Social Enterprise Incubator Looks to Impact Investment

A newly-launched incubator program wants to move the social enterprise sector away from grants and government funding to a private and impact investment model.

The Two Feet program, the brainchild of The Difference Incubator (TDi), is geared towards social and environmentally-focused startups who want to become sustainable and investment ready. The program will have two cohorts in Melbourne and one each in Sydney and Brisbane.

TDi co-founder and CEO Bessi Graham said their pilot program, which ran in October 2010, was set-up to understand how to support enterprises to stand on their own feet.

She acknowledged the role of philanthropy and government in engaging the social sector, but said it wasn’t enough to address social challenges.

“We are absolutely passionately backing the role for philanthropy and the role for government to engage the social sector. There is a place for that,” Graham said.

“The reality of the market in Australia, in both impact investment and social enterprise, is that we have quite an immature market.

“Our argument is that shrinking pools of that type of capital, government and philanthropy, is a shrinking bucket of funding for a massively expanding stack of challenges and social issues that we are trying to address.

“We want to see organisations where there is an opportunity to build a commercial business model. We want to help develop those and move those organisations away from grant reliance that freeze up grant money, either through development or because of the issues they are addressing.”

Graham said investable social enterprises had three main components: a social and environmental mission at the core of their organisation, a business model that demonstrates their commercial viability, and a management team that has the right governance structures in place to deliver the aims of the mission based on the model.

She said social enterprises could address a range of issues across society and underscored the importance of social innovation.

“Social innovation is at a much higher order system than most social enterprises are dealing with,” she said.

“At the level of social innovation and the role that social enterprises play in that space, you can have broader issues like housing, aged care, disability, where you need to come up with models that can deliver wonderful outcomes for beneficiaries in a sustainable way.

“On a smaller scale, you have grassroots issues of where you are needing to actually help people feel connected, like issues of isolation that lead to depression, etc.

“Such small case intervention and projects deal with very specific, niche issues through to broader social innovation challenges where you are actually saying: how do I use a business model to address something that not only has a broad impact on society but actually has a massive cost to the public purse because of the issues that are caused by the problem.”

For Graham, the ultimate aim of the Two Feet program is to move the maturity of the market, get more enterprises ready for investment and ensure that every enterprise that is inducted in the program is equipped to build a more sustainable enterprise.

Eligible startups have to pay $5,000 for enrollment into the six-month program, which is sponsored and subsidised by NAB. They will attend 12 fortnightly sessions that discuss the current state of the industry and the tools to create a successful business.

Each cohort will vote for the top two finalists from their group who will then go on to present their ideas to a panel of judges in Melbourne at the end of November.

Successful startups will receive a cash prize and become a member of TDi’s Investment Readiness Program, which provides bespoke one-on-one support to organisations that TDi believes are ready for investment in the next 12 to 18 months.