Accessing social investment is a journey that is unique to each organisation and /or social entrepreneur. In this article, I share the impact social investment has had on the organisation I proudly lead, Micro Rainbow. 

In case you don’t read all the way to the end; it has been life changing. We have used social investment to create the first ever housing scheme for LGBTQI people fleeing persecution. 

About Micro Rainbow

There are more than 60 countries in the world where being yourself is illegal. Several countries impose the death penalty, torture or imprisonment for being LGBTQI. Millions of LGBTQI people have no option but to live under the constant threat of being killed. Only a minority of LGBTQI people can escape those repressive countries and find safety in another country. 

The irony is that for those who decide to come to the UK to seek safety, they are still not safe. Many face violence and abuse in housing from other refugees. As a result, they become or stay homeless. 

We wanted to find a solution. Social investment paved the way.

#1 It is not all about money. Social investors are key too

Our first round of social investment was provided by six social investors in the UK. They are Joseph Rowntree Foundation, Esmée Fairbairn Foundation, Cadbury Trust, Trust for London, Postcode Innovation Trust, and City Bridge Trust. In addition, a senior lender, Charity Bank also contributed £1.5 million. Collectively, they lent Micro Rainbow approximately £4 million. 

That social investment has been used to purchase houses across the UK. Micro Rainbow refurbishes them and transforms them into safe houses for LGBTQI people seeking asylum. Currently, Micro Rainbow has a capacity of over 31,000 bed-nights a year. As a result of the social investment, we have created homes away from home where LGBTQI people can start expressing their LGBTQI identity in safety and while they go through the painstaking process of claiming asylum in the UK.

In our experience, the money is as important as the people giving it to you. I still remember the first time that my colleagues Moud Goba, our National Director, and myself pitched to the group of social investors.

We were sceptical and excited about their potential interest in us and our work. An hour into our meeting, it was obvious that they supported queer people, homeless people, and migrants.  There was no awkward moment. They did not blink at queer stuff. We felt we could be our full selves with them. Our values were aligned.  

When it came to money and the financial model, I will always remember what they said to us, “We are here to help you make this work. We want you to succeed”. 

It still feels emotional to this day. Nobody had ever said that to us. It was almost surreal to think that someone was prepared to back our dreams. Publicly. 

Three years on, our social investors have proven their alignment to our work and values in many ways: they proudly showcase our work, they recommend us to other social investors, they supported us during COVID-19 and the high cost of living crisis, they remain curious about our impact and are genuinely interested in our achievements and challenges. They have become our mentors.

At times when queer people and migrants are increasingly scapegoated in the press and by politicians, it is crucial for us to know that have the unwavering support of our social investors. That they are not going to drop us when the arguments become toxic.

We feel we have gained more than social investment. We have gained people and organisations that are like minded, who are there to celebrate our success and have done so during times of hardship. We know we can turn to them openly and honestly. They are part of our tribe. 

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#2 Embrace scrutiny

Before securing social investment, our investors requested due diligence to be undertaken by an external advisor. 

It was scary. It is never pleasant to have someone to tear your model apart before putting it back together! I remember thinking:

What if they discover our model doesn’t work?
What if they find we aren’t good enough?
What if this amazing project is just in our minds?

Those questions, those fears seemed justified. By the time we reached the due diligence process we had already experienced several failed attempts at finding solutions to the issues raised above and had spent two years of blood sweat and tears trying to create a model that worked.

Obviously we decided to embrace the due diligence process. We opened our books and our hearts to it. We chose to see it as an opportunity to win a seal of approval from a third party who was not emotionally attached. We owed it to our beneficiaries. Instead of thinking “what if it doesn’t work?” we decided to focus on “how wonderful it would be if someone else shared our vision!”

The due diligence process forced us to think even more about our impact and operations. What we found incredibly helpful was to know that our auditor was there to spot any weaknesses and potential threats, not for the sake of it but to make our model stronger.

The due diligence improved our model in several ways. I remember one specifically. We had paid to get advice on a particular mechanism of our income generating model. It turned out the advice was inaccurate and as a result, our income projections were 20% higher than they should have been! 

I remember that day as if it were yesterday. I felt a mixture of feelings: the frustration of having “lost” 20% income, the relief that we had caught the mistake early on and the worry about “where are we going to get that 20% now?!”.

In the end, we were all on the same page: our social investors, our external auditor and all of us at Micro Rainbow.

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#3 Be commercial and diversify.

I enjoy negotiating and yet it was difficult when it came to securing social investment. It was more important to secure a commercially sensible social investment.

I think we were both, lucky and prudent. Some of our social investment was secured at a fixed rate and some at a variable rate. Our fixed interest rate was set when interest rates were almost 0%. At that time 4% felt a lot. A year later we were grateful of having made that decision. The variable part of our social investment requires almost 8%. We also have a small amount of social investment which is interest free. Diversifying the structure of our social investment has been key to edge our risk.

We accessed our social investment during a pandemic, which was followed by high inflation, increased interest rates and high energy bills. As well as facing these financial challenges, the demand for our services increased by 50% putting additional pressure on our team.

Our resilience could not have been tested more.

During these difficult times diversifying our income streams has been as crucial as negotiating the various interest payments of our social investments. The high cost of living and the ever-increasing interest rates had a big dent on our finances, and we needed to find ways to mitigate the changes. As a result:

-    We secured a two-year contract with a local authority to provide services to some LGBTQI refugees in their borough;
-    We launched our training programme which has received CPD accreditation; both activities bring in much needed unrestricted funding;
-    Lastly, we continue to fundraise from trusts and foundations to provide those additional services that are key to our holistic approach to integration but which are not income generating, such as our social inclusion programme.

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We hope that some of our learning proves helpful, especially in inspiring other social enterprises with an LGBTQI mission. As we approach our second round of social investment, we feel that we still have lots to learn. However, the prevailing feeling now is one of excitement. Excitement to scale, to multiply our impact, to have more social investors, to learn from our mistakes and from the challenges the world will bring us.
 

At Good Finance, we'd like to say a huge thank you to Sebastian for sharing his insight and experiences so openly with our users. If you're feeling inspired and are looking to take your next step with exploring social investment, here's a few things that might help...

The 'Is It Right For Us?' tool - take this quick and easy quiz to determine whether or not social investment is a viable option for your organisation. 

The Investor Directory - ready to start looking for social investors? Check out the directory for quick and easy connections to investors aligned with your values...

The Outcomes Matrix - a practical tool to help you to plan, measure and communicate your social impact in terms of Outcomes. 

If you're not looking for social investment right now but it might play a role in your financial toolkit in the future, why not check-out some of our e-Learning programmes to further your understanding of the space and how it works.