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The vision of Community development venture capital is to use the methods of venture capital (equity investment and hands-on support to companies) to develop businesses that create jobs, entrepreneurial capacity and wealth, to improve the livelihoods of people on low incomes and to stimulate the economies of disadvantaged communities. This is not the same as venture philanthropy. With community development venture capital, the investors will look for a relatively high rate of return, reflecting the high risk. There are a few current initiatives, but new ventures are being developed all the time.
These investments may be said to be at the high-return end of the spectrum. In that sense such investment is not philanthropic, but for those interested in social redevelopment and who believe that investment in enterprise is a way of building communities, it may be an interesting and new part of a strategic approach to linking investment and support of deprived communities.
The first UK example of this approach is Bridges Community Ventures. It was set up in May 2002 and aims to:
- Invest in ambitious businesses in the most under-invested areas in England;
- Provide hands-on support to help these businesses grow;
- Make a financial return for investors that will attract private sector investors into future funds of this type; and
- Make a difference in communities by creating jobs, stimulating economic growth and fostering entrepreneurs who can become role models of business success.
Bridges Community Ventures is looking to invest in small and medium-size enterprises, which may be start-ups, businesses needing development capital, or management buyouts, that have a strong connection to the local area, with a potential for growth, as long as they:
- are based in electoral wards in England that fall within the most deprived 25%, as defined by the Index of Multiple Deprivation; and
- are small or medium-size, independently-owned businesses.
The funds total £40 million, with 50% committed by the private sector and 50% as matched investment from the Department of Trade and Industry. Funds are invested in businesses in exchange for a stake in the shares of the company. As well as funding, entrepreneurs receive ongoing support and guidance from Bridges Community Ventures and its investors, aiming to achieve the highest possible level of mutual benefit over the long term. Investors in the funds include companies and individuals. Investees may receive further support from the company's Entrepreneurs Club, which comprises over 20 successful entrepreneurs and business people across England, all of whom have invested in the funds.
In June 2005 Bridges Community Ventures completed its first exit, with the acquisition of Harlands of Hull, a specialist self-adhesive label printer, by a trade buyer, the Clondalkin Group for £8.5 million.
Another example of a venture capital business with a social mission is Foursome Investments. Foursome, which is not a CDVC fund, advises its investors on early stage and development capital opportunities in clean-tech and health sector enabling technologies. Founded in 1998, the company has developed from the belief that there is a human and economic dimension to all business activity and that business decisions should be based on looking at both aspects.
© Copyright 2007 Association of Charitable Foundations (ACF)
Every effort has been made to ensure that the information provided in A Guide to Giving is current at the time of publication (October 2005), but the Association of Charitable Foundations (ACF) cannot guarantee its accuracy. Furthermore, there may have been subsequent changes to legislation, policy and/or to tax bands and rates. If you are considering any investment you should seek appropriate professional advice. This guide is not intended to replace professional advice on particular investments or the manner in which tax relief is applied under any scheme, and you should not rely on it for such purposes. You are responsible for your own tax and financial affairs and so should seek independent advice. ACF can not accept responsibility for the investment choices you make.
Views expressed in A Guide to Giving are not necessarily those of Philanthropy UK or the Association of Charitable Foundations.
Coutts & Co is not responsible for the content of A Guide to Giving, and the content does not constitute any advice whatsoever from Coutts & Co. The case studies and profiles within the Guide are not necessarily clients of Coutts & Co. Coutts & Co shall not be liable for any loss whatsoever arising from your reliance on any information produced in the Guide.
