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Strasbourg Conference on Social Entrepreneurship
Social Entrepreneurs: Have your say!
January 2014
European Social
Investment Market
Dr. Wolfgang Spiess-Knafl
Civil Society Center (CiSoC)
Zeppelin University
Selected results of the ex-ante evaluation on “Imperfections in the Social
Investment Market and options on how to address them”
for the European Commission
The Financing of Social Enterprises
What is different?
2
Source: Spiess-Knafl (2012)
Jan 16-17th, 2014
The Financing of Social Enterprises
What else is different?
Financing Structure
Can the social enterprise repay the investment after a
few years?
No
Yes
Can the social enterprise pay a certain sum
(interest, dividend) in each year?
Yes
No
Donations
3
Equity
Capital
(„Patient
Capital“)
Can the social enterprise pay a certain sum
(interest, dividend) in each year?
Nonrepayable
Hybrid
Capital
Equity
Capital
Source: Achleitner, Spiess-Knafl, Heinecke, Schöning & Noble (2011)
No
Debt Capital
(Interest-free
loans)
Yes
Repayable
Hybrid
Capital
Debt Capital
Jan 16-17th, 2014
Mezzanine
Capital
Social Investment Market
There is already a (small) Ecosystem
4
Institutions in the
Traditional Capital
Markets
Institutions in the
Social Capital
Markets
Commercial Banks
Value Banks
Investment Banks
Social Investment
Advisers
Stock Exchanges
Social Stock
Exchanges
Venture Capital
Funds
Venture Philanthropy
Funds
Investment Funds
Social Investment
Funds
Research & Rating
Agencies
Funding
Consultancies
Source: Spiess-Knafl (2012)
Jan 16-17th, 2014
Who are the actors?
Venture Philanthropy Funds (Selection)
Fund
Country
Assets
Selected Investments
Ilses weite Welt
Germany
€ 15.7m
UK
£ 300m
Rock your life
Parlamentwatch
Auto 22
Cloud.iq
Historic futures
Abakus
NL
n.a.
Autest
Loco Tender
Concordia
Italy
€ 10m
Fraterniti Sistema
Personal Energy
Ecodair
France
€ 5.5m
Ethical Property
Fonciere Chenelet
5
Source: Spiess-Knafl & Jansen (2013)
Jan 16-17th, 2014
Who are the actors?
Value Banks (Selection)
Bank
Country
Assets (in billion Euros)
Alternative Bank Switzerland
Switzerland
1.0
Banca Popolare Etica
Italy
1.0
Crédit Coopératif
France
14.9
Cultura Bank
Norway
0.1
Ecology Building Society
UK
0.1
GLS Bank
Germany
2.7
Merkur Cooperative Bank
Denmark
0.3
Triodos Bank
Netherlands
5.3
Total
6
Source: Spiess-Knafl & Jansen (2013) based on data of the Global Alliance of Banking on Values
25.4
Jan 16-17th, 2014
Who are the actors?
Crowdfunding Platforms
452 Crowdsourcing
Platforms worldwide
USD 1.5bn
raised
> 1mn campaigns in
2011
Thereof > 650,000 in
Europe
Types of Platforms
Equity-based
Lending-based
Reward-based
Donation-based
|
66% of donation-based and reward-based project generate less than USD 5,000
|
80% of equity and lending-based projects raise above USD 25,000
7
Source: Crowdsourcing (2012)
Jan 16-17th, 2014
Social Finance
Background
Missing link between
return and risk
| No relationship between risk and return as in “classical investments”
| Trade-off between financial and social returns
| Typically, internal financing is preferred to debt to equity investments
Missing pecking order
Divergent return
expectations
8
| Grant as a “cheap funding source” changes things
| Investors might have different return expectations
| Conflicts can arise concerning the overall strategy of the social enterprise
Source: Spiess-Knafl & Jansen (2013)
Jan 16-17th, 2014
Social Investment Market
What could be better?
Missing secondary market for
equity investments
Missmatch between
sustainable and needed
investment sizes
The matching of supply and
demand
| No secondary market for equity investments (yet) for a number of reasons
| Debt capital is widely used
| Funds need to reach a certain size to become sustainable
| Few social enterprises need large investments (at the moment)
| Long way to access finance for social enterprises
| Lack of “investment readiness”
| Funding is often based on single financing period of 3-7 years
Lifecycle cooperation
| Little cooperation between different social capital market participants
9
Source: Spiess-Knafl & Jansen (2013)
Jan 16-17th, 2014
Social Investment Market
Key Recommendations
1.
Increase the capital base (direct investment and signaling effect)
2.
Facilitate lending for social enterprises by reducing the risk for capital providers
3.
Support capacity building in the social investment market
10
Source: Spiess-Knafl & Jansen (2013)
Jan 16-17th, 2014
Dr. Wolfgang Spiess-Knafl
Civil Society Center (CiSoC)
Zeppelin University Friedrichshafen
Am Seemooser Horn 20
88045 Friedrichshafen