Response to "Time to get the builders in?"

In his blog "Time to get the builders in?" David Floyd of Social Spider CIC discussed some aspects of the Builder Capital model that Robbie Davison and I have talked about in our book, "The Investable Social Entrepreneur". 

We are grateful for David's support and we have added a response to the original blog: 

Robbie and I are pleased to be able to contribute to the debate about how to make social investment more relevant to social enterprise and hope that our work will help to take us at least one step forward towards that goal. 

The example that you quote from the book: no financial return at all for the first 7 years, then a set percentage of the enterprise's revenues paid to the investor each year until year 20 is just one scenario that we show to illustrate how the model might look and work in practice.

As you point out, Builder Capital does not yet exist and so we have not been able to provide actual examples based on real money invested (although the scenarios are based on actual revenues delivered by an existing social enterprise over a 20 year period). While we are clear that Builder Capital investors must be willing to accept only social returns for a number of years before the enterprise is in a position to start making repayments of capital and provide financial returns, the actual length of time for the social return only and total investment periods will be dependent on the circumstances and requirements of the social enterprise and investor and so will be different in each case. 

To be quite clear, this is most definitely long-term (or ultra-patient) risk capital and everyone involved needs to be aware of that, and comfortable with it, right from the outset if the Builder Capital concept is to work. 

In truth, we don't yet know whether there are investors out there who are prepared to invest on these terms because they have not yet had any firm proposals put to them which would enable them to do so. However, we do know that we have been pleasantly surprised by the positive responses we have received when we have been talking about the concept of Builder Capital with potential investors and their advisors. We look forward to developing these ideas to the point at which they can be tested in the market. 

We hope that the events that we are holding will encourage anyone interested in providing Builder Capital to come forward so that we can gauge likely levels of supply and start the process of understanding what does and does not work in terms of duration of investment and return expectations of investors. 

Details of the London event can be found here and more information on Builder Capital is at this link.