1. FINANCING SOCIAL
INNOVATION
Geoff Mulgan

2. WHAT KIND OF MONEY?
1 Prompts
2 Proposals
6 Systemic
3 Prototypes change
4 Sustaining
5 Scaling

3. Most money, fewest
constraints
Least money, most
outcomes

4. High
Risk
Low
Low Impact High

5. MONEY AND VALUE

6. EARLY STAGE –
speculative, open,
stage-gate … for
individuals, teams,
organisations

7. centralised
Corporate
Venturing
Innovation lab
Open Source
external internal
Open Innovation
Skunkworks
Movements,
campaigns
decentralised

8. centralised
external internal
decentralised

9. • Inducement prizes – Big Green
Challenge
• Accelerators

10. SUSTAINING AND SCALING

11. Analysing ventures from a commercial lens

12. •Developing a business model Intellectual
•Securing initial funds – Developing
Building operational property
strategy protection
customers and investment systems and
processes to deliverDistribution
Business planning Money and for users
channels and
systems
Banking and business model Know-how
working capital Management
Pricing
information
Sales and business Purchasing systems
development
Leasing
•Acquiring the premises Co-operatives
and equipment to Physical INNOVATION
People and
deliver the innovation Resources governance Community
•Accessing the raw xxxx chain
Supply Interest
•Setup up Company
management Advertising Independent
materials the innovation evaluationgovernance
and Industrial and
requires Reputation •Recruit
benchmarking Provident
•Evaluating effectiveness
and leadership and Society
•Building brand, profile, Non-executive Partnerships
effectiveness team
reputation Directors Charities
•Switching from previous Shareholders
solutions PR agreements

13. Impact vs financial return

14. High
X
Risk
Social investors
Low
Commercial
funding
Low Impact High

15. Foundations
Government
Crowdfunding

16. EXAMPLES OF SOCIAL FINANCE
• Banca Etica and Banca Prossima in Italy
• Big Society Capital in the UK
• Acumen in the US

17. MOBILISING PROCURMENT AND PRIZES
Articulate Procure
need and outcomes &
send clear solutions,
signals to not
the market products
and services
Variable tariffs
Widen the pool of
suppliers and
innovators

18. WHAT DEGREE OF COMPETITION?
Competition is
good for
innovation…
up to a point
How open to
make public
markets?

19. MOBILISING PROCURMENT AND PRIZES
Very efficient
Cost efficiencies
Less efficient
Small Size of organisation/unit Large

20. The pattern for public services, and national governments:
replication is not always best served by organisational
growth
Very efficient
Cost efficiencies
Less efficient
Small Size of organisation/unit Large

21. FUTURE VALUE
From ‘we need more money’ to ‘how do we create
future value and turn it into present money’. This
is where social finance overlaps with public funding
and pressures.

23. A long history of tools ....
• Commissioning for outcomes
• Payment by results
• PPPs
• Shared savings models
• Publicly created markets (carbon, housing)

24. Cost-benefit analysis stated preference revealed
Social Impact Assessment methods preference
QALYS
Best Available
Charitable Option
Social Return on Life
(BACO)
Investment satisfaction
DALYs Education value Blended value
added
WARM
public value Social value
PROMs
Index of Civic Health
Satellite
environment
National time bilan societal accounts
i5
accounts bilancio sociale

25. FINANCING SOCIAL
INNOVATION – two examples

26. 1. Social Impact Bonds

27. Social Impact Bonds
• Finance from
A programme • Commitment to
Foundations, or of actions pay on achieving
Commercial outcomes
• Implemented by a
investors • Benchmarked
range of providers,
against control
coordinated by a
group, and
lead organisation,
separated from
intermediary or an
"environmental"
Raising a sum SPV
risk factors
for investment
A commitment
to repay

28. Peterborough SIB
•First SIB contract signed with the Ministry of Justice in
March 2010. Social Finance raised £5m to fund work with
3,000 male, short-sentence prisoners.
• Nationally, 60% of such prisoners re-offend within 1
year.
• Social sector organisations provide intensive support to
prisoners and their families.
•Investors will receive a return if re-offending among the
prison leavers falls by 7.5% or more
• If there is a drop in re-offending beyond 7.5%,
maximum is capped at 13% over eight years.

29. Australia: New South Wales
(Social Benefit Bonds)
US Federal Government
(Pay for Success Bonds)

30. 2. Preventive investment at the
level of a city: Greater
Manchester

31. Elements
• collaboration of municipalities and national
government combining:
• evidenced actions to reduce costs (in this case
mainly on prisons and courts)
• a Financial Incentive for reductions in prison
numbers
• a range of commissions to NGOs and others

32. Grounded in analysis of where crime could be
de-escalated with savings
Young Young Young Adults at
Adults at
1 People at
risk of
conviction
2 People at
risk of
reoffending
3 Adults at
risk of
reoffending
4 risk of short
custodial
sentences
5 risk of
reoffending
Police-led Restorative Intensive Alternative to Custody
Disposals
Restorative Youth Choose Change
Conferencing
Multisystemic Therapy

33. Combined with options for greater integration
1. A single assessment process
2. A single plan for offenders
3. A single leader of each plan
4. Shared outcomes
5. Shape the pattern of resource allocation
6. Shared savings

34. Questions
• how to align interests of payers, funders,
delivery agencies, beneficiaries?
• will this spur or hinder innovation?
• is it worth the transaction costs?
• what are the political risks?