If there's one thing you can say about the Carefree team, it's that we have hustle!
Take the above photo of the 200 cookies our CTO, Joey Ceunen, made for a recent hotel expo to charm our way into some new hotel supply when we didn't have a budget for any fancy merch. But really, what's the point of having a beautiful monogram like ours if we never get the chance to show it off 😂
So this week, I, as the money hunter, find myself at The Gathering. A two-day event for social investors to come together and figure out how to make social investment better. A few social enterprises are selected to take part, and as one of the only scaling charities out there, it feels like I'm here to represent more than just Carefree.
My journey with the social investment sector started early, very early. Most will know David Floyd for his thought leadership work on social investment, but you probably don't know that he was my first editor at a youth magazine when I was 15 and was kind enough to bring me in on some of those original reports on the social investment market when I graduated. I can't say I was very good at it, but it did mean that in exploring social investment opportunities for Carefree, I've been pretty good at navigating the various financial instruments and what could work in a charity context.
At this conference, I've been asked to speak on a panel hosted by Denise Holle from Joseph Roundtree Foundation on "Reimaging Health and Social Care". I will enclose a link to my speech below as it was a labour of love to prepare it, but you can pick up from the below slide the opportunity and challenge for accessing social investment I was outlining for the crowd.
Numbers as at 15 October 2023
So can and should Carefree seek to access further social investment?
The main (unfortunately likely unworkable) suggestion from participants was for us to explore setting up a subsidiary trading company to expand the range of social investment products that we could access and avoid ploughing more debt onto Carefree's balance sheet. This is something that ordinarily might work, but I believe we have a responsibility to our hotel partners who donate their excess capacity to us to be transparent about the income that we make from the £25 that we charge for every break booking that we facilitate. Siphoning off that income into a separate company structure instinctively feels less accountable, but maybe some of that discomfort could be offset with effective asset locks.
A second perhaps, more practicable suggestion was to seek out more flexible finance that's as close to overdraft terms in form as one can get. For those that don't know, charities can't typically access overdrafts, invoice finance or asset finance in the same way that companies can. This flexible finance would be incredible for helping us with our short-term cashflow problems, and I'll definitely be seeking entities like Key Fund Investments for this when I get back.
Quasi-equity, where an investor seeks to make their return from a portion of your revenue, also came up, but I've only seen this applied to organisations seeking to make the vast majority of their income from trading.
We've always been keen to work towards self-sustainability, but at the same time, we also want to use our charitable status to pull on all the levers available to us to grow the organisation - be that winning a big-ticket donation, public fundraising drive unrestricted funding or receiving corporate sponsorship. A quasi-equity style business plan to see us meet 75% of our operating costs through trading income in the next three years, for example, would mean we'd need to cap our operating costs at circa £650k, which would undoubtedly cap our potential impact.
We're six years old, and in the next six years, we believe we can get over 100,000 unpaid carers a break - that's £25m of gifted inventory mobilised into the social care sector.
Sticking with our mixed-income model so that we can level up our operating costs to reflect the volume of delivery we're doing is still the best bet to achieve this - combining our trading income with social investment and money from various fundraising channels.
Which leads me to my final conclusions on where we should go from here.
As much as the sector seems to have fallen out of love with blended finance as a financial solution for charities in our position, I think it or an interest-appropriate loan in the region of £500k over a 10-year repayment period is our best bet for putting the organisation on the right track for scaling our delivery.
It may create a choke point for us in our ability to secure new grants from funders that will baulk at the level of debt we'll be carrying, but in business, you have to build on momentum when you have it, and financing to underpin the month-on-month growth we're seeing is essential for that.
Most social finance options are for lower amounts than this and around shorter repayment plans, so it might take some time to find the right package.
But I can't shake my sense that the magnitude of what Carefree could do with real working capital behind it will be much much more than something that extends our runway by a few months.
Thanks for reading!