Investing in Europe/United Kingdom

Market Overview

EuropeFor Europe, social enterprise and impact investing are familiar concepts dressed in new terminology. The United Kingdom (UK) and the Netherlands are far ahead of the field followed by Western Europe with a vibrant innovation and entrepreneurship ecosystem, supported by incubators and accelerators, active investors, supportive government bodies, research institutions and intermediaries. However, Europe is not a homogenous region and the stage of the social enterprise investment market differs greatly from country to country.

Opportunities

  • Capital + intermediaries. The terminology and infrastructure around social entrepreneurship is nascent in Central and Eastern Europe, but the field is starting to coalesce around the concept. While the number of investable social enterprises is currently limited in this part of Europe, there is a lot of potential when pairing the large amount of capital searching for impact opportunities with new intermediaries providing support to entrepreneurs.
  • Social entrepreneurship is just entrepreneurship. A recent survey of the start-up landscape found that one in three new enterprises are considered “social” in nature and very few early-stage businesses—social or not—are currently receiving the capital they need. There is opportunity in plugging into the traditional entrepreneurship and innovation infrastructure to create more quality deal flow.
  • Government support for entrepreneurship, particularly in the UK. There are multiple pools of government capital available to help spur early-stage investment. These sources are popping up regularly as the government tries to jumpstart innovation and entrepreneurship, so keep an eye out for new pools of capital available. Three examples are: Angel CoFund. The £50M Angel CoFund was created in November 2011 to invest alongside three or more angel investors for equity investments between £100K and £1M in UK start-ups. The government accepts the same deal terms as the lead investor, reducing complicated negotiations. Investment and Contract Readiness Fund. The £10M, three-year fund provides capital for enterprises to get them investment ready. If entrepreneurs need bridge capital to refine their business model, hire talent, develop a legal structure, etc. this fund will provide that support. Big Society Capital. Utilizing unclaimed assets, the Independent Commission, chaired by Sir Ronald Cohen (known as the “father of social investment” and pioneer in social investment in the UK), established Big Society Capital in 2011 to develop and grow a sustainable market for social investment in the UK.

Leveraging the Network for Efficiency. Johannes Weber of Social Venture Fund recently invested in Auticon, a Germany-based company that provides IT jobs and job skills training to people with Autism. The initiative began as an effort to bring working opportunities for people with Autism to Germany. To achieve this, Weber’s team partnered with Passwerk, a successful Belgium-based company with a similar mission and business plan. Thanks to Passwerk’s expertise and openness, the formation and implementation of Auticon’s business plan did not suffer the same inefficiencies that companies starting independently in new countries face. Auticon did have to tailor its approach to Germany – different European countries have different kinds of governmental regulations and support – and this is often a stumbling block for initiatives that are trying to scale up across countries. However, thanks to an experienced and motivated CEO, the help of Passwerk, and a pareddown business plan, the company is succeeding. Kois Invest recently made an investment in the Social Venture Fund to capitalize the scaling of this enterprise to other cities in Germany. They also are providing necessary expertise and mentorship to help Auticon manage this growth.

Challenges

  • Mismatch between capital and social enterprises. There is a large growth in available capital but few investment-ready opportunities. Currently there is a concentration of mission-first enterprises that are not investment-ready. For example, a five-year old global fund reviewed 60 deals throughout Europe last year and did not invest in any of them. The field needs to develop better business models to absorb the interested funds. Several incubators and accelerators have emerged in response to this need.
  • Pace of deals. The pace of deals similar the the US, however, getting traction with investors can be harder because of the lower density and geographic distance between members of the financial community (not clustered together, don’t know each other before doing the deal). Europeans place a high value on relationship building as a necessary first step to any investment syndication.

Resources

  • Big Society Capital. Government-sponsored investment bank established to develop a sustainable social market in the UK, invests in social investment finance intermediaries. http://www.bigsocietycapital.com/
  • Bridges Ventures. Specialist fund manager dedicated to using an impact-driven investment approach to create superior returns for both investors and society at-large. http://www.bridgesventures.com/
  • ClearlySo. Intermediary providing corporate finance and financial advisory services to social entrepreneurs looking to raise capital. Runs UK-dedicated social angel group Clearly Social Angels. http://www.clearlyso.com/
  • Deutsche Bank Impact Investment Fund. Fund of funds, investing in social investment intermediaries that lend to social enterprises. https://www.db.com/unitedkingdom/content/en/social_investments.html
  • European Venture Philanthropy Association. A membership association made up of organizations interested in or practicing venture philanthropy and social investment across Europe. http://evpa.eu.com/
  • Impact Hub. A global network of people taking action towards a single purpose: impact. http://www.impacthub.net
  • Impact Invest Scandinavia: Angel impact investor group focused on social and ecological businesses. Scandinavia representative of Toniic, LLC. Works with investors in Scandinavia, with investments occurring globally. Based in Stockholm, Sweden. http://www.impactinvest.se/
  • Investment Ready Program. Capacity building social enterprise from Central and Eastern Europe located in Vienna, Austria. http://social-impact.org
  • LGT Venture Philanthropy. Impact investor supporting enterprises with social and environmental impact by providing blended capital, mentoring, and network opportunities. Also offering co-investment or fund investment opportunities. http://www.lgtvp.com/
  • NESsT. A catalyst organization for social enterprises in emerging markets, providing financial capital, training and mentoring, and access to markets for a high-impact entrepreneurs. In Central & Eastern Europe, NESsT works in Croatia, Czech Republic, Hungary, Romania and Slovakia. http://nesst.org/
  • Omidyar Network. A philanthropic investment firm investing in and field building social for and not-for-profit enterprises globally. http://www.omidyar.com
  • Prime Advocates. Legal services and consultancy for social enterprises and impact investors. http://www.primeadvocates.com/
  • Put Your Money Where Your Mouth Is Community (PYMWYMIC). Angel impact investor group and conference in the Netherlands, Belgium and Luxembourg. http://www.pymwymic.com/
  • SE Outreach: A social business program, with majority funding from the Swedish international development agency, focused on early-stage entrepreneurs working in developing and emerging markets. Includes an accelerator program and incubator. A program of Social Entrepreneurship Forum based in Stockholm, Sweden. http://www.se-forum.se/
  • Social Enterprise UK. National body for social enterprises in the UK. Does research, advocates for social enterprises, and supports social entrepreneurs through information, advice and networking. http://www.socialenterprise.org.uk/
  • Social Venture Fund. Impact investor in Germany. http://www.socialventurefund.com
  • Toniic Europe. Toniic is a global network of action-oriented impact investors. https://www.toniic.com

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