InformOntario:Understanding Social Enterprise for Your OrganizationJune 20, 2014PRESENTED BYSean GeobeyPhD Candidate, Research Manager
Social Enterprise
• Awareness• Practice• Concerns
Production
Returns Savings
Consumption
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General Investments
Production
Return on Investment
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For-profit Investments
Investment
Production
Impact
Social Investments
Social Investment
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Financing and Investment
Investments in real productivity-enhancing capital
• Retained earnings– Direct sales– Third-party sales
• Debt• Equity• Grants/Donations
Retained Earnings: Direct Sales
• Selling goods and services• Beneficiary pays• Savings used to invest• Slow expansion
Retained Earnings: Third-Party Sales
• Beneficiary does not pay– Government, foundation, etc.
• Pay-for-performance contracts• Risk of non-performance• Verification– Measurement– Legal restrictions
Debt
• Loans repaid with interest• Risk of default• Credit:– Character, capacity, capital, collateral, conditions
• “Don’t foreclose on God”
Equity
• Purchase of ownership• Risk of bankruptcy• Exit strategies• Legal restrictions– Co-op– Nonprofit
Grants
• No repayment required• Crowd-out with debt• Risk of non-performance• Reputation– Third-party sales?
Legal forms• Why does legal form matter?
– Formalize stakeholder relationships– Restrict action
• For-profit– Corporation (public/private)– Sole proprietorship, partnership
• Co-operative– Consumer, worker, other producer, multi-stakeholder
• Non-profit• Charitable
– Subset of non-profit• Social enterprise?
Access to CapitalLegal Form For-Profit Co-Op Non-Profit Charity
Equity access High Moderate None None
Debt access High High Limited Limited
Grant access Limited Moderate High High
Direct revenue access High High Moderate Limited
Third-party revenue access Limited Moderate High High
Questions?
Sean GeobeyPhD Candidate, Environment and Resource
StudiesResearch Manager
What is Social Finance?
• Finance with a social and/or environmental return
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Social Finance
• [Investments] made into companies, organizations and funds with the intention to generate measurable social and environmental impact alongside a financial return (Global Impact Investment Network 2012)
• $4.5 billion in Canada (Bragg 2010)
• Comparison:– Canadian assets under management is approximately $3
trillion (source Mobilizing Private Capital for Public Good 2010)
– Total credit union / caisses populaires assets $304 billion (Credit Union Central 2011; Desjardins 2010)
– Donations to charity total $10.6 billion (Turcotte 2012)
Microfinance
• Small loans• 2006 Nobel Peace Prize– Muhammed Yunus & Grameen Bank
• Supports self-employment activities• Profitable in developing world• Coupled with other assistance in Canada
Example: PARO Centre For Women’s Enterprise
• Northern Ontario• Up to $5,000 loans• Multistage microfinance projects• Business coaching and mentorship• Two uses:– As recipient– As funder
Community Bonds
• Debt funding to organization– Can be asset-backed
• Price accessible to community• Market or below-market interest• Issued by bank or credit union
Example: Centre for Social Innovation
• Centre for Social Innovation (Toronto)• Funding new building• CSI had a city-backed loan guarantee
Social Impact Bonds
• Not a bond• Government pay-for-performance• Private financing• Handoff from philanthropy to public funding• Focus on scaling proven interventions• “Bet” between finance and government
Example: Peterborough (UK)
• 2010 UK pilot – Peterborough Prison recidivism– Case management oriented– If reoffending drops 7.5% then payout is 7.5%– If more can increase up to 13.5%– If 7.5% not achieved, no payout
• SIB is not finished yet
Crowdsourcing
• Raising small amount from many people online • Five models– Donation– Reward or perk– Pre-purchase– Peer-to-peer lending– Equity investment
• Regulatory status is challenge
Example: Pebble Watch
• Customizable wristwatch– Electronic watch faces
• University of Waterloo / Palo Alto, CA
• $100,000 goal• $10,266,845 raised• Pledges of $99+ will receive a Pebble watch• Largest Kickstarter campaign to date
Questions?
Sean GeobeyPhD Candidate, Environment and Resource
StudiesMcConnell Fellow