Simon Bass | Former Treasurer, Praxis

The lessons of an unsuccessful social investment

October 21, 2019

Simon Bass shares his experience of an unsuccessful social investment and the valuable lessons Praxis learned. He also offers three key pieces of advice for others exploring social investment.

Unfortunately, the enterprise we tried to build using social investment was unsuccessful. I hope our experience will help other charities overcome similar challenges.

Simon's story

Praxis Community Projects is a charity founded in 1983. Its vision is for a world where people are not defined by their immigration status; a world where people who have migrated are treated with dignity and respect, are able to live in safety and take control of their own destinies.

Praxis’ core purpose is to provide: practical, legal and welfare support for migrants in crisis or at-risk; to ensure that their essential human needs are met; and that they are able to overcome the barriers they face to integrate and thrive in the UK. Amongst Praxis’ 2016 impact highlights were providing 11,737 nights of safe accommodation to vulnerable people and 5,500 hours of interpreting in 37 languages to support migrants.

Why did we consider social investment?

Praxis took on social investment in 2014 with a view to generating an income to fund their core charitable aims in a sustainable manner.

The business plan centred on a Language Gym; an online, tailored learning programme allowing individuals to learn English at their own pace with content delivered by native speakers to build confidence in using and understanding colloquial, everyday conversations.

The executive team and trustees were supportive of the proposed enterprise believing it closely aligned to the charity’s core mission and allowing them to grow their impact. Social investment provided capital to develop the infrastructure.

Why the social investment didn't work

The Language Gym was unsuccessful due to a number of factors. Whilst the original idea was good in theory, it took a long time to market, by which time the market conditions had changed and competitors had appeared. Alternative providers with more experience had quickly established effective marketing channels that hindered our ability to compete for demand effectively.

The B2C revenue model was based on a payment by users for training packages, but there was insufficient demand from our target beneficiary group at a sustainable price point.

The Language Gym was a first significant step to diversifying our income through trading revenues. We underestimated the level of practical, operational experience required to run the delivery of the service. Recruiting an additional Board member with this specific expertise would have been beneficial, if not straightforward.

Praxis may also have benefitted from borrowing more or having grant funding from investors initially to ensure the enterprise was adequately resourced to hire the right people, market itself and sustain itself through its initial start-up phase.

What happened next?

For Praxis: The social enterprise subsidiary was wound up. Whilst the initial investment was lost, other fundraising wasn’t affected. And other projects continue to generate positive impact for the UK’s vulnerable migrant communities. Praxis has also used the experience to develop their learning of social investment.

For beneficiaries: Language Gym courses were discontinued and enrolled participants were redirected to alternative courses with other providers where possible.

For social investors: The social investors supported the charity in the difficult period of closure of the subsidiary and beyond.

Advice I would give to others

Test and prototype the idea as much as possible: Our theory of change, market research and financial modelling were all very thorough, and carefully assessed by management, external advisors and trustees. What we would look to do more of next time is pilot the key assumptions to test what works in practice or needs refining.

Be thorough, but dynamic: A Language Gym is now a more widely understood concept with a number of organisations successfully delivering this service. Praxis was an early pioneer in this type of service but didn’t capitalise on our first mover advantage. As a charity, we were too slow adapting to a business mind-set and our time to market was ultimately too long.

Be aware: A new enterprise can be a significant drain on time, particularly when things aren’t going well. There’s an opportunity cost to this that inevitably distracts from core activity – this reinforces our feeling that an extra pair of safe hands would have helped give this the absolute focus it really needed.

What have I learnt?

As a charity, I think we learnt how we could better support our social mission by embedding stronger commercial know-how into a young entity. That means finding the right management to instil the agility and innovation required to succeed.

We maintained strong relationships with our investors. They were highly engaged throughout, and particularly supportive when the enterprise entered difficulties and this was a positive aspect of our experience.

Would I do it again?

All organisations have to react to changing circumstances, charitable or commercial. Not to do so risks stasis and the gradual loss of fit between the service delivered and the need being targeted. Risks have to be taken, so we would never rule out doing something else that we thought would benefit the charity in the long run. However, we would ensure that we assessed the market more carefully with independent but relevant advice, ensuring the project was better capitalised and that we worked through staff who were experienced in operating in a commercial / quasi-commercial market, rather than solely a charitable one.

Simon also shared why he thought GET INFORMED's mentoring programme could be valuable for trustees and executives who don't know a lot about social investment. Watch Simon and others talk about the programme in the video below.