Social sector urged to wise up to woo angels

SOCIAL enterprises have been warned they need to start “talking business not political correctness” if they want to raise money from investors.

A survey has found that half of Scottish business angels – cash rich individuals who plough their money into start-up companies – would be willing to back third sector enterprises but only if they boost awareness of the investment opportunities available.

The research, undertaken by the University of Edinburgh Business School, found that social enterprises – which bring in income but operate to achieve social aims – are missing a “huge opportunity” to raise funds from potential funders.

The report’s authors, Troy Barnes and Robert Hoermann, said: “A large number of investors were simply not aware that investment opportunities existed in the social enterprise sector. Many investors seemed interested in the idea of investing in social firms, and some even have a personal affiliation or a deep desire to do so. Quite often… investors do no know of the opportunities that are available to them.”

Typically social enterprises rely on income or grants from government or from charitable trusts, but increasingly these funding streams are drying up due to austerity measures.

The report said social firms should tap into existing business angel networks, such as Archangel Informal Investment and Linc Scotland, and submit proposals with business plans in the language that investors – who seek profitable returns – can understand.

“With the right approach, focused on awareness and professional presentation… we see a bright future ahead for social investment in Edinburgh,” the report concluded.

Karen Anderson from the Acquiring Business 4 Good programme, part of Social Firms Scotland, which sponsored the research, said: “The actual results are far more positive than we had expected. We know that the number of social enterprise start-ups which could be eligible for angel investment is very small, but business angels bring ‘smart money’ and this would be a boost to the sector as a whole.”