Growing interest to interest grown: Is the youth sector ready for social investment?

Date: 31 March 2013

A new report from The Young Foundation working as part of the Catalyst Consortium argues that, whilst much of the youth sector recognises the potential of social investment, many organisations can not yet be considered investment ready.

In their 2011 publication “Growing Interest” The Young Foundation outlined the potential for social investment for the youth sector. This new report summarises the learning from 18 months’ further work with over 350 youth sector organisations. The learning comes from an investment readiness programme The Young Foundation ran for youth sector organisations between October 2011 and March 2013.

The report outlines the challenges for social investment in the youth sector including:

• The need to unlock latent demand. There is a perception that social investment is inappropriate or too risky. Organisations are struggling to see past the associated risk to balance this against the potential upside of achieving sustainability or scaling their impact.

• Rapid pace of change in the external environment. Funding and commissioning practices are changing extremely rapidly at the same time as the overall level of funding for the youth sector is reducing dramatically. Consequently youth sector organisations are struggling to adapt fast enough.

• Scale versus sustainability. There is a mismatch between the kind of social investment available from the market today and the needs of the youth sector. The social investment market is focused largely on development capital to support investees to grow. The demand from the youth sector, however, is mainly for risk capital and transitional funding to allow them to shift from a grant-based business model to a revenue-based model.

The report also makes recommendations as to how social investment can best reach its potential. It asks that commissioners and policy makers involve youth sector organisations in the consultation process for prospective commissioning changes so that they can effectively plan and adapt to change. It recommends that grant funders provide financial and non-financial support for organisations to develop their strategic plans so that they can identify and develop truly sustainable and robust business models. Finally it asks that social investors and intermediaries increase the transparency and publicity surrounding investment transactions and the investment readiness process. Report author Gemma Rocyn Jones, Programme Lead at The Young Foundation said: “There is real potential for social finance to help youth sector organisations increase their impact and sustainability. Unfortunately this does not fill the gap that funding changes have created and a large part of the sector needs financial support to become both investment and contract ready.”

ENDS.

Notes to editors:

1. Contact: Alison Harvie on 07909 912 444 or alison.harvie@youngfoundation.org

2. We are The Young Foundation and we are determined to make positive social change happen. We pioneered the field of social innovation with The Open University, UpRising and Studio Schools. We work closely with individuals, communities and partners building relationships to ensure that our thinking does something, our actions matter and the changes we make together will continue to grow. (www.youngfoundation.org )

3. Catalyst is a consortium of four organisations working with the Department for Education (DfE) as the strategic partner for young people, as part of the Department’s wider transition programme for the sector. Catalyst are working to deliver three key objectives over a two year period. We are strengthening the youth sector market, equipping the sector to work in partnership with Government and coordinating a skills development strategy for the youth sector’s workforce.

4. “From Growing Interest to Interest Grown: Is the youth sector ready for social investment?” will be available to download from www.youngfoundation.org