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

SiG@Waterloosgeobey@uwaterloo.ca

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

SiG@Waterloosgeobey@uwaterloo.ca