SIS Ventures Q&A
Why do SIS believe this is important? What exactly is a mission led business? How do I find out more? These are just a few of the questions we have been asked during the development of SIS Ventures.
More information is available on the SIS Ventures website but this summary should help you understand more.
- SIS Ventures will be a new legal entity and a wholly owned subsidiary of Social Investment Scotland as the parent company.
- The new company will be self-sustaining in its own right.
- The Scottish Government have supported an element of the set up and design costs of this new fund.
- In a significant development for SIS’s governance and operations, the new entity is seeking authorisation by the Financial Conduct Authority (FCA) as a regulated fund manager. This will also facilitate SIS’s broader fundraising programme.
- In the initial fundraising round, SIS Ventures is looking to raise £1.5-2m of investment using both EIS and Social Investment Tax Relief.
- The fund aims to have half of this capital allocated to a debt product for regulated social sector organisations, in line with the conditions of SITR. This will be invested as loans, with patient repayment periods, in asset locked social enterprises who require access to risk capital.
- The remainder of the capital will be invested as equity in mission driven businesses, essentially limited companies with a clear impact intent and mission lock.
- SIS Ventures expects to make around 8-12 investments from the initial capital raised, allocated in line with the available capital.
- SIS Ventures will provide a mechanism to generate both social and financial returns and unlocking a significant amount of untapped capital for the sector.
Questions and Answers:
Q What exactly is a mission driven business?
In 2014 the UK Government created the Social Impact Investment Task Force who usefully defined a mission led business as follows:
“Mission-led businesses place duties on their directors to deliver against this commitment, encouraging confidence amongst socially-minded investors, customers and employees. They also report on their impact, and are transparent on wider environmental, social and governance criteria. What sets them apart from social sector organisations is that profit-with-purpose businesses have no asset lock or restrictions on the distribution of profits, encouraging more commercial investment and thereby allowing for more rapid growth and impact.”
Q What type of investment will be available to these businesses?
SIS Ventures plans to make equity investments in these businesses. SIS Ventures will only make these investments in businesses that have a demonstrable and primary social mission. Before making an investment, SIS will take steps to ‘lock in’ this mission to the business structure, to preserve the achievement of the mission as the business grows. This may include certain provisions within the organisation’s articles and governing documents as well as clauses inserted into the investment agreement.
Mission driven businesses will only be able to access investment from SIS Ventures. The investment policy of all other SIS funds will remain unchanged and require an asset lock.
Q What investment will be available for more conventional models of social enterprise in Scotland?
Over the next 12 months or so, it is expected c. £1m will be available for asset locked social enterprises looking to expand and grow. SIS expects that this will be invested in 4-8 social enterprises as a conventional loan, over a seven year term. Risk capital loans will carry an interest rate of 7-8%, with no repayments in the initial 3 years.
Eligibility criteria for these loans will be consistent with the conditions of SITR e.g. certain sectors will be excluded (such as property investment) and loans will only be available to smaller social enterprises, with less than 500 employees.
Q When will the funds be available?
Organisations are welcome to discuss their business plans with Rob Halliday, SIS Ventures Fund Manager or call 0131 558 7706.
In the meantime SIS has a range of other investment available for social enterprises. For more information see here.