The Triodos Opportunities Fund
a pathfinder social enterprise fund
path·find·er [path-fahyn-der] noun 1. a person who finds or makes a path, way, route, etc., esp. through a previously unexplored or untravelled wilderness.
The Triodos Opportunities Fund (the Fund) is a ground-breaking social enterprise equity fund. It will invest in high impact and commercially sustainable social enterprises and provide expertise to help them grow. The Fund brings together social investors who are looking for meaningful ways to put their money to work with promising social enterprises. Its mission is to deliver social and financial returns to its investors by funding the next generation of pioneering social enterprises.
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Who is the Fund for?
The Fund will consider investing in those social enterprises that are financially and commercially sustainable and have high growth aspirations. The Fund will become a shareholder in the social enterprise and help to provide strategic direction to the management team. Equity investment is capital that is at risk, i.e. there is no certainty of the investor ever realising the investment. This means that it shares in the fortunes of the business, both good and bad. If the social enterprise is successful the Fund will share in that success, both through the social return generated and sharing in the financial return.
The Fund will not be suitable for all social enterprises. Some social enterprises rely more heavily on grants, do not have ambitious growth plans or might be reluctant to share ownership with an outside investor. However, for ambitious and commercially minded social enterprises, the Triodos Opportunities Fund could make an excellent equity partner.
Why does the Fund exist?
Investing in social enterprises is key to help entrepreneurs tackling social and environmental issues to become commercially successful. SMEs generally find it difficult to access growth capital but this equity gap is particularly acute for social enterprises because they are more-than-profit businesses. In the last few years the availability of grant funding and loans aimed at social enterprises has increased, but there are few sources of equity funding for social enterprises. We believe that adequate capitalisation is critical for social enterprises to successfully scale up and that raising equity capital can be a useful mechanism to achieve this.
What kind of investment does the Fund provide?
The Fund will invest significant minority stakes in between seven to 10 social enterprises with a proven business model and the desire to grow. Investment size will generally range from £250k to £750k. The Fund will normally purchase shares in a company limited by shares but might consider other mechanisms through which to invest in those organisations that cannot issue equity.
The Fund will invest across a range of sectors with investee companies likely to be in the fair trade, health and social care, education, social housing and training and employment sectors. For example the Fund might invest in a fair trade business bringing tangible benefits to its suppliers, a company delivering a much needed health service in deprived communities or an organisation set up to deliver sustainable energy to the local community.
Why Triodos Bank?
Triodos has in-depth knowledge of the social enterprise sector in the UK through both lending and capital raising. Triodos Bank has over £60m lent to charities and social enterprises, including the Children’s Scrapstore in Bristol and Pecan in London. Triodos has raised capital for leading social enterprises through share or bond issues for Cafédirect, The Ethical Property Company and Golden Lane Housing, the housing arm of mental health charity, Mencap.
Like most equity investors we normally take a board seat and work with management teams to plug gaps in expertise. But Triodos brings much more to investees with our shared understanding of the challenges that social enterprises face. Triodos Bank has an extensive network of social economy partners that we will use to open doors, make connections, and help our investees succeed.
What we look for in an enterprise
- A clear social and/or environmental mission at the heart of the business model
- A clear group of stakeholders that benefit from the existence of the social enterprise (could be employees, suppliers or the end user of the goods or services)
- A track record of revenue generation (at least annual sales of £400,000)
- A scaleable business model with the ambition to grow significantly
- An outstanding and entrepreneurial management team
- A willingness to share ownership and governance with social investors
- Potential exit routes identifiable at the time of the investment
What the Fund doesn’t do
- Invest in start-ups
- Invest in individuals
- Provide grants
- Invest in ‘nice’ businesses where the social or environmental mission isn’t intrinsic to the business model
- Make loans – though Triodos Bank does – so please get in touch with our Business Banking team, should you wish to enquire about a loan, on freephone 0800 328 0181.
How to apply
If your organisation meets the criteria laid out above and is looking for an equity investor, then please send your business plan to whitni.thomas@triodos.co.uk.
There is no set format that a business plan must be in but it should cover the following:
- Executive summary
- Overview of the business
- Products or services
- Ownership, management and key staff
- Target market
- Analysis of present and future competition
- Marketing and sales
- Operations, suppliers, production
- Social purpose and impact
- Financial projections and funding requirements
The application process
- Stage 1
Submission of business plan
Preliminary review of business plan and initial conversation
We will tell you within 10 days whether we will pursue - Stage 2
In-depth review, follow-up conversations and meetings
Preliminary review by investment committee and go/no go decision - Stage 3
Full due diligence process (where we ask you lots of questions!) and investment structuring discussions
Full investment committee review and approval - Stage 4
Finalisation of investment and completion
The process will take between three and four months from the date of submission of a full business plan.
Frequently Asked Questions
How do you define social enterprise?
Social enterprises are profit making businesses set up to tackle a social or environmental need. They have a clear group of stakeholders who benefit from their existence. We do not define social enterprises according to legal structure but according to the tangible social impact created.
Are Companies Limited by Guarantee and Industrial and Provident Societies precluded from investment by the Fund?
We recognise that many social enterprises will not be set up in a way that enables them to issue equity and that many social enterprises might not be comfortable with the notion of having an outside shareholder invest in the business. This Fund is looking to invest in those social enterprises that see the value in raising capital from a committed social investor. We believe that adequate capitalisation is critical for social enterprises to successfully scale up and that raising equity capital can be a useful tool to employ. We welcome applications from ambitious social enterprises who want to use equity or quasi-equity to grow, regardless of their legal structure.
What do you consider to be an established social enterprise with a proven track record?
There are no set cut-offs but most investees will probably have been trading for at least two years and have a turnover of at least £400k. The business model must be proven and there must be a credible trajectory for how the organisation will reach profitability if it isn’t profitable.
What is the biggest factor that determines whether the Fund will invest?
If the social enterprise meets the Fund criteria and can deliver equity type returns, the most important elements in the decision making process are the management team and the board.
Who are the investors in the Fund and what do they expect from the Fund?
The investors in the Fund are socially motivated individuals and charitable foundations who want to use their money to generate social change in a sustainable way. They expect their money back, along with a healthy financial return and a social return.
Is there a deadline for application?
No, though the Fund expects to be fully invested within the next two years (September 2010).
Who is Triodos Bank?
Triodos Bank was founded in 1980 in The Netherlands. We now have offices in the UK, The Netherlands, Belgium, Spain, and representation in Germany. Triodos Bank is a fully public bank with thousands of customers and shareholders. We only lend to and invest in projects and enterprises which create social and environmental value – in fields such as organic food and farming, renewable energy, social housing, complementary health care, fair trade and social business. We also finance microfinance organisations in developing countries.
Triodos Bank offers a wide range of banking services including savings accounts for individuals and loans, current and investment accounts for social businesses, charities and groups.
Triodos Bank NV is a fully licensed bank, incorporated under the laws of the Netherlands with limited liability, registered in England and Wales (BR3012). Authorised by the Dutch Central Bank (DNB), and regulated by the Financial Services Authority (FSA) for the conduct of UK business.
