How to increase the investment readiness of Swedish social enterprises

LSV is actively working on strengthening the field of social innovation in Sweden. During our first year, LSV has focused on initiatives driven by entrepreneurs. In this field note, we discuss and compare internationally the maturity of these Swedish “grass root initiatives”, We then review what the Swedish field of social innovation can do to empower these initiatives and increase the chances for success in terms of sustainability and scalability.

There are many  impressive initiatives, yet few meet all investment criteria employed by LSV

From its inception, LSV has built data on the quality of the grass roots sector. Based on about 200 applications received and analyzed, we can see that:

  • 22% are rejected on only one of our investment criteria – hence, there are many initiatives that, with a discrete amount of help, could be developed to investment readiness.
  • 76% have a credible model to create social benefit – this means they have a clearly defined target group and an articulated model for how the initiative is going to provide social utility for the target group.
  • 46% have the potential to become economically viable – they have a believable hypothesis or an already defined model for how they will provide for their business through sales.
  • 44% have an evidence based or even, validated model –initiatives developing and evolving through documented model effectiveness or indeed, established and proven as effective in realizing their theory of change, having validated their social model. We are currently working on specifying the data further.

Nevertheless, many initiatives have a hard time in meeting individual investment criteria, in particular that of scalability:

  • 56% of the initiatives are in the earliest stage, pilot state – the initiative is immature and cannot validate the credibility of the model through documented experience or validation by the target group
  • 27% of the initiatives are somewhere between the pilot and growth stage – the initiatives have valuable experience yet have not yet landed in a clear, believable and scalable model
  • Only 16% of the initiatives are ready for growth – they have a clear model that is proven to be effective and is well received amongst target group clients, with a credible business model towards customers

Are LSVs demands on the grass root initiatives too high?

The investment criteria of LSV are demanding, they are however based on international best practice. The applications to date result an expected investment frequency of about 1 investment per 100 applications (0,8%). This may seem like discouraging but actually echoes the experience of European impact investors.

During the summer, LSV analyzed 140 initiatives in other welfare states (mostly Europe), each having attracted support from one of 45 social impact investors. Out of these, a full 60% fulfill all LSV investment criteria. This is clear evidence that high quality mature initiatives are possible, we just haven’t seen them in Sweden yet. There are a few examples however. One is Järvaskolan, a private model for schooling in areas characterized by socioeconomic exclusion. Another example is Sweden’s first social supermarket, based on the pioneering SOMA model from Austria and initiated in partnership between Stockholms Stadsmission and AxFood (only available in Swedish).

How do initiatives overcome obstacles of meeting professional investment criteria?

Through fall 2015 and spring 2016 , Leksell Social Ventures will continue in discussing our experiences of grass root initiatives, their challenges and their potential. Together with our social innovation sector colleagues, we hope to create transparency and guidance regarding the development of sustainable, scalable and effective models for social innovation.


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