The New Economy and What it Holds for Social Enterprise

and Social Firms in Particular

Rodney Schwartz

Chief Executive, ClearlySo

Manchester, 14 July 2009

A Bit About My BackgroundFinancial Sector and Investment

Social Investment

2009

1999

1980

2009

1999

1980

Social Enterprise & Investment Experience

• Founder of Catalyst Fund Management & Research, a venture capital firm focused on social businesses

• CEO of ClearlySo–the first marketplace for social business & enterprise, commerce & investment

• Advisor/Non-Executive Director at several firms including:– Ethical Property Company (Non-Executive Director)– The Green Thing (Chair)– HCT Group (Advisor)– PST 2020 (Trustee—behind the 2020 Commission on Public Services)– Justgiving.com (previous Chair)– Shelter (previous Chair)

• Lecture on Social Finance at Oxford’s Said Business School • Regular columns in social enterprise magazines & sites

Structure of Today’s Discussion

• Cursory analysis of the current economic and financial situation

• Recent developments and issues in social investment• The case for the emergence of a new Social Economy

from the ashes of the old one• What a Social Economy might look like?• How Social Enterprise in general and Social Firms in

particular might feature in this Social Economy?• Possible constraints

One Man’s Analysis of the Current Economic and Financial Situation

• A complete meltdown of the financial system • Crisis deferred at an estimated cost of $3 trillion—some

say much more• The full impact will be realised over the next 20 years—

seems unlikely to be paid for by the banks (this can be euphemistically described as a “negative externality”)

• The choices we will need to make in the coming decades will be profound, painful and unavoidable

• The current economic slowdown is not cyclical, but represents a discontinuity—really fixing it requires systemic changes

Developments in Social Investment:The UK Picture

• The attraction, growth and futility of Socially Responsible Investment (SRI)

• Microfinance and Cleantech (and selected themes) have boomed and become part of the investment mainstream

• Impact/social Investment (II) has entered the lexicon, as have “ethical shares”

• Government sponsored/backed II funds and companies have reached a sort of maturity (Bridges, Unltd, NESTA, Venturesome, Futurebuilders)

• Independent firms are attempting to gain traction (WHEB Ventures, Impax, Catalyst)

Developments in Social Investment:Emerging Issues in the UK

• Measurement of social “impact”• Sources of funding—Government;

hopefully transitioning to foundations, financial institutions, HNWIs or even individual investors

• “Crowdfunding”• Liquidity• The supply and demand (im)balance

Developments in Social Investment:Some Interesting International Cases

• Global Federation of Social Stock Exchanges• Rockefeller’s Global Impact Investment Network• Renewal Partners’ (Canada) first fund close• Developments spreading across the globe—much

more on the continent than we realise (e.g. the Global Economic Symposium in Germany)

• Surging interest in the sector (the press, business schools, other graduates, conferences, the wealthy, politicians)

The Case for a “Social Economy”

• Consumer preferences have profoundly shifted, as:• Product and service purchasers• Voters (who are incredibly angry)• Employees (existing and prospective)• Investors

• The mainstream investment area has been…disappointing• Successful UK social/high impact businesses emerging

• The Body Shop• Justgiving.com• Organix• The Ethical Property Company

• The early phase of the impact of social networking

What a “Social Economy” Might Look Like

• Success measured in financial/risk and social/ethical/environmental terms

• Investment takes place across a 3D horizon• Far greater variety of financial instruments to

fund more diverse organisational aspirations• A “tilt” in the tax code to reflect externalities• Smaller involvement on the part of Government• Some fundamental changes in “our” democracy

What Could be the Role for Social Enterprisesin this New Social Economy?

• Source of products and services for an increasingly social consumer body

• As a new investment possibility for a growing body of more socially-minded investors

• Beneficiaries of a tax code which may become more tilted

• Laboratories for experimentation given their greater latitude on funding

• More interesting and rewarding places to work

How Social Firms Might Feature:Social Firms’ Market Position (and the SFUK)

• Robust growth since the late 1990s; up to 274 members and more than doubling in the last five years

• A strong history therefore, in a newish sector, with European (ISFA, CEFEC) and international links

• A considerable profile, built over years , that could be further developed

• A diverse sector meeting a range of vital client needs• Broadly spread across the UK • Offering vital services:

– For the disabled (jobs, training and empowerment)– For society– For the economy (especially now)

How Social Firms Might Feature:Some Strategic Issues for the Sector

• Still a small sector with relatively small players• Funding uncertainty stemming from the

current fiscal predicament (for those receiving Government and Foundation funds)

• Some confusion due to social enterprise “buzzwordism”

• Mixed attitudes from those dealing with Social Firms specifically and the disabled generally

How Social Firms Might Feature:Some Modest Suggestions from an Outsider

• Consider mergers to achieve scale• Reduce your dependence on Government sources of funding

and increase those which come from trading with individuals and the corporate sector

• Embarrass Government for favouring big over smaller firms, businesses over people and the advantaged over the disadvantaged

• Focus on tapping into a broader array of sources of capital—explore crowdfunding and other means

• Leverage your social orientation—its now fashionable • Increase your profile, by leveraging modern media platforms

—its called social networking for a reason

ii

ClearlySo has built a marketplace, which is designed to assist firms like yours…

Vendors Investors

Social Enterprises

...and we invite you to join it! There are handouts at the back.

Social Firms UK Members Already Present on ClearlySo

• Bioregional• Charity Bank (Member)• Decoda• Forth Sector (Vendor)• Fuse Jobs (Vendor)• Mow and Grow (“Speed Dating” Investee

and Member)

Thank You

rod@clearlyso.com