In 2014 we launched the Liverpool City Region Impact Fund. Last year we made the first round of investments . So how did we get on? And what did we learn during the process?
First a recap.
Our aim was to provide loans to charities and social enterprises based in the Liverpool City Region, an area with a growing social economy. We wanted to help more organisations grow and scale up their economic and social impact.
The fund was designed to provide loans of less than £250,000. Research from Social Enterprise UK has shown the demand for loans of this size yet many social investment funds are unable to offer them. We wanted to buck this trend.
We provided £1m for the fund ourselves alongside another £1m from the European Regional Development Fund (ERDF) 2007-13 programme. This was going to be one of the first times that ERDF money had been used for social investment so we were excited to test the approach to see if we could then replicate it in other areas.
So how did we get on? First the good news.
We invested £1.2m in eight charities and social enterprises across the Liverpool City Region. The investments helped them transform their premises, offer more apprenticeships, develop new products and grow their businesses. One of the investments was into the Rare Trust – a performing arts school – who needed to expand their premises. As Michelle Faulkner, Director of the Rare Trust said.
"Without this investment we would not have been able to expand our services…. Working with a social investor who understood what we’re trying to do has really helped us.”
Another success was that we actually invested ERDF money into charities and social enterprises. The fact that the money could be invested shows that this was a model we could replicate in the future.
Unfortunately, it wasn’t all plain sailing.
First, we weren’t able to invest all of the fund. Despite plenty of initial interest we only invested £1.2m of the total £2m. Our initial analysis shows that there were three main reasons for this.
Firstly, despite plenty of initial enquiries many of the organisations who expressed an interest in applying to the fund weren’t quite ready for the type of investment on offer. Secondly, the rules around investing ERDF money meant that a number of key sectors weren’t eligible. As a result, a number of great organisations couldn’t apply. Finally, there were specific timeframes in which we had to set up the fund and invest the money and this meant that there were some deals that just couldn’t be completed in time.
Sadly some of the investments have not been as successful as we’d hoped. As a result of financial difficulties - unconnected with the investment they received - the National Wildflower Centre entered voluntary liquidation seven months after our investment was offered. As a result, their trading subsidiary that we invested into - Landlife Wildflowers - has closed and the majority of the money has now been returned. This was obviously a disappointing outcome and one we would have liked to avoid.
Overall, we set out to provide finance to help charities and social enterprises in the Liverpool City Region to help deliver economic growth and improve people’s lives. To this extent, we’ve done what we set out to do.
However, this was also a pilot fund and the point of a pilot is to learn things. We will be publishing a full lessons learned report later this year where we will expand further on these issues outlined in this blog.
We are also aiming to re-open the fund for a second wave of investments in 2018. If you’re interested in applying, please do get in touch as it’s never too early to start discussing your proposal with us to work out how the fund might work for you.