NESTA, the National Endowment for Science, Technology and the Arts, who made the first commitment to the fund and acted as a catalyst for private sector investment. It will also mark the launch of NESTA's social finance strategy.

Other founder partners in the Bridges Social Entrepreneurs Fund include Deutsche Bank, private equity barons Sir Ronald Cohen and Nigel Doughty, Prudential chair Harvey McGrath, the Apax Foundation, Lehman Brothers Foundation Europe, the Generation Foundation, 3i and the Bridges Ventures team themselves, who have allocated funds from their profit share.

The fund will be looking for ambitious social enterprises that are already, or have the potential to be, financially sustainable without grants in regards to revenue.

The social enterprises must have the potential and desire to scale up and at the same time they must have scalable social impact.

The fund is designed to be an ‘evergreen' fund with profits from the successful social enterprises re-invested to fund other social enterprises in the future.

Antony Ross, director of the new fund, said Bridges Ventures would provide hands-on help to five to ten enterprises with the potential to make a social difference.

However, it is also hoping to provide a track record of social and financial returns that will help show that equity-like investment is viable for the sector.

While any returns made by this fund will be re-invested, ultimately the fund hopes to demonstrate the possibility of exit strategies for investors that are linked to repayments from revenue as opposed to the usual equity exit strategy of selling the enterprise.

Bridges Ventures executive director Michele Giddens said the need for equity-like investment for social enterprises had been obvious since Bridges first started investing in businesses based in areas of high deprivation in 2002 but one of the main problems was an exit strategy, as social entrepreneurs are unlikely to want to sell their business.

Sir Ronald Cohen, also founding Chairman of Bridges Ventures and chair of the government's Social Investment Taskforce, said:

‘The development of social enterprises is being held back by a chronic shortage of long-term capital. The launch of the Bridges Social Entrepreneurs Fund is an important development in addressing their long-term investment needs.'

Jonathan Kestenbaum, CEO of NESTA, said: ‘We believe the fund will change the landscape for investment in social enterprises. In particular, the blend of public, private and institutional capital will have radical implications for the field.'

Head of social finance at NESTA Sarah McGeehan said the investment in this fund was the first element of NESTA's social finance strategy that will include support for a variety of different solutions.

She said this was a demonstration fund and Bridges Ventures' track record proved larger funds could result from this initial investment.

NESTA's three-year programme will include, among other things, making cornerstone investments in two new funds in the social finance market, commissioning research to understand the motivations of small investors and commissioning a review of the tax treatment of social investment.

Social enterprises looking for growth capital, and investors interested in supporting the fund, should contact: antony@bridgesventures.com