Impact investment benefits

Australia has about 600,000 NFP organisations of all shapes and sizes working to deliver the social, cultural or environmental benefits society clearly needs.

But despite the growing pool of organisations focussed on making a positive impact, few have the capacity to deliver at scale. Many reach a plateau because they cannot find the right advice, support and funding needed to take them to the next level. Meanwhile, there is no shortage of investors actively seeking impact investment opportunities.

For some organisations, impact investment can be a useful tool for innovating, collaborating and delivering better outcomes. An impact investment occurs when an investor provides an NFP organisation or social business with capital it can use to develop a new income stream or expand an existing one.

Must be repaid

Unlike a grant, an impact investment must be repaid. It needs to generate income to the point of a surplus. From establishing a new service to building new premises or delivering a “payment by outcomes” program, impact investing has the potential to play a special and important role.

For an organisation or program to secure an impact investment, it needs to be “investment ready”. This means it needs the capacity and capability to seek and use investment funding. Attributes that help make an organisation investment ready include…

• Business planning and financials: Is your organisation’s business model clear, and can you provide a solid picture of its financial position with forecasts and projections?
• Governance: Do you have clarity around your organisation’s governance structure?
• Management: Does your organisation have the right leadership and team in place to achieve its vision?
• Impact: Is your orgaisation measuring its performance? Can it demonstrate its impact and potential impact with investment?

Different types of support are available to help NFP organisations access the advice they need to become investment ready.

For example, the impact investment-ready growth grant is an initiative of Impact Investing Australia that provides up to $100,000 for NFP organisations or social enterprises to buy specialised capacity-building support from providers to prepare them for securing an impact investment.

The Social Traders’ incubator program The Crunch is for early social enterprises. Through an intensive six-month process, Crunch enterprises build their capacity, develop a rigorous business plan, develop a network of mentor support and gain exposure to social-impact investors.

Case study

Hireup harnesses the power of technology to revolutionise how disabled Australians find, hire and manage their own support workers. Meanwhile, Hireup takes care of the necessary tax and super payments, insurance, payroll, and workplace health and safety requirements.

After six months of consultation and pilot testing, Hireup launched in January last year. With a small team, it needed funding to scale the enterprise, hire staff, improve the technical platform and market the service. Hireup successfully applied for an impact investment-readiness growth grant, which helped pay the legal, accounting and other advisory services needed to prepare the business to raise external capital.

Hireup went on to raise $2.5 million via an impact investment late last year. The funds are helping Hireup scale quickly and in lockstep with the national rollout of the National Disability Insurance Scheme.

This article originally appeared in Third Sector’s print magazine- click here for more information.

Daniel Madhavan, CEO, Impact Investing Australia.

Daniel Madhavan

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