WHAT IS AN IMPACT INVESTMENT?
Impact investments are investments that are intentionally made into organisations that deliver measurable social and/or environmental outcomes alongside financial returns.
WHAT IS IMPACT INVESTMENT READY?
The Impact Investment Ready program is an initiative that supports the impact investment ecosystem to scale its impact and is funded by the Australian Government Department of Social Services. The initiative funds Growth Grants of up to $100,000, which enable impact businesses to become investment-ready and scale their social impact.
The grants are used by eligible applicants to pay for the specialist intermediary skills they need to support their business.
Impact Investment Ready supports mission driven organisations with funding, plus also strengthens the intermediary sector and builds the impact deal pipeline – all of which are important as we grow the impact investing sector in Australia.
ARE GROWTH GRANTS REPAYABLE?
In general, Growth Grants are not repayable, however, funds not expended in accordance with grant agreements may be repayable. Under special circumstances grant agreements may have conditions where part of the grant is repayable if defined performance thresholds are not met. These conditions would be negotiated between Impact Investing Australia and the enterprise with the underlying intention to maximise the ecosystem support of the Grant funds. All further details are determined on a case-by-case basis.
WHAT IS GRANT LEVERAGE?
Grant leverage refers to the ratio between the grant amount and the investment raised. For instance, if an enterprise receives a grant of $60,000 and raises $1,200,000 in equity and debt funding, the leverage is 20x.
Over the past five years, grantees of the Growth Grant who have successfully secured capital achieved an average leverage of 20 times the value of the grant. Applicants should seek leverage of at least five times the grant value in capital raised.
HOW MUCH INVESTMENT ARE GRANTEES USUALLY LOOKING FOR?
Growth Grant recipients have typically sought between $500,000 and $3,000,000 equity and/or debt funding.
WHAT DOES A VALIDATED BUSINESS MODEL WITH A PROVEN TRACK RECORD LOOK LIKE?
The Impact Investment Ready Panel looks for organisations to illustrate tangible growth in a validated business model. Though the metrics may vary between organisations, strong applicants will exhibit significant traction that places them well to raise investment capital. Often, a lack of investment capital will be the only factor obstructing the organisation from achieving scale.
HOW WOULD A SUCCESSFUL APPLICANT BEST MEASURE AND PRESENT THEIR SOCIAL OUTCOMES?
A successful Growth Grant applicant will be able to explain the societal outcomes they create and demonstrate how these outcomes are achieved. While there is no ‘one size fits all’ approach to outcomes measurement, the Panel expects that the applicant has found a method and metrics that best suit their organisation’s needs.
As part of the project, Grant recipients will usually be required to prepare a Social Impact Framework. Although flexible in its structure, the Social Impact Framework will:
- define the intended impacts of the enterprise’s activities
- define the theory of change through which impact will be created
- establish valid and reliable indicators that will be used to measure and report on impact.
DOES THE APPLICANT ALREADY HAVE TO BE IN CONVERSATION WITH A PROVIDER?
Yes, enterprises can only apply for a Growth Grant in partnership with a Provider.
HOW CAN THE APPLICANT FIND AND ENGAGE WITH A PROVIDER?
Finding the right Provider who understands your business and can offer the support you require is essential for the success of your capital raising. We highly recommend that you find one lead Provider who commits to go all the way to the capital raising with you. These organisations should have prior experience with investment readiness and connections to potential investors. For services outside of their expertise (e.g. accounting, legal), you can subcontract a second or third Provider.
For instance, you may work with your lead Provider on the financial modelling, investment documents, information memorandum and investor engagement and subcontract a law firm to help you with the legal structuring of your organisation.
At the time of your application, you need to clearly understand what will be required to get you to investment readiness and the associated costs.
The lead Provider will be able to subcontract specialist advisers where additional skills and services are required. These advisers should be discussed and agreed between you and the Provider.
WHO CAN BE A PROVIDER?
Providers can be organisations or individuals who provide services like advisory, legal, financial, or intermediary services that help the applicant to become investment ready.
If a provider is successful in receiving grant funds through the enterprise they are working with and fails to secure investment for the enterprise on the agreed conditions three times, they will not be able to apply for further grant funding. This is to ensure that the quality and effectiveness of the services provided to enterprises will give them the best chance for success.
CAN PROVIDERS INVEST IN ENTERPRISES THEY PERFORM CAPACITY BUILDING WORK FOR?
Yes. However, the Growth Grant Panel requires full disclosure if the Provider expects to take an equity component in the enterprise or a performance fee upon the successful capital raising. If the aggregated amount of the equity component and performance fee is greater than 10% of the total deal, this will reflect unfavourably on the applicant, even though it will not automatically make them ineligible for a grant.
To avoid the potential perception of bias or conflict of interest, Providers cannot take more than a 30% share of the equity or debt raised as part of the Growth Grant Agreement.
WHAT IS A MILESTONE PAYMENT?
The intent of the Growth Grant is to help enterprises with the greatest chances of success to secure capital investment. It has been designed based on global best practices and has incentives that help to achieve this and recognise social impact outcomes.
A milestone payment of $15,000 is usually included in the Growth Grants. It is payable when the Social Impact Framework, prepared as part of the project, is approved.
For example: An organisation that is awarded an $80,000 Growth Grant will receive $65,000 when the Grant is awarded and $15,000 when their Social Impact Framework is approved.
A significant level of responsibility sits with the Providers to help create a Social Impact Framework or tool to measure impact outcomes for the enterprise.
IF I RECEIVE A GRANT, WHEN CAN I EXPECT TO RECEIVE THE FUNDING?
The initial Growth Grant funding is paid approximately eight weeks after the application round closes. The milestone payment of $15,000 will be paid upon approval of a Social Impact Framework.
DOES IMPACT INVESTMENT READY FACILITATE ACCESS TO INVESTORS?
No. If your organisation requires introductions, we recommend working with your selected Provider who understands your business and investment requirements to help you find values-aligned investors to meet your needs.
More questions? Contact us