A new impact investment fund, Impact 12, aims to finance mission-led social ventures coming out of UK universities, for which traditional funding models do not provide high enough levels of support during their early-stage development.
The ten-year fund is being developed by Social Investment Scotland (SIS) in partnership with twelve UK universities to support social ventures developed within those institutions.
It will target investors from alumni networks, family offices and the wider impact investor community seeking to support spin-out ventures motivated by beneficial social or environmental impact, rather than solely by profit.
“The business models these social ventures have just don’t fit what we’ve got around in the ecosystem at the moment,” says Mark Mann, Social Venture Lead at Oxford University Innovation (OUI), who devised the idea for the fund in collaboration with colleagues from Oxford and other universities.
“The financing set up at the moment is aimed at gradual organic growth, whereas we’ve got ventures we know are going to work, but need a few hundred thousand pounds to really get going,” he told Impact Investor. The fund will typically be seeking to make investments in the £150,000-£300,000 range.
Equity and debt mix
Impact 12 will support social ventures with a mixture of financing, including equity investment and debt, in addition to technical assistance and other support.
The fund has an initial fundraising target of £8mn. This will be used to support up to fifteen social ventures across the partner universities, with both seed and follow-on funding and technical assistance provided over the next ten years. More details on its structure will be available when the fund is formally launched around October 2021.
“We have a portfolio of projects, which we’ve put together to give examples of the sorts of things that we will be investing in,” says Mann. More than half of the projects in the portfolio currently originate from Oxford and Cambridge, reflecting the relative size of these institutions compared to the others involved.
He cites Sophia Oxford as one social venture that would benefit from this type of funding. The organisation is partnering with the Oxford Poverty and Human Development Initiative (OPHI) to scale up the use of a set of tools that can be deployed by companies in the developing world to assess poverty levels among their staff and take action to alleviate it, such as improving access to housing finance. The approach was pioneered in Costa Rica with encouraging results and has since been used more widely in Latin America.
“It’s profitable, and it’s also solving social problems. Now it needs to be able to expand to handle the data coming in from all these companies. You need the technical infrastructure in order to be able to deploy the methodology at scale, and that’s what it needs investment for.”
Impact 12 aims to build on increasing interest in impact investing and the development of social enterprise strategies within universities across the UK. Part of its rationale is to mobilise financing to social ventures being developed by regional universities, which can struggle to compete with higher-profile London-based institutions for funding.
By pooling promising projects from smaller universities along with those generated by Oxford and Cambridge, the fund’s creators hope to improve financing flows.
According to fund manager SIS Ventures on its website, “The fund will only be suitable for investors who are professional clients and can be classified as high-net-worth, sophisticated, an investment professional or other suitable exemption.”
SIS says it hopes to benefit from a healthy flow of philanthropic funds into higher education. It points to data from the annual CASE-Ross Support for Education Survey showing new philanthropic funds secured by UK and Irish higher education institutions reached £1.3bn in 2019-20, the third year in a row that new funds secured from philanthropic sources have been higher than £1bn.
OUI is leading the university consortium that is setting up the new impact fund. The other universities involved are Cambridge, Northampton, Coventry and eight universities comprising the MICRA Project (Aston, Birmingham, Cranfield, Keele, Leicester, Loughborough, Nottingham and Warwick).
The MICRA collaborative programme – the Midlands Innovation Commercialisation of Research Accelerator – aims to increase the speed at which innovations developed by research centres in central England can reach markets.