Sefa in the rear view: from a capital experiment to connecting a sector
Social Enterprise Finance Australia (Sefa) started as an experiment. One that set out to prove that impact investment isn’t too risky – and can be a catalyst for meaningful change. Here’s what we’ve learned 12 years on.
Sefa was established in 2011 to bridge the gap between philanthropy and mainstream finance through a dedicated pool of funds. With a $10 million grant from the Federal Government’s Social Enterprise Development and Investment Fund (SEDIF) and another $10 million raised through equity and debt investors, we set out on a journey that has been anything but straightforward.
A second pillar
Our business plan was highly ambitious. We aimed to grow fast and become self-sustaining quickly, with a goal to write 86 loans in the first year.
We quickly realised that our small ticket, high impact loans meant becoming self-sustainable so quickly wasn’t that easy. Every loan we do is unique, requiring a lot of work on due diligence and bespoke support. Through our holistic investment process we also recognised our role didn’t stop at capital. We needed to help organisations build their capability through an investment lens and walk alongside them to set them up to succeed. Because when we do, social enterprises truly thrive.
Take 42 Adelaide. When Louise Nobes came across 42 – the only free coding school in the world – she immediately wanted to bring the model to Australia to create a more sustainable way of supporting young people who don’t fit the traditional education system. Louise was the first non-millionaire to embark on setting up a 42 school.
In 2020, 42 Adelaide opened its doors, but needed a secure loan to help with the start up costs. So, we asked the tough questions through a four-month due diligence process, modelled various finance options and provided a loan under the Federal Government’s SME Recovery Loan Scheme . We supported Louise every step of the way. Today, the social enterprise is a success, already looking to expand to other cities. You can read more about the school here.
Our role as a critical friend and a second brain gave way to a second pillar at Sefa that we didn’t foresee: building capability. It’s this second pillar that’s helped us amplify our impact and make us a sustainable, profitable business – paying our first dividends in 2023.
Adding Sefa Partnerships to the family
In 2016, we also founded Sefa Partnerships to address some important gaps in the market along our journey. A lot of social enterprises and purpose-driven organisations are excluded from philanthropy and blended capital because they don't have the right tax status. Sefa Partnerships is a benevolent institution – a connecting entity that collaborates with both demand and supply side and holds the key to catalytic capital to those that fall between the cracks.
Through Sefa Partnerships, we have also created partnerships with key players in the sector to make sure we can plug any skills or knowledge gaps and extend our reach and impact.
Our work with Macquarie Group Foundation over the last seven years is a perfect example of the impact we can have when we collaborate with likeminded partners. We have facilitated its last three 12-week Kickstarter Programs that allow social entrepreneurs to develop and test their business models, build sustainable plans and learn about commercial practices. We also helped run its Future Skills programs, where Macquarie staff collaborated on real-world social enterprise challenges, and facilitated a number of hackathons. Sefa’s work on these programs has also helped bring a social enterprise mindset to Macquarie Group’s leadership team. Together, we have not only helped set up many organisations for a sustainable future, but we’ve also learned a lot from each other along the way. Read more about our work with Macquarie Group Foundation here.
Central connectors
While our goal of 86 loans in the first year now seems unrealistic in hindsight (after 12 years we’ve written just under 80 loans), we’ve accomplished so much more than we originally intended.
We’ve shown that Sefa’s role as a central connector is vital for helping purpose-driven organisations thrive. We have also busted some common myths along the way, proving that impact investment doesn’t have to be risky – and that bigger isn’t always better. And the direct difference we’ve made for organisations is what keeps us going every day.
A thriving social impact sector is much more than just a loan. It's more than capability building and partnership. It’s about walking alongside founders and organisations and offering a second brain and the unique support they need at each step.
Now that we’ve proven our model works, we are more confident than ever we can contribute to shaping a bold, new social impact investment sector.
