What can social investment do for the arts? Case studies beyond the Arts Impact Fund

Travelling up and down the country in search for investment opportunities, the Arts Impact Fund team hears a lot about the need for case studies to show how social investment can help arts and cultural organisations. We hope that our first eight investments provide some insightful case studies into the role of repayable finance in making organisations more sustainable and impactful.

And while the Arts Impact Fund may be a world-first example of a social investment fund specifically for arts and culture organisations delivering social impact, there are other examples of social investment in the sector. In this post, we’d like to share with you some more case studies from a number of other social investors who lend to arts organisations.

 

Social investment works for all organisations, big or small, charitable or for-profit

Social investment can sometimes be seen as something that only bigger or more commercially-focused organisations can afford. This rests on a misconception that startups and smaller companies, especially non-profit ones, cannot generate the necessary revenue to repay a loan. However, no organisation is too small or too new to take on social investment, as long as loan repayments are affordable and there is a solid business plan in place with a skilled management team to deliver it.

World Beats Music – an organisation engaging professional tutors to deliver high quality music education in primary schools that can’t afford specialist music teachers, was set up thanks to a loan from Fredericks Foundation, a responsible finance provider helping businesses which dont have access to mainstream lending. Its founder, Richard Ashton, used the investment to develop his idea into a business offering that is now an award-winning arts social enterprise (full case study here).

Another example is Miles and Mia Ltd – a publishing company specialising in educational books for children which benefited from a start-up loan and business advice from London Small Business Centre to help get its first book published (full case study here). Although not exactly social investment because the loan is unlikely to have taken into account the social returns of the company, the support came in at a crucial moment to help the company get off the ground. However, as many arts and cultural organisations have a non-profit structure and charitable aims, social investment would likely be more accessible than a regular loan as investors understand and support organisations’ missions and are more open to managing the associated financial risks.  

 

Social investment can be used to scale up and branch out

Most arts managers would know from experience that the success of their work is hard to predict for a variety of reasons; the process of creative production cannot be fully controlled and neither can be audiences’ subjective experience of the final artistic product. Social investment can be used to scale up successful initiatives and make the most out of opportunities to reap commercial success. This can not only boost arts organisations’ bottom line but, as arts and cultural products are essentially public goods, can also help them engage with a larger number of people, ultimately increasing their benefit to society.

Theatre companies such as Headlong, Almeida, 1927 Productions and Young Vic, among others, have taken advantage of social investment to scale up selected productions and take them to London’s West End. For this, they received support from  Esmee Fairbairn Foundation’s Arts Transfer Fund, which helps theatre productions transfer from the subsidised to the commercial sector (see all investments here).

The International Guitar Foundation also used social investment to scale up albeit in a slightly different way. The company borrowed from Charities Aid Foundation’s investment arm, CAF Venturesome, to launch two new events in 2014 – a guitar summit and a summer school, making their cultural offer to the community richer and more diverse (full case study here).

 

Social investment can help arts and cultural organisations through a difficult period

One of social investment’s key strengths is that it is not only project-based or supporting new activities, it is unrestricted funding. It can cover gaps until a grant is paid in or help organisations that find themselves strained as a result of funding cuts.

Pressured by reductions in their public funding, Bedford Creative Arts – an arts venue with a varied  artistic and educational programme, and Headliners UK – a charity that supports the development of young people through journalism, were among those who looked for support with going through periods of transition. Short-term financial difficulties can often put organisations on a downward spiral since they cause damage to the organisations’ capacity to think and plan in the long-term, making it harder to recover. Taking a loan from CAF Venturesome gave both charities much needed breathing space to reorganise their business models and avoid cashflow shortages that could have had a negative impact on their ability to carry on with core activities (read full case studies here for Bedford Creative Arts and here for Headliners).

 

There are other success stories of arts and cultural organisations using social investment. Although until recently this type of finance was not directly targeted at the cultural sector, it is reassuring to come across so many examples of organisations moving ahead of trends and trailblazing in new territories. Their number and diversity lifted our spirits as we get ready to leave our offices behind for the Christmas period and motivated us to share some of them in today’s blog. We hope they’ve fed into your festive mood as well and wish everyone happy holidays!