A new fund hits the circuit

The Connect Fund was born this spring. The fourth young fund in the Access Foundation stable, it has slowly found its legs, teetered around the field, and poked its nose into the social investment market. The initial task was to map and consult with many social investment actors to design the new social investment infrastructure fund. We left no stone unturned.

By mid-June, the Connect Fund was ready for its first outing, and debuted to much fanfare. The fund’s stated purpose is to ‘build a better social investment market’ to ensure that small to medium sized charities and social enterprises – that make up the bulk of the social sector – access the right kind of repayable finance to advance their mission.

Dazzling debut with daring debate

A diverse crowd of over 95 people gathered at the Foundry in Vauxhall to hear about the Connect Fund. Its stated objectives are to fill gaps in the architecture of the current social investment market, and to better connect existing voluntary sector infrastructure organisations to social investment.

An engaging debate on the state of social investment took off at the starting gate. Steve Wyler, a trustee of Access, quoted Responsible Finance figures to make the argument that social investment isn’t working. Jeremy Rogers, Chief Investment Officer at Big Society Capital, pointed out that £306m of ‘risk capital’ non-bank investments were made in 2016, including unsecured lending, community shares, charity bonds, social impact bonds, equity and social property funds. David Floyd from Social Spider, followed up with a blog to make sense of it all.

Place your bets

Next up was the first round call for expressions of interest (EOI) for grant funding, which ran from June to early July. This funding window had a focus on collaborative initiatives to address current gaps in social investment market infrastructure. A primary purpose was to promote sharing of tools, data and resources to lower transaction costs; increase diversity and innovation; and facilitate learning and feedback to move social investment forward.

In response, the Connect Fund received 62 applications, for a total request amount of £3.25m and an average grant size of £49,849. Of these, approximately 40 are best suited to the aims of this first round EOI, for a total request amount of £2.4m and an average grant size of £60,927. The remaining 22 proposals are better suited to the second round EOI, with a focus on voluntary sector infrastructure and membership organisations, and will be shifted to this second stage.

Looking strong, but keep an eye out

Comparing the field, the fund generated a strong range of proposals. There was a positive turnout across nine separate themes. These include business development, capacity building, data sharing, diversity, market information, networks, shared resources, skill development and standards/templates. A number of collaborative approaches were put forward, and the message on partnership was clearly received.

A good selection of ideas is in the running. The need for diversity was well recognised. A number of proposals showed promise to build staff teams, expand diversity of demand-side recipients, encourage new entrants to the sector, and widen the leadership pipeline for social investment.

Ideas for reducing transaction costs, sharing resources and enhancing market information were put forward. Proposals to increase regional representation and eliminate geographic cold spots also turned up. Of the 62 proposals we received, 42% were from organisations outside of London.

A few gaps in the line-up remain. One task for the Connect Fund is to identify areas that are missing or might need further development. Initiatives to develop a shared diagnostic tool, common due diligence, and technical skill development for the sector have been discussed but did not make an appearance.

Key to form is to build learning groups for initiatives that share a common theme. Data sharing is a perfect example of how a ‘community of practice’ could achieve added value to ensure that projects are mutually beneficial and non-duplicative. Capacity building initiatives also have the potential to be greater than the sum of the parts. The Connect Fund will seek to host or promote learning partnerships to accelerate solutions to shared challenges and extend collaboration across organisations working on related topics.

The current task is to sift through the 40 first-round grant applications on the basis of 10 different criteria to finalise the shortlist. Applicants will be notified by mid-August if they will progress to the next round. Shortlisted proposals will be asked to submit full grant applications for final investment management committee decisions in mid-November.  

One to watch

Voluntary sector infrastructure and membership bodies should keep an eye out for the second round EOI which will run from 2 October to 5 November 2017. This funding round is designed to foster enterprise-driven initiatives that can connect places or sectors to social investment. A key objective is to extend the reach of social investment by geography, sector, and on an equalities basis to diversify and widen access to new forms of finance. This will take the form of grants for feasibility studies to explore social investment capacity building, brokering, and advice or scoping of social investment programmes.

The Connect Fund will continue to engage with the social investment market to shift the narrative to focus on the funding realities that mission-driven social organisations face. Social investment is one tool for charities and social enterprises to consider as they explore a pathway to generating income and building more financial resilience. Please get in touch if your organisation has good ideas that the Connect Fund could help to support.

By Jessica Brown, Connect Fund Manager, Barrow Cadbury Trust