Eine Initiative von

FINANCING AGENCY FOR SOCIAL ENTREPRENEURSHIP:CREATING COLLABORATIVE HYBRID FINANCING MODELS FOR SOCIAL ENTERPRISES

Presentation for the OECD Workshop, BrusselsEllinor Schweyer, Co-Founder of FASE GmbH

Munich, February 2016 1

2

$500bnmarket size 2014 (GIIN, 2010)

The market (challenge): capital (not) meeting investees

€50mcurrently committed inimpact investing funds in D

why?Investors are waiting at the end of the pipeline -> early-stage financing gap

350Ashoka Fellows in EUabout 1/3 “investable”

150Ashoka Support Network members in EU, about 1/3 willing to invest

10-15Deals in Germany/yr.

€500k-1m possible deal range for typical impact investing fund

€1bncurrently committed inimpact investing funds in EU (EVPA, 2012)

1700social entrepreneurs in D (CSI Heidelberg, 2013)

3

The mission: closing the ‘strategic financing gap’ with hybrid growth capital

-100 %(grant)

Strategic financing gap- Early stage financing -

„Too large for philanthropists,too small (and risky) for

institutional social investors“

Hybrid financingCombination

of philanthropic capitaland impact „first“ investments

Experimentation Scaling

Early-stage growth Later-stage growth

Market rate return

Start-up

< 50 TEUR

Equity Donations

50 - 250 TEUR > 250 TEUR > 1 Mio. EUR

Multiple financing options

4

The FASE solution: building a bridge between social entrepreneurs and investors

FASE was established as the leading financial intermediary in Germany, supporting social enterprises with outstanding impact in attracting growth capital.

FASE has fuelled an open pipeline of leading, investment-ready social enterprises that are poised for growth: 12 deals closed so far, EUR 4 mn injected.

FASE created an active network of more than 250 philanthropic and impact-oriented investors, incl. the first social business angel club (‚Ashoka Angels‘).

The EU supports FASE with grants to pilot hybrid financing models during 2014/2015.

FASE is setting-up an early-stage co-investment fund to co-invest in social enterprises in Germany/Austria together with lead-investors ( EUR 5,5 mn fund volume)

Major achievements so far: Closed financings to date:

5

Hybrid finance models allow to finance both social enter-prises with and without break-even to scale their impact

Use “classical” financial instru-ments for impact investments Equity Mezzanine (quasi equity) Subordinated loan

Build hybrid model with for-profit and non-profit entity Non-Profit: Grants For-Profit: Equity, mezzanine,

subordinated loan

Use innovative financing tools to internalize external effects Pay-for-success mechanism

(e.g., social impact bond)

Social enterprises with break-even

Financingstrategy

Social enterprises without break-even

6

FASE has developed and tested 7 state-of-the-art financing models

Tailored financing models (part of a hybrid deal structure)•Mezzanine capital with revenue participation and social impact incentive

•Mezzanine capital with profit participation and social impact incentive

•Easy-to-use investment scheme (simplification of mezzanine capital)

Hybrid cooperation models

• Equity donation combined with impact investment

• Crowd investment combined with impact investment

Innovative hybrid financing vehicles

• Non profit financing vehicles

• Early Stage Co-Investment Fund

7

Two international financing cases who have closed their financing needs with FASE

Gregor’s new venture, disAbilityperformance austria (dpa), is the link between commerce and people with disability. The entrepreneurial and social goal is to help companies identifying the potential in disabled people.

Social impact: dpa is the first inter-mediary between companies and disabled people with the aim to identi-fy and use new potential and use it.

Investment need: For the start-up phase in Austria EUR 330k are needed.

Gregor DemblinDisability Performance Austria

Contract with one institutional investor signed (Model 1)

Robert has created a unique social online-network connecting schools with external partners, who offer various external offers to enrich the schooling curriculum.

Social impact: the online market place is free of charge for schools and connects them with companies, cultural institutions, experts and sporting clubs (for example via a virtual pin board) to enhance the learning of students.

Investment need: Setup costs of EUR 450k are needed until break-even.

Robert GreveSchulePlus

Contracts with business angel and twoinstitutional investors signed (Model 1)

Key Findings:proBono Legal advice hashelped to find the right

financial instrument

The clear methodology ofthe transaction processhave been transferred

from Germany to Austria

A local ownership in Austria will be

established in 2016

Capacity building SEs: provide more public funding should be made available to helpmore Social Entreprises become investment ready.

Capacity building Ecosystem: provide public funding to intermediaries like FASE support SEs in raising growth capital.

Direct financing on a deal-by-deal basis: provide grants or guarantees to leverageprivate capital and to enable hybrid deals between -100% and market rate return

Indirect financing via hybrid investment vehicles: provide guarantees or first losscapital to leverage private capital into SE, eg. Co-investment fund

Regulatory framework: establish a supportive regulatory framework to support socialfinance structure eg. Tax incentives, legal structures.

8

Key policy recommendations to developearly-market for social enterprise finance

9

We are looking forward to your feedback!

Ellinor SchweyerManaging Director

Finanzierungsagentur für Social Entrepreneurship GmbHPrinzregentenplatz 1081675 München

Mobil: +49 – 179-5007913Fax: +49 - 3212 - 14 02 672E-Mail: eschweyer@fa-se.de

www.fa-se.de