Dirk Bischof, Chief Executive of Hatch Enterprise talks about their cautious and organic journey with social investment to date and what it’s helped them to understand about their business along the way

The term social investment has been around for a while now. Hatch was first exposed to this idea in 2009, at the Good Deals conference. Back then, there was real excitement around social investment and how social enterprises can use it to grow. Fast forward 10 years and much of that excitement has turned into much needed realism. Social investment is not the ‘catch-all’ that it was heralded to be 10 years ago. And that is a good thing.

Growing a social enterprise is really challenging. Making an impact and making money are often at odds, mainly because we’ve not priced the cost of making an impact into the business model and because the sale of goods and services more often than not, only reflect the cost of producing them, neglecting the impact side.

When we got started with Hatch in 2013, we chose an organisational structure that we believed would enable us to build an organisation that we knew, would never be ‘profitable’ in its own right. No business incubator or accelerator is profitable. All of them use either private or public or mixed finances to support entrepreneurs to start and grow their businesses. We knew that we could not monetise our entrepreneurs as customers, at least not fully, as they usually do not have money to get going. We also needed to find a different customer group that would enable us to deliver our mission ‘to support diverse entrepreneurs into business’. Being a charity has really helped us in that because we were able to work with some of the most forward-thinking trusts, foundations and corporate partners who wanted to support entrepreneurs from diverse backgrounds.

Our journey into social investment…

Back in 2015 we decided that whilst our entrepreneurs will be unable to pay for the true cost of our support, we should nevertheless charge them something for the support we provide. We went from a free programme provider of enterprise support to a charged-for programme provider. This was the single most important business decision for years to come. With this decision, we put a price on our service. With that, we were all of a sudden competing with all the other “free” programme providers that were not just offering free programme, but actually paid entrepreneurs to be on their programmes. How do you compete with that? Well, we had to super-charge our marketing and we had to do the best job possible at helping each and every entrepreneur on our programme. For this, we developed a customer-centric approach, invested heavily in monitoring and evaluation so we could understand whether we are doing a good job with our entrepreneurs. At the same time, the entrepreneurs that did come, and paid showed us something else too. They cared about the service they were getting from us, they wanted value for what they paid for. Our programme completion rates went from 80% to 95%, showing us that we got people to commit to our programmes. At the same time, we also now received funds from the entrepreneurs in the form of programme fees, often heavily discounted and subsidised, but nevertheless. With this, we all of a sudden generated income that we knew could grow if we delivered more and better programmes over time.

We first approached City Bridge Trust via their Stepping Stones Fund to help us explore social investment into a space we took on together with our partner Peabody Housing. We desperately needed a space as we had outgrown our office space in Brixton and we also had demand from entrepreneurs for flexible office space, together with continuous demands for pop-up space for people to try their business ideas.

We worked with Peabody to unlock a space in Elephant & Castle, enabling us to have a home for Hatch, whilst also helping us to offer the local community a space to try new ideas from. Together with the Stepping Stones Fund, an investment from Peabody and funds from Southwark, we were able to unlock an under-used space and brought it back into community use. This space now generates revenue, whilst also generating social impact. 55 East is available for the local community, for example hosting local organisations like Migrateful and their community cookery classes and as an event and training space.

Our social investment journey continued with another investment from the Stepping Stones Fund into our Impact Accelerator programme, supporting growing social enterprises.

This took us 2 years to establish. By no means a ‘quick’ turnaround. Then in 2018, we took on our first social investment from Big Issue Invest, as a repayable grant or 0% interest loan to help us grow our team. This was both exciting and scary at the same time as we now had to pay this money back. We never had to pay money back as we operate a grant-funded enterprise model.

We had to think about new revenue streams and about our ability to pay back funds, whilst growing our impact, reaching more and more entrepreneurs over time and doing the best job with them to help them start and grow their businesses. In 2018 we also got help from The Reach Fund, enabling us to invest into better business and operational modelling and improving the way we market our programmes.

Fast forward to 2019, we are now ready to seek new social investment funds to continue to invest into our space, which has come a long way since establishing it in 2017. We’ve seen the delivery of some 250+ events, trained over 100 entrepreneurs in it and it has become the office space for local freelancers and is still our home. To transform the space to be even more flexible and more easily rentable, we need to change how people get access to it, implement a key-less opening/ closing system, upgrade facilities and more.

As the space at 55 East now generates revenue, we can take on another round of investment to upgrade it, anticipating that these changes will allow us to increase revenue streams further and enable us to pay back the social investment we currently seek.

All in all, social investment for us has been a cautious, slow and organic journey over 4 years, starting with the decision to charge for services, all the way to operating a community space.

Further information about Hatch and 55 East can be found at –

www.55east.co.uk

www.hatchenterprise.org