Social Entrepreneurs
Summary
Ferd Social Entrepreneurs (FSE) invests in social entrepreneurs that can demonstrate measurable social results and the ability to become financially self-sustaining in the future. FSE also works to facilitate their market access. Further, FSE provides these companies with networking, knowledge and capital in an active partnership with defined milestones and social ambitions in order to strengthen their chances of success.
Like 2020 and 2021, the first six months of 2022 were influenced by Covid-19. The restrictions had a significant impact on many of the companies and meant they had to change how they operated. However, we saw the companies manage to adapt to the situation and they are looking forward to the coming year. We also saw positive progress in the field of social entrepreneurship, despite the difficult environment.
At the Arendalsuka conference, FSE organised its own event and also participated at various other organisations’ events as well. Our own debate, ‘Recruitment with a capital S’, was intended to inspire Norwegian organisations to recruit in a way that increases their diversity. ‘It’s about looking more successfully, not about being nice and politically correct’ was our message at the event, which was initiated by FSE and Vi er OSS, a diversity agency.
The market
We are finding that the market has returned to normal after the Covid pandemic, and municipalities have more capacity. At the same time, public sector finances tightened over the autumn, and municipalities are very conscious of the higher costs facing them, particularly in relation to care of the elderly.
The Zero-Profit Commission that Norway’s Socialist Left Party demanded in last year’s budget negotiations was set up in spring 2022. FSE took part in its consultation exercise with non-profit organisations in order to highlight the disadvantages of preventing small, innovative and socially motivated private organisations from playing a role in public welfare provision. The Commission is due to report in spring 2024.
2022 was characterised by the Russian invasion of Ukraine, followed by escalating energy prices and rising inflation, which created concern for household finances. At the same time, there are factors driving the situation for social entrepreneurs and social investors in a positive direction. This particularly applies to the commitment around the world’s need to become more sustainable and efforts to achieve the UN’s Sustainable Development Goals and the objectives of the Paris Agreement. Over half of the 17 Goals are in the social field, and there is increasing awareness of the need to address many of them to achieve the green Goals. The EU has announced that it has set aside several hundred million euros to invest in social funds, and work is also being done to incorporate this dimension into its new Taxonomy.
The underlying trend of growing interest in investing in companies with a double or triple bottom line has thus continued despite the difficult market conditions. A range of private and institutional investors, as well as a number of foundations, are providing financing for an ever increasing number of distinctive social entrepreneurs. We are pleased to see more competition both in terms of supply and demand, and we note that the market is maturing at a rapid pace. We are convinced that the increased professionalism we see among many social entrepreneurs will create better market opportunities, improve their access to the financing they need, increase the number of sustainable companies and consequently grow their overall social impact.
Portfolio companies
In 2022 we continued and strengthened our collaborations with our innovative portfolio companies. We attached extra importance to monitoring our companies through the pandemic, but it was good to be able to meet with them physically in 2022 and to get all the companies together. We tried to help create synergies across the portfolio where it is natural to do so. FSE is impressed with how its portfolio companies are supporting each other, sharing information and finding opportunities to collaborate with one another.
FSE has a number of significant and high-quality collaboration partners who have meant a lot to the companies, and also to us as a team. Advokatfirmaet Schjødt, a law firm, has provided the companies with free legal support, which proved particularly valuable in 2022 given the challenges associated with the pandemic. Sopra Steria, a digitalisation consultancy, contributed pro bono time and training in various topics for the portfolio companies’ teams in 2022. McKinsey supported four of our companies as part of its ‘Day of Service’. McKinsey has also contributed with a major development work together with FSE, a Social impact strategy playbook. Consultants from Deloitte provided some pro bono time to portfolio companies and Impact StartUp. Zynk, a strategic analysis and advisory firm, carried out very interesting stakeholder surveys for a couple of the companies free of charge.
At the end of 2022, FSE had 12 social entrepreneurs in its portfolio, comprising ten companies and two fund investments (as well as three active social impact bonds). IMAL is now part of the alumni portfolio. In 2022 FSE made two new investments, namely in Ludenso and Lifetools KnowMe, as well as a further investment in Mindmore.
Ludenso is an educational technology company that uses AR enriched textbooks to create a more engaging and customised learning experience for pupils, as well as a greater sense of mastery. The company has signed agreements with a number of international publishers, including Cambridge University Press, Aschehoug, PG Online, Plantyn and SAGE.
Lifetools KnowMe develops digital communication tools that help people who lack verbal language to be understood. This has a profound life-changing effect on its target group, their families and their relatives.
Mindmore (SE) is a healthcare technology company that provides digital tools for testing cognition, and is present in over 100 clinics in Sweden.
Unicus provides high-quality IT services in the areas of data science, data engineering, software development, software testing and quality assurance. In 2022 Unicus increased its stake in Specialisterren in the Netherlands, and is now a strong majority owner. Specialisterren and Unicus complement each other in that they provide different types of IT services but have in common the fact that all their 165 consultants have an autism spectrum diagnosis.
Den Sociale Kapitalfond IV made a positive progress in 2022. The fund has made nine investments, and in 2022 carried out two exits with very good social and financial returns. Hitsa was sold to Crowd (NL) in the second quarter, and Refurb was sold to Egiss in the third quarter.
Auticon had a very strong exit from the pandemic, with its turnover up 30% in 2022. It now has over 300 employees with an autism spectrum diagnosis. The company has set up a new office in New Zealand, meaning it is now present in nine countries. Auticon also won the prestigious ‘Social Enterprise of the Year’ in the UK.
Gammel Nok saw strong growth in the demand for its senior citizen workforce, and in 2022 provided work to over 400 senior citizens. The company provides staffing solutions, practical services and home-based care to customers in the private and public sectors. In 2022 the company expanded its operations to cover the Hamar and Østfold regions.
Generasjon M signed a social innovation contract, a tailored social impact bond, with Aurskog-Høland, taking the number of municipalities in its portfolio to four. The Østfold/Akershus Savings Bank Foundation served as a private financing partner in the same way as in Østfold and Våler, and also committed to providing Generasjon M with assistance for a further three municipalities. The DNB Savings Bank Foundation has also committed to providing NOK 4.5 million in the event that Generasjon M signs contracts with more municipalities.
In 2022 we monitored the three social impact bonds in which FSE has invested. These contracts are in Øvre Eiker municipality and Lillehammer municipality in collaboration with SOS Barnebyer, and in four municipalities in Vestfold and Telemark with Back in the Ring as the social partner. The active phase of our social impact bond in Lier involving Trygg av Natur has come to an end. The measure has now been implemented at the school and is provided by the municipality itself. We will find out in 2025 if the measure decreases the dropout rate from upper secondary school.
A social impact bond involves a private investor financing an activity with a fixed performance target, with the investor reimbursed by the public sector if the target is met. The authorities only reimburse the private investor if the pre-agreed results are achieved, and the investor is only repaid if society itself benefits. The 2022 SosEnt conference on impact contracts helped increase knowledge and interest in social impact bonds among public sector organisations, and the Norwegian Association of Local and Regional Authorities is making good progress on a guide for municipalities that wish to explore this type of collaboration.
Impact Startup
FSE’s accelerator program, Impact StartUp (set up in 2017 as Social StartUp) was formally established as a separate company in 2020, Impact StartUp Norge AS. The company has strong collaboration partners on board, including Wilstar, Klaveness Marine, the DNB Savings Bank Foundation, Nordic Innovation, The Østfold Akershus Savings Bank Foundation, the Kåre Berg Foundation, the Anton Foundation (Antonstiftelsen) and Deloitte. The company has entered into a pan-Nordic collaboration with Denmark’s Social Capital Fund (Den Sociale Kapitalfond) and Sweden’s Prosper Social Impact. A total of over 100 companies have completed the Nordic accelerator program, with 22 of these completing the two accelerators that were run in 2022. The accelerator run in the autumn was Nordic-wide and run in collaboration with our partners in Sweden and Denmark.
The Oslo Initiative
In 2022 FSE Launched its ‘Oslo Initiative’, which brings together the business community and foundations in a joint effort to help underprivileged areas in Oslo. We are doing this on the basis of Ferd’s history and our personal and commercial connections to our city, and because we think that increasing levels of inequality mean that we as a society, and therefore we at Ferd as well, are losing out on talent, resources and ideas that we need for the future. FSE is seeking to help more people to be in work, to be more motivated at school and to have more meaningful free time in four districts of Oslo, namely Grorud, Stovner, Alna and Søndre Nordstrand. FSE is contributing significant administrative and coordinating resources to the project, and we have also provided support to 12 organisations that have already started work.
Organisation
In 2022, FSE had seven employees. The team increased its knowledge of new financing instruments for social investment, and also created and used a new instrument called an FSE Impact note. FSE also entered into a collaboration with Rambøll for in-depth research into our investment areas of long-term absence from school and employment, with the aim of creating targets and performance indicators in 2023.
Future prospects
We expect 2023 to be another challenging year for many social businesses, and we are continuing to support the social entrepreneurs in FSE’s portfolio individually and as a group. All the companies now have their own impact measurement and management plan that helps them to make management decisions based on their social results. Our hope is that the public sector’s attention will slowly shift towards a greater awareness of which services and measures provide good social results. We believe that if expertise in this area increases in the public sector, this will make it easier for companies that have new, high-quality solutions to attract the interest of municipalities and support systems.
FSE believes that the public sector will enter more social impact bonds in the time ahead. The challenging economic climate is making this type of bridge financing from social funds and investors even more important. We want to actively contribute to progress in this area, and we also want to help develop the expertise and capacity that other investors have in relation to this type of financing. We will continue our work on impact management processes in our portfolio companies, as doing so will help to highlight the relationship between their activities, measurable social results, enduring change, and social impact.
FSE’s aim is to contribute to the identification of good solutions to problems that the public sector can better solve in partnership with other organisations, and we will continue our work to inspire the public and private sector to use innovative procurement solutions and collaborations that cut across traditional structures.