1

Social Capital Partners:

Investing in Social Enterprise

St. Michaels College

October 21, 2005

2

1. About Social Capital Partners

2. The Context for Our Work

3. Our Work in Action

4. Roles You Can Play

5. Questions

Agenda

3

Our Mission

Invest in social enterprises that employ people from economically marginalized communities

Enable these organizations to grow and succeed financially

Support these organizations to create improved social and financial outcomes for employees

Catalyze other innovative financing models for social initiatives

About SCP

4

How We Got Started

2000 Bill Young leaves the private sector after 20 years as a successful executive and a successful liquidity event

2001 Bill approaches The Monitor Group to help him develop a strategy to “give back” while still using his business skills

2001 Non-profits and thought leaders from across North America are interviewed to identify areas where SCP can add value

2001 Key tenets of the social enterprise strategy are developed and SCP is “born”

2002 SCP runs a national business plan competition to find its first social enterprise investment – Inner City Renovations

About SCP

5

What We Bring to the Table

30 years of combined experience in the private sector as entrepreneurs, consultants, and senior managers

Strategic partnerships (Monitor Group, RBC Capital Markets)

One of the few Canadian sources of risk capital

Backed by C$10MM in initial funding by the founder

Relationships with regional co-funders

Business Experience /

Expertise

Social Enterprise Expertise

Extensive social enterprise research in Canada and the US

Hands-on social enterprise experience

Hands-on experience with Social Return on Investment

Appropriate Capital

About SCP

6

Our Investment Approach

Using the principles of

venture capital

To invest in high potential social

enterprises

And create a network of successful enterprises

across Canada

That ultimately employ

thousands of people

• Risk capital

• Deep engagement

• Management support

• Growth oriented

• Profitable

• Strong job creation per dollar invested

• Cross pollinate ideas and best practices

• Engage communities

• Make the concept “mainstream”

• Provide a positive alternative to social assistance

• Make long lasting changes in communities

About SCP

7

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

Portfolio Company

ProfitsTarget Employees

Non-Target Employees

Results From Our Portfolio Companies

Portfolio Company Revenue

Target Employees: 260

Total Employees: 400

Portfolio Company Revenue: 10.6M

Portfolio Company Profit: 600k

Individual Portfolio Companies

About SCP

8

Government Funding

Private Investment

Charitable Donations

Context: Traditional Investment Lenses

Social Safety Net Civil Society

Wealth Creation

Blended Outcomes

?

We tend to think of investment through traditional sector-based lenses . . .

9

Context: The Need for Multiple Lenses

Private Investment

Charitable Donations

. . . but innovative solutions to social and economic challenges may exist between these silos

E.g.

• Sustainability and Conservation

• Inner-city economic development

• First Nations economic development

• Affordable housing

Government Funding

10

Joint venture of nonprofit housing corporations in Winnipeg

Renovates run-down housing in the inner city

Employs 10-15 low-income inner city residents, mostly Aboriginal Canadians

Has revitalized dozens of homes and commercial buildings across the Winnipeg inner-city

Generated nearly C$1.5M in business revenue in 2004 / 2005 but is struggling for profitability

. . . and some ground breaking organizations already defy these traditional views

Context: Blended Returns Example

11

Business generates revenue, strives for profitability and services loans

However,

Profitability and returns do not meet typical private investment hurdles

Jobs are provided for those who might otherwise rely on social assistance

However,

Government is reluctant to support an organization that competes within the private sector

Affordable housing is constructed and at-risk individuals receive job training

However,

ICR does not fit the traditional definition of a charity and cannot receive philanthropic gifts

Investment Outcomes Policy Outcomes Charitable Outcomes

However, these organizations often fall between the cracks of traditional financing programs . . .

Context: Blended Returns Example

12

Blended Outcomes

Pure Social

Outcomes

Pure Financial Outcomes

Traditional Charities

Social Enterprises

Traditional

Businesses

In these cases we must set aside traditional lenses and create hybrid financing mechanisms . . .

Context: The Social Capital Market

Hybrid Financing Vehicles are Required

13

Our Work in Action: Renaissance

Chain of second hand stores in Montréal

Operate under the Fripe-Prix name

Mission to integrate difficult to employ into the workforce

C$150k in 5 year subordinated debt at competitive rates

C$150k in equity capital

Payback linked to performance

Seventh store opened in fiscal 2004 with eight planned for fiscal 2005

Expect C$5M in store revenue and 700k in profit for fiscal 2005

200 employees (120 target)

Description Hybrid Investment Results

14

Our Work in Action: Franchising

SCP provides unencumbered capital and business support for franchisee

Franchisor provides its system and expertise

Franchisee hires employees through YMCA job training programs and provides social support programs

Unencumbered capital provided to franchisee who might not otherwise qualify

Payback is linked to business cash flow

Investment covenants include both financial and social requirements

Actively developing partnerships with

o Two Men and a Truck

o Active Green & Ross

o ServiceMaster Clean

Description Hybrid Investment Results

15

And allow . . .

Which creates. . .

Develop . . .

New Risk Capital Vehicles

Social Investors

Entrepreneurial Solutions to Social

Problems

Which encourage . . .

And attracts new . . .

Our Work in Action: Creating a Positive Cycle

Risk taking and Innovation

Greater social returns

16

What Role Can You Play?

Can your CSR strategy include not only charitable giving but also investment in community projects?

– Affordable housing, sustainability projects, etc.

Are there unique ways for your company to connect with community partners?

– Employment or training for those facing employment barriers?

Are there opportunities to procure goods and services from community-based businesses?

– Turnaround Couriers (www.turnaroundcouriers.com)

– Social Purchasing Portal

Sponsorships and donations will always be important but there are other creative ways to make a difference . . .