Three of the largest crowdfunding platforms in the UK will join Big Society Capital in a unique £10 million Crowd Match Fund which will allow the public to invest directly into charities and social enterprises.
Crowdfunder, Ethex and ThinCats (through Community Chest) will help connect people with the causes they really care about by listing social sector organisations who want to raise debt and equity finance.
The £10 million fund will see Big Society Capital match crowdfunded investments made by individuals into Social Investment Tax Relief (SITR) eligible charities and social enterprises. It will be the first of its
kind to match different investments made by the public across the social sector. Private investors will qualify for Social Investment Tax Relief (SITR), which offers a 30% tax break.
The Chancellor recently announced an increase in the amount that younger charities and social enterprises can raise through SITR to £1.5 million from April 2017.
Ben Warren, Investment Associate at Big Society Capital, said:
“This fund marks a totally new approach for social investment and crowdfunding. By bringing together the experience and knowledge of these three partners we want to open up opportunities for the public to invest in a huge variety of causes they feel passionate about.
“We hope that this initiative will help charities and social enterprises to find new routes to investment which could offer better value and engagement from their local community. We know that donation-based crowdfunding was the fastest growing model of alternative finance in 2015, and we are excited about the potential for this fund to create similar momentum in the social investment sector.”
Recent Nesta research shows that the UK alternative finance sector grew by 84% in 2015, with £3.2 billion in investments, loans and donations.
Kevin Caley, CEO of Community Chest (and founder of the ThinCats platform), said:
” By providing loans to enterprising projects with a clear mandate for social good, Big Society Capital has provided an exciting new source of finance for social enterprises and charities, many of whom have struggled for funding during recent years.
This makes it the perfect partner for ThinCats, and Community Chest in particular, which connects investors in search of financial returns with social enterprises in need of funding. By doing so Community Chest is providing a tax-efficient way to make a difference in the community, allowing private investors the opportunity to support a good cause while potentially earning a return on their investment. The new Crowd Match Fund is a real step change for social funding and could become the lifeblood for dozens of social projects in the years to come.”
Phil Geraghty, Managing Director of Crowdfunder said:
“This is going to be a game changer for groups looking to do Community Share offers. We know from Crowdfunder’s experience that matching can supercharge campaigns and that for every pound of matched funds for
reward-based crowdfunding, it levers in £4 from the public. For community groups with big plans and projects, in our experience community shares are the main way they’ll fund those, and being able to incentivise their supporters to invest will be a fantastic addition.”
Lisa Ashford, CEO of Ethex said:
“We are thrilled to be partnering with Big Society Capital to roll out this innovative match fund scheme to help social enterprises find the finance they need to grow and flourish. This scheme will encourage more people to invest in businesses they believe in so they can have a direct connection with their money. Having raised close to £50m in investment for organisations that have a positive impact on the world, we can’t wait to make more money do good.”
The platforms deploying the fund on their sites will allow the public to invest directly in charities and social enterprises, and make use of SITR. SITR enables individuals to gain personal tax reliefs, which can include income tax at 30% of the amount invested, capital gains disposal and hold-over relief.
Matt Fountain, who raised investment through SITR for his social enterprise Freedom Bakery, says the new fund will make a huge difference to charities and social enterprises:
“I think we will see a fast increase in the number of deals being made through crowdfunding platforms and the fund is going to be a very powerful tool for communities and social enterprises to raise investment.
If crowdfunding has been the democratising of money, then the SITR match fund is the democratising of investment. The magic of crowdfunding in this way is that it will not only bring in much needed investment but it will unite communities and bring the public far closer to the causes they seek to support.”