Social finance in the UK Designing the experience for ventures

The Design Council champions great design. For us that means design which improves lives and makes things better. As an enterprising charity, our work places design at the heart of creating value by stimulating innovation in business and public services, improving our built environment and tackling complex social issues such as ageing and obesity. We inspire new design thinking, encourage public debate and inform government policy to improve everyday life and help meet tomorrow’s challenges today.

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Contents Introduction 5 Discovery phase 6 Research methodology 7 Social venture segmentation and business paths 11 Factors affecting the decision to seek finance 22 Attitudes to risk 23 Attitudes to growth and scale 28 Attitudes to public sector 30 Attitudes to finance 31 Attitudes towards each other 32 Experiences of seeking and accessing social finance 35 Awareness 36 Consideration 39 Application 41 Response 45 Market trends 46 Define phase 48 A design approach for problem framing 49 What’s Next 60 Annex 62

Foreword The Design Council is delighted to have been asked to undertake this work, to uncover the ways in which entrepreneurs discover and access social finance and to identify opportunities for improvement. As an active social funder itself through its Design Challenges programme, the Design Council is passionate about the growth of social entrepreneurship in the UK and equipping innovators of all forms with the tools that they need. Design has long been recognised as a human-centred driver of innovation, using the experience of end-users’ interactions with products, services and systems in order to improve them. While historically focused on commerce – using design to help companies grow – design methods are increasingly being used across a wider range of issues. How might we design better, more efficient public services? How might we design better solutions to the pressing social issues of our time?  A huge amount has been done already to meet the needs of social ventures and the UK is proud to have one of the most vibrant and advanced social enterprise ecosystems in the world. From the Social Incubator Fund that made £10m of match-funding available to those supporting the earliest stage support for new social ventures, to tax relief for Socia l Investment Diversity and a £20m Social Outcomes Fund the supply of social finance has never been stronger. This report therefore looks at the detailed experience of ventures accessing social finance and what holds them back from finding the funding that is right for them, so that all ventures can make the most of the  support that exists. The insights and tools within this report are intended to provide social funders – whether charities, foundations, government agencies, private sector consortia or others –  with understanding and ways to fulfil the un-met needs of ventures that seek social finance in order to adapt and improve their funding products and services accordingly. We hope readers find it useful.

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John Mathers Chief Executive, Design Council

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In the UK we have made great progress in supporting social ventures to strengthen our communities and deliver better public services. Now 15% of SMEs are social, and they employ two million people, contributing £55bn to the national economy. By 2012 £200m was being invested into the social finance market. But it is by no means easy being a social venture. As the social investment market grows we must ensure that its development is shaped by the voices and experiences of everyone involved in it – not just policymakers and investors but also social ventures and entrepreneurs. Nick Hurd MP Minister for Civil Society

We engaged the Design Council to help bring out these voices. The Design Council’s expertise in putting users at the centre of designing systems and services has been invaluable in this research. And it is another leadi