Social Capital Partners: Strategies and Experience to Date

Presentation to Policy Forum on Social EnterpriseToronto, OntarioOctober 11, 2006

1. Social Capital Partners – Introduction

2. Social Enterprise Investment – Current Portfolio

3. Private Sector Engagement

Franchise Strategy

Fresh Start Market

4. Collaborative Partnerships – Current Focus

Presentation Overview

Our Mission Invest in and support revenue-generating social enterprises that

employ at-risk populations

Help these organizations to gain scale and eventually exist without external funding

Help these organizations provide improved social outcomes and financial self sufficiency for the individuals they employ

Be a catalyst for encouraging other innovative funding approaches in the nonprofit sector

Using Venture Capital

Principles

Using Venture Capital

Principles

Revenue Generating

Social Enterprises

Revenue Generating

Social Enterprises

National Network of

Socially Branded

Enterprises

National Network of

Socially Branded

Enterprises

To Invest in . . .

With a Vision of . . .

Our Method

What Social Enterprise Offers for Canada

Finding suitable employment

Maintaining employment

Disconnect between job training programs and actual jobs available in “real world”

Coping with life issues (i.e., housing, counseling, etc.)

Discovering and working towards career options

Stability and consistency of programming

Specific focus on hiring at-risk populations

Business is sensitive to employee challenges

Business provides “real world” challenges and outcomes

Network of external social service partnerships to assist employees

Business can provide professional development opportunities

Business helps create economic development in the entire community

Revenue generation not only acts as primary driver of social mission but also as the financing mechanism

Challenges of Assisting Individuals with Employment Barriers

Challenges of Assisting Individuals with Employment Barriers Social Enterprise BenefitsSocial Enterprise Benefits

All of SCP’s work is guided by the sustainable livelihoods framework

www.livelihoods.org

SCP’s Approach

Social Capital

Human

Capital

Natural

Capital

Financial

Capital

Physical

Capital

Employability Skills and Health

Support network and contacts

Shelter and infrastructure

services

Financial resources and regular inflows of

money

Safe and Healthy Environment

VulnerabilityContextof Target Employee

Group

Livelihood Assets & Deficits

Social Enterprise Strategies

Social Capital

HumanCapital

NaturalCapital

FinancialCapital

PhysicalCapital

Influence& Ability to Affect

Change

Regulatory Economic/Political

Environment

Before Social Enterprise Employment During Social Enterprise Employment & Beyond

to Achieve

Change in Vulnerability

Context

Change in Employment

and Livelihood Outcomes

*Employment Creation *Social Support Infrastructure

*Social & Financial Goals*Social Capital*Social Costs

Financing Alternatives

Provided under relatively limited circumstances

Purpose is to provide social support infrastructure to enterprise employees

Grants are generally in the C$15K to C$50K range

Will consider equity or near equity investments under some circumstances

Desired rates of return are assessed based on risk profile and value-added support required

SCP will take an ongoing governance role

Grants

Equity

Loans

Loans are generally in the C$50k to C$250k range

Interest rates will be assessed based on the risk profile of the business and the value-added support required

SCP will take an ongoing governance role

What We Look For in an Enterprise

Social Elements:

Majority of employees from an economically disadvantaged community

Employ at least 12 individuals

Provide skills and experience that promote long term employment

Help create a sustainable livelihood for target employees

Business Elements

Financially viable -- reach break-even or profitability within 3 years

Realistic long term growth plans that involve employing 20 or more individuals

Meet any repayment obligations to SCP and other financiers

Develop an outstanding management team capable of carrying out the plan

Loans Made

Grants

Equity

Total Investments: C$1.1M

Loans: C$700k

Grants: C$335k

Equity: C$60k

Investments Made in Portfolio Companies

Target

Non-Target

Total Employees in Portfolio: 400

Target Employees: 250

Employment in Portfolio Companies

Location Industry Date of Initial SCP Investment

Atira Property Management

Vancouver, BC Property Management

February 2005

Cook Studio Food Services

Vancouver, BC Commercial Catering April 2005

Inner City Renovations

Winnipeg, MB Construction June 2002

Renaissance Montreal, PQ Second Hand Goods April 2004

Two Men and a Truck

Oakville, ON Moving Company April 2006

Active Green+ Ross Hamilton, ON Auto Tire and Service Centre

March 2006

Turnaround Couriers Toronto, ON Bicycle Courier August 2002

Active SCP Portfolio Companies

SROI Report Card: Year Three October 2004 - September 2005

COURIERSTURNAROUND

TurnAround Couriers: Social Mission Overview

SROI Report Card: Year End 2005

Goals Methods Success Metrics

• Hire couriers and office administrative staff from disadvantaged youth population

• Provide transitional work experience to enable youth to develop employability skills, a resume and a support network

• Enable youth to access the mainstream job market

• Enable youth to stabilize life situation, begin a career path and leave the shelter system

• Recruit youth from youth shelters and youth serving agencies across Toronto

• Provide a real job, not a job training experience

• Establish a supportive management environment

• Assist youth with planning and making next steps regarding housing and employment

• Youth are able to get out of shelter system and into independent housing

• Youth meet or exceed job expectations

• TurnAround helps youth secure next job and establish a career path

• Youth are able to get off and stay off government financial assistance

COURIERSTURNAROUNDCOURIERSCOURIERSTURNAROUNDTURNAROUND

Enterprise: TurnAround Couriers Location: Toronto ON Date of Inception: October 2002

Overview of Target Population (sample group)• Majority of youth recruited from Evergreen Centre for Street Youth, an initiative

of the Yonge Street Mission

• Males: 70%

• Average Age is 21• 90% unemployed at time of hire• 60% receiving social assistance at time of hire• 90% had been recruited from youth shelters or had used the shelter system

within the last year• 30% had been involved with the justice system• 70% did not complete high school

Overview of Business

• Did not require any additional external investment • Grew sales 17% from Year 2• Grew monthly sales 31% by end of Year 3• Royal Bank of Canada remains TurnAround’s biggest client and tripled its

delivery volumes during the year• Developed in-house capacity to deliver on-line courier service • Market wages paid and WSIB coverage offered to all staff

SROI Report Card: Year End 2005

Financial Performance

Total Sales Revenue: $135,000

Total Grants and Subsidies: $0

Total Sales Revenue and Grants: $135,000

Additional Social Support Infrastructure: $0

Total Operating Profit (Loss): $916.00

Total Investment in Year Three: $0

Social Return On Investment

Average Change in Societal Contribution (Target Employees): $10,000

Average Number of Target Employees: 4.5

Number of Target Employees in Sample Group:

Current Year Cost Savings to Society:

10

$45,000

Cumulative Cost Savings (prior to Y3): $83,178

Total Cost Savings to Date: $128,178

Cumulative Societal Payback Period: 2.3 years

Cumulative SROI: 128%

Employment Outcomes (sample group)• Maintained a staff ratio of 75% target/non target staff throughout the year

• Paid out $76,400 to courier wages over Year 3 • 30%of TAC’s couriers went on to work at larger courier companies after

leaving TurnAround and were able to increase their income by approximately $500.00 per month

• 40% continue to work at TAC• 30% reported that working at TurnAround motivated them to finish high school

and/or go to college or university• TurnAround now in a position to offer career laddering opportunities within the

company

Sustainable Livelihoods Outcomes (sample group)• 90% of youth who were on social assistance before hire were able to get off

and stay off social assistance

• 90% of youth were able to move into independent housing within 3 months of working at TurnAround

• Those that had previously been involved with the justice system had no additional issues while employed at TurnAround or at time of follow up after leaving TurnAround

COURIERSTURNAROUNDCOURIERSCOURIERSTURNAROUNDTURNAROUND

SROI Report Card: Year Ending March 31 2005

                                                     

Renaissance: Social Mission Overview

SROI Report Card: Year End 2005

Goals Methods Success Metrics

• Provide job skills training and employment placement to people with employment barriers

• Help participants at end of employment placement to access mainstream job market and/or formal education system

• Be a leader in sustainable recycling practices of clothing and other consumer goods

• Deliver six month skills training program and ‘real world’ employment placement (Reintegration Program) accredited by Emploi Québec – to eligible participants

• Provide employment opportunities in retail, office administration, maintenance, shipping and handling

• Provide specialized training, personal counseling and post training follow up to assist participants transition into mainstream employment

• Continually improve collection and sorting practices to create access for low income people to modestly priced, recycled consumer goods

• Maintain an 80% or better employment placement/return to school rate after program completion

• Continue to generate an operating profit while running a successful employment training program

• Continue to be recognized as a Bruntland enterprise in Québec

• Re-sell 35% or more of recycled goods collected in network of stores

• Sell at least 95% of remaining goods to recycling operations

• Ensure that 5% or less of collected goods goes to landfill

                                                     

Enterprise: Renaissance Quebec Location: Montreal, Quebec Date of Inception: 1994

Overview of Target Participant Group (sample group)• 100% unemployed and meet all Emploi Québec’s eligibility requirements • 53% of African origin• 35% West Indian and South American• 12% Quebecoise• 90% female• Average age is 33• 57% receiving government financial assistance at start of program• 39% live in two parent households with 1 or more children• 14% are single parent households with 1 or more children• 67% of non Québecoise arrived in Québec between 2000 – 2004 (e.g. New Canadians) • Majority had finished high school and had some post secondary training (home country)

Overview of Business

Accomplished 10 years of job training – over 1000 people secured employment Over 10 year period averaged 78% job placement rate 2004 grand opening of brand new ‘flagship store’ – model for gradual revamping of

stores in network Refined marketing strategy in 04/05 led to annual 9.5% increase in sales across

network of stores (excluding the flagship store) Reorganization of training model to increase efficiencies and customize training

support Improved customer service, sorting methods and merchandizing systems across store

network

SROI Report Card: Year End 2005

Financial Performance

Total Sales Revenue: $4, 216,764

Total Grants, Gifts and Subsidies (GGS): $415,434

Total Emploi Quebec Service Contract/SSI $2,677,435

Total Sales,GGS and Government Contracts: $7,309,633

Total Operating Profit (Loss) $93,768

Total Investment: $2,999,101

Social Return On InvestmentAverage Change in Societal Contribution (Target Employees): $5,784

Annual Number of TE Completed 6 Month Reintegration Program: 192

Number of Target Employees in Sample Group:

Current Year Cost Savings to Society:

49

$1,110,528.00

Current Year SROI 37%

Societal Payback Period: 2.7 years

Employment Outcomes (sample group)• 84% of participant group entered mainstream employment or returned to school at end

of employment training program

• 65% secured employment and 18% returned to school

• 63% secured full time employment

• 38% secured part time employment

• $8.48 – average wage for next job

• Majority of jobs secured were in customer service/retail sales sector• 16% stopped job search for personal reasons

Sustainable Livelihoods Outcomes (sample group)• 79% of those receiving government income assistance at start of program did not

need this assistance at end of program

• 47% of the sample group reported that the reintegration program significantly contributed to their cultural integration into Quebec society

• 39% of female participants reported that their experience at Renaissance enabled them to move from living in a socially isolated situation to establishing friendships and social support networks outside of their immediate household/family structure

• 39% of female participants reported that the program structure - particularly the customized, one on one support - positively influenced their self esteem, capacity to adapt to new (employment) settings, ability to set goals, deal with stressful situations and ability to seek out community services/resources

ContextThe impetus for our beginning to think about social support for low

wage employees evolved from our work with social enterprises

• SCP works with social enterprises that employ individuals with employment barriers and helps these employees create more sustainable livelihoods

• There are thousands of individuals working in low-wage jobs in the private sector who experience similar sustainable livelihood challenges to those faced by employees of our social enterprises

Therefore . . .

• We began wondering whether we could apply the methods used to improve outcomes for social enterprises employees in ways that would benefit people with similar profiles working in the private sector

Perhaps . . .

• We can create a “win-win-win” where private sector companies maintain more productive and satisfied workers, low wage employees live more sustainable livelihoods, and the principles of social enterprise become more “mainstream”

Step 1: Engage Existing SCP Portfolio

Step 2: Engage Select Private Sector Partners

Step 3: Engage the Broader Private Sector

• SCP works with a portfolio of social enterprises

• These enterprises have been developed for the express purpose of assisting low income individuals

• These companies will act as test beds for new social support programs

• SCP has begun developing partnerships with mainstream employers

• Our first relationships are with franchisors and retail consulting company

• We will work with these partners to create social support programs as part of the business

• Once the value of creating social supports has been established there may be opportunities to partner with a broader set of mainstream employers

• SCP may share its experience or consult to mainstream employers

SCP will work toward creating a greater understanding for the importance of workplace social supports for low wage employees

SCP’s Approach

SCP has begun testing ways to provide workplace-based social supports to employees of its portfolio companies

• Inner City Renovations employs inner city residents in Winnipeg who experience employment barriers

• In addition to providing employment and on-the-job training we have also worked with our partner, Community Ownership Solutions, to institute programs that help employees create more sustainable livelihoods including:

– Company-based employee savings program to influence behaviour change re: money management and asset development

– Apprenticeship and skills upgrading opportunities

– Access to a social worker to help with personal challenges and emergencies

– Culturally sensitive opportunities to build social connectedness

1 Social Development Canada, 2002

SCP’s Approach: ICR Example

Franchise Strategy The Franchise Strategy was born from experiencing how difficult it is to manage the dozens of variables required to ensure financial success while at the same time managing a social mission

Anticipated Benefits:

A successful franchise represents a proven, branded business model that reduces business uncertainty and financial risk

A well-defined operating model or ‘turn-key operation’ with training and support allows entrepreneurs to devote more time to the social mission and less time to ‘fighting fires’

By lowering business and financial risk, the social mission can flourish while the business continues to grow

A successful franchise model can be replicated

Franchise Strategy: Progress to Date

– One of the largest chains of tire and auto care centres in Ontario with 50 stores

– SCP provided $120,000 in financing to convert a corporate store in Hamilton to a franchise

– Franchisee is the former manager of corporate store

– Working actively with the YMCA, Job Connect program of Hamilton and others to recruit target employees

– One of the largest moving companies in the United States

– 173 locations in 27 states

– Recently established operations in Canada and plan to expand across the country

– SCP provided $125,000 to help finance a location in Oakville

– Working actively with Region of Peel Social Services and others to recruit target employees

Fresh Start Market: Overview

What is Fresh Start Market?

1. Idea generated from private sector company – Perennial Inc. – Canada’s leading retail consulting firm specializing in grocery market sector

2. Charitable mission with a private sector philosophy

3. With Fresh Start Market, running a self-sustaining business IS the social mission

• Supermarket that will employ single mothers and provide financial support to help parents pay for quality child care/development programming

• Goal is to help single mothers become financially independent, develop employment and job retention skills and define a career path

The Opportunity: Fresh Start MarketWhen taken together, these needs demonstrate the opportunity to

create a new type of supermarket . . .

• . .Social Need

Market Niche

• Create an independent supermarket that will compete within a strong market niche

• Recruit seasoned retail management team

• Partner with key social agencies to pre screen, customize training program and recruit single mothers as target employee group

• Target employees earn employment income, gain transferable job skills and work in a supportive environment

• Provide financial support for child care or child development programming

• Empower them to develop a career and life path

+

Branding: Fresh Start Market

Social Enterprise Key Social Mission Components

1) Recruit target employees• Current portfolio• Franchise Strategy• Fresh Start Market

2) Create access to jobs and skills training (formal, informal)

3) Establish a supportive work environment

4) Offer opportunities for internal and/or external career

advancement

Collaborative PartnershipsSome Early Learnings

1. Social enterprise model requires expertise and resources from

different sectors

2. Need to effectively sell the idea and vision of social enterprise to

motivate interest in getting engaged

3. Engage organizations with similar mission and vision at key stages

along the way

4. Engage organizations and individuals that connect to SE mission and

want to lend support

5. Need certain level of critical mass (e.g. 50% target employee base)

within individual social enterprises before formalizing partnership

model re: social support infrastructure

Thank you

Please contact us if you have further inquires at:416 646 1871 x110 – Joanne Norris

For more information, please visit our website:www.socialcapitalpartners.ca