Sir Ronald Cohen
Sir Ronald Cohen wants to achieve a "radical improvement in the UK's capacity to create wealth, economic growth and employment". However, he is not speaking of the growth potential of the venture capital industry, which he helped found 30 years ago, but, rather, of an emerging approach to social investment - community development finance.
In 2000 HM Treasury invited Sir Ronald to head up the Social Investment Task Force, a new initiative with a remit to explore ways to create a system of sustainable investment in economically deprived areas in the UK. Five years on, the Task Force's recommendations are bearing fruit: today the community development finance sector is worth £400 million, has financed over 9,000 businesses, created 10,000 jobs, and levered £160 million in additional funding to underinvested communities. The formation of the Community Development Finance Association, of which Sir Ronald is honorary president, has further strengthened the capacity of the sector.
Another of the five key recommendations of the Task Force - the creation of community development venture capital (CDVC) funds - is successfully applying the venture capital model to community investment. Bridges Community Ventures, the first CDVC company in the UK, launched in May 2002 with a £40 million fund, comprising £20 million of private investment matched equally by government funding. The company completed its first exit in June 2005, which garnered a 3.5x financial return on its investment. Sir Ronald, who is also Chairman of Bridges, believes that "CDVC will become a significant driver of the social investment sector", pointing to the growth of a number of regional CDVC funds throughout England.
Having recently stepped down as Chairman of Apax Partners, the company he founded in 1972 and which today ranks as one of the largest global private equity firms, Sir Ronald is embarking on his second career. He hopes to replicate the success of the venture capital industry, which has become a driving force of the UK economy, in the community development finance sector: "In the same way the venture capital industry helped to lift the UK out of economic crisis in the 1970s, the community development finance sector can help drive entrepreneurship and wealth creation in deprived communities. Capital has a multiplier effect, by levering in additional funds by boosting economic activity, by creating role models of entrepreneurial success and by recycling wealth within the community."
Moreover, Sir Ronald sees a new wave of social entrepreneurship emerging in the UK, driven in part by tax incentives and government support, but also by an influx into the sector of smart and energetic individuals committed to social investment and to creating "equality of opportunity for all". There are challenges, of course, such as defining and measuring social impact (metrics relating to jobs created, days worked, income levels, measures of economic activity and so on) on communities - the ultimate objective of social investors.
Yet Sir Ronald is optimistic as he seeks to harness the power of the private sector to achieve sustainable economic growth in disadvantaged communities: "The private sector, as it is decentralised, can operate swiftly in a community, as a part of it." Indeed, the experience of the Task Force has shown that the private sector will respond enthusiastically to opportunities to support social entrepreneurs, given proper incentives. He likens this approach to a train, with the financial return as the locomotive, and the social returns as its carriages.
Sir Ronald firmly believes that the private sector has an important role to play in supporting our communities: "As the private sector has grown, so its sense of social responsibility must grow." Social investment - in creating a bridge between the private and public sectors - will, he hopes help foster "a strong social culture that underpins entrepreneurial economies which tend to create divergences in wealth".
(from Starting from the heart By Mike Dickson A Guide to Giving, 2nd edition, 2005)