What we do

There is increasing interest in impact from VCs, as they see the potential for venture-backed start-ups to make a huge difference to social and environmental issues, while delivering outsized returns. But we believe there are two important gaps. Firstly around connectivity between VCs working on impact, and secondly around impact resources tailored to early-stage venture investment.

To unlock the impact potential of venture capital, and help solve world problems, we need high-quality resources and a community of dedicated VCs.

ImpactVC does this through building a community of leaders within venture capital, including VCs experienced in impact, and top-tier mainstream VCs who are newer to impact. Since launching in February 2023, we now have more than 750 VCs from over 570 firms in the community. The community learns together, shares insights and fosters collaboration to accelerate impact within venture capital. The community also co-develops open-source resources to help venture firms invest effectively for impact – such as the VC Impact Playbook.

Challenge

Many industries are stuck with business models that limit the potential for addressing negative environmental and social impacts and delivering more positive outcomes for people and planet. For such models, improving environmental or social impact performance comes with a significant increase in cost.

Solution

In 2020 BSC invested in Eka Fund I, the largest impact-driven, early-stage, venture capital fund in the UK (£68m), to address the urgent need and opportunity to use the power of science, data and technology to build a better economy. The fund invests in innovative companies that use technology to deliver high growth and profitability in parallel with delivering societal value with a focus on two areas: preventative healthcare and sustainable consumption.

Impact

To date, Eka has invested in 15 innovative companies. Portfolio companies are providing a range of important products and services, from fair and transparent insurance (Urban Jungle) to support to happier and healthier relationships (Paired), and from more sustainable packaging (Sourceful) to cleaner parcel delivery (Hived).

Frontline example

In 2021, Eka invested in Paired, a mobile app designed to improve relationship health. Relationships are an important contributor to health, but there is little help available to couples and therapy is expensive. Paired offers a range of simple tools to help couples build healthy relationships. Their vision is a fully personalised offering that helps couples navigate major transition points, such as having children.

User voice

Having direct and ongoing access to end-user feedback is important for Eka to understand and support its portfolio companies in the best possible way. To make this possible, Eka is automatically scrubbing end-user reviews on Trustpilot for its portfolio companies and feeding them back into its internal team slack channel on a daily basis.

Challenge

As the social sector emerges from Covid-19, charities and social enterprises are facing a new set of challenges. Some have experienced increased demand for their services as a result of the lingering negative social effects of the pandemic and lockdowns and others have had to pivot their business models to cope with the new environment, or refinance borrowing taken on to survive the crisis.

Solution

BSC worked with Social Investment Business (SIB) to establish the £25 million Resilience and Recovery Loan Fund during the early stages of the pandemic. This initiative assisted nearly 80 social sector organisations in sustaining their services. Building on this success, BSC invested in the Recovery Loan Fund (RLF) to ensure continued financial support for these organisations during the recovery phase.

Impact

The RLF, managed by SIB in partnership with several other social lenders, delivers loans backed by the government’s Recovery Loan Scheme to social sector organisations. The wide network of partners ensures that the fund can reach a diverse set of borrowers, while the government guarantee helps keep costs low for borrowers and attracts investors. A grant provided by Access – The Foundation for Social Investment also allows the fund to target Black, Asian and Minoritised Ethnic (BAME[2])-led organisations, and looks to address historical imbalances by offering unrestricted grants, bespoke business support, and reducing eligibility and loan size criteria for the RLF. To date nine out of 33 applications submitted from Black, Asian and Minoritised-Ethnic-led charities and social enterprises have been approved, resulting in £1 million in grants approved.

Frontline example

Contento Social Homes, a Black- and Minoritised Ethnic-led organisation, originally worked with homeless individuals who required refuge and living support. During the pandemic, Contento Social Homes faced a surge in referrals from women seeking refuge from domestic abuse, overwhelming existing capacity within Birmingham centres. The lack of available spaces led to the urgent need for alternative housing solutions.

SIB supported Contento when the opportunity to buy a home came up, with a loan and grant from the RLF. It was also able to purchase a van to transport residents and pay for some vital maintenance.

User voice

SIB prioritises incorporating user input into its decision-making processes. Notably, the Recovery Loan Investment Committee consistently includes either a past customer or a member of the SIB community panel. SIB actively solicits customer feedback during key stages such as funding applications and throughout ongoing relationships, especially when outstanding funding is involved. This qualitative information, coupled with objective data, forms the basis for continuous review and adaptation of funding strategies. An illustrative success of this approach is evident in the case of the RLF, where feedback and data revealed a lack of outreach to BAME-led organisations. In response, SIB introduced the Flexible Finance programme alongside the RLF, significantly increasing investments in such organisations from approximately 4% to around 25%.

Understanding why enterprises take on social lending

Strengthening enterprise resilience and growth continues to form an important part of our investment objectives in this market system. The framework was piloted in 2021/22, and during 2023 we have focused on better understanding why organisations take on social investment, and what they spend the proceeds on.The framework includes data on 501 SPOs across nine fund managers ­– the project is still in the first year of rollout and the sample sizes are therefore limited. As the framework progresses, the sample size will reflect the social lending sector as a whole.

The key insights from the data collected so far indicate that:

- The most common reason SPOs are taking on social investment, is growth and expansion. Given the quick sequence/subsequence of crises, we would have expected a higher rate of organisations taking on investments to bridge lost income streams or support cost-cutting and consolidation. Instead, many investments were used to enable services and products to be created or expanded. Growth through either new or existing product or service continues to be the top two primary purposes of investment. During the pilot 30% of organisations were accessing social investment to grow through existing product or service; this has now increased to 45%.

- Since the pilot we have seen a higher proportion of SPOs leveraging their social investment to acquire fixed assets (property or land). While supporting ongoing operating expenses and human capital (such as hiring new employees) remains a use of proceeds among the SPOs in the data set.

However, there has never been a comprehensive attempt to quantify the value created by SOCs in the UK. This made it difficult to substantiate our claims in conversations with key stakeholders.

As a result, BSC commissioned an independent study by ATQ Consultants to research this. Its findings 'Outcomes for All report' were published in mid-2022 and were launched at an event in Parliament. We have since been working on repeating this analysis on an annual basis, and on refining and improving the underlying methodology by working with other partners in the SOC market.

The analysis, which was conducted on 72 SOCs out of a total 90 in the UK (for which data was available), showed that over £1.4 billion of public value has been created by outcomes achieved to date, at a cost of just under £140 million to commissioners. That means for every £1 that government has spent, a further £10 of public value has been created, nearly £3 of which is fiscal (cash saved and costs avoided). These findings have been referenced in Parliament and have provided a firm evidential base for our engagement work.

Challenge

National and local government is effective in delivering large-scale generalist public services. But for complex areas such as homelessness, traditional public service siloes struggle with tailoring long-term support to individual need. The result is that the individual’s problems can persist and worsen, leaving public services to firefight crises rather than prevent them.

Solution

Bridges Fund Management launched its second fund dedicated to social outcomes contracts, building on the learnings from its first Social Impact Bond Fund. The £35 million Bridges Social Outcomes Fund II (SOF2) backs projects commissioned by local and central government departments, as well as other commissioners, across several policy areas. Individuals using services in these areas often interact with multiple parts of the state; so an approach that uses collaborative design, flexible delivery and clear accountability is crucial to the success of these services. Through Bridges Outcomes Partnerships, SOF2 provides upfront working capital and additional capacity-building resource to delivery partners, providing vital local services in areas such as children’s services and child protection, employment, health and social care, education and homelessness.

Impact

Revenue is fully contracted through the life of the contracts and is conditional upon achieving meaningful, pre-agreed, positive milestones – outcomes – without the constraints of detailed specifications or artificial KPIs. It creates better outcomes and better value for money than traditional public service approaches. So far, SOF2 has supported 25,707 people, many highly vulnerable with complex and overlapping needs, across 25 contracts, delivering £76.6m of short-term value to the UK government.

Frontline example

Bridges Outcomes Partnerships supported local authorities and NHS bodies in Northamptonshire to pioneer a new social prescribing programme called SPRING, which works to create sustained lifestyle changes and improved self-care for people living with long-term health conditions such as diabetes, asthma and heart disease. The programme maps existing community assets and works in collaboration with statutory and community organisations to effectively tailor its support to what will make a real difference for each person. “Link workers” across three experienced delivery partners are delivering services to over 1,000 people so far.

User voice

The partnership gathers feedback from frontline staff, so that they can track progress with participants and identify additional areas of support needed to address health concerns. Early on this process found that a high proportion of participants had acute mental health needs. In response the partnership put together a programme of “first aid mental health training” for staff.

The deep dive brings together a detailed dataset of underlying property information BSC has been collecting across the portfolio alongside external, national and local data sources. This includes data from investments in 16 funds, financing nearly 6,690 homes, which will house over 15,000 of the hardest-pressed people in the UK.

Addressing the structural undersupply: BSC has funded the supply of 4,577 General Needs Affordable homes in the UK, of which 87% are affordable, and 61% are the most affordable tenures (social and affordable rent); 74% of the General Needs Portfolio is in areas of “constrained affordability”[3].

Homes for those in greatest need: Three quarters of the TSH Portfolio is in areas where the incidence of homelessness is above the national average, and 65% of TSH delivery in areas with the highest homelessness pressures, helping tackle the nearly 100,000 households spending each night in temporary accommodation in the UK.

Challenge

At least 200,000 people in the UK live in supported housing. Government figures show that more than 100,000 households, including over 130,000 children, are in temporary accommodation, the highest figure since records began. Many small and medium-sized charities that provide accommodation-based support services struggle to access safe, stable and appropriate housing. This restricts their potential to support disadvantaged individuals and families.

Solution

The Sustainable and Sustainable Housing (SASH) Fund – which was developed by SASC in partnership with social enterprise and charity partners ­– provides lending to charities to purchase safe, affordable accommodation for the people they support.

Impact

SASH I has enabled 20 charities to purchase 445 properties, which are supporting 717 tenants. Tenants are very often those excluded from the mainstream housing market – including those experiencing challenges such as domestic abuse, homelessness or living with disabilities.

Frontline example

Thrive Women’s Aid is a charity that supports women and their children affected by domestic abuse in Neath Port Talbot. Neath Port Talbot faces significant challenges, with elevated levels of deprivation, poverty and disadvantage. Within the county borough, 14 areas rank among the top 10% of the most deprived communities in Wales. The pandemic exacerbated these issues, leading to a 42% surge in referrals for the charity’s adult services.

Thrive Women’s Aid received a loan from the fund to purchase 20 properties in the Neath Port Talbot region, which will serve as safe move-on accommodation, where support services can also be delivered to help women and children rebuild their lives.

User voice

SASC Investment Committee includes two members who are both former CEOs of social sector organisations and bring invaluable insights into beneficiary needs or experiences. As part of their due diligence on a given charity, SASC will conduct first-hand research by speaking to staff, local authority commissioners, charity peers, etc.