Alex Oppes On Impact Investing & Opportunities For Social Enterprises

Alex Oppes joined Social Ventures Australia’s Impact Investing team in 2013 and helps build and finance social enterprises. He is responsible for investing SVA’s $15M Diversified Impact Fund. In addition to this, he leads SVA’s work supporting social enterprises to win and deliver large social procurement contracts.

Alex also helped establish and is a founding director of Vanguard Laundry Services – a leading Australian social enterprise.

Prior to SVA, Alex worked as a strategy consultant at McKinsey & Co., specialising in mergers and acquisitions.

Alex discusses the social enterprise movement in Australia, providing key insights into some of the progress made, as well as opportunities to improve, whilst providing advice for social entrepreneurs to maximise their impact.

Highlights from the interview (listen to the podcast for full details)

[Tom Allen] - Could you please share a bit about your background and what led you to working in impact investing and the social enterprise sector?

[Alex Oppes] - Absolutely. I started my career as a management consultant with a firm called McKinsey. Basically, my job there was helping businesses improve. That was through a combination of analysis, strategy, making PowerPoint slides, and racking up frequent flyer points.

I guess my thoughts on that were, ‘what if I can use my skills and efforts to work on projects that were more meaningful, and really could to help create a better society?’ That's what attracted me towards social enterprise.

Alex Oppes – Social Ventures Australia, Luke Terry – Vanguard Laundry Services and Sinclair Taylor – Westpac Foundation at the 2016 Social Enterprise Awards. Winners of the Capital for Impact Award

As Director of Impact Investing and SVA then, what sort of projects are you involved in, and what is it that gets you up in the morning?

It's a good question. To summarise my role, it's really around helping to build and finance some of Australia's leading social enterprises. Some of the projects that I've been involved in include helping to build Vanguard Laundry, and take that from being an idea, through to executing it and working very closely with Luke Terry throughout that process.

Then, on the financing side of things, I’ve been lucky enough to work with a whole bunch of different outstanding social enterprises, from STREAT, to the Christie Centre in Mildura, Ability Enterprises up in Toowoomba, and most recently, a business called Maths Pathway based down in Victoria.

In terms of what gets me out of bed in the morning, I guess one of the great pleasures of the work that I do is getting to work with some of the most talented and dedicated people, in any field I guess, who are really doing their lives' work.

Whether it be Bec Scott at STREAT, her vision and the force of her personality; Luke Terry at Vanguard with his entrepreneurial zeal. Even Florence Davidson at the Christie Centre with her steely determination. I guess that's what I love to do: is to be able to work with some of these amazing people.

Absolutely. There's some amazing people you’ve just mentioned there.

So, Alex, working within this Impact Investment space, how have you seen the movement change over the last five years or so? And where do you see it heading into the future?

I would say it's a bit of a mixed bag, to be honest. I think there's been really good progress in some areas, and I'll call out a few of those. There's been some other areas where I think progress has not been as fast as it should have been.

In terms of the good progress, I think, from the perspective of institutional investors, (that is superannuation funds and insurers), I think they are increasingly putting their money where their mouth is.

Here I'm talking about Impact Investing in a fairly broad context. Broader than just the financing of social enterprises, but really looking at more broadly how people's lifetime savings are invested. And thinking about all of those positive and negatives externalities associated with those investment decisions.

A couple of examples in the institutional investor space… HESTA is an Australian superannuation fund which now has a $70 million mandate, which is managed by SVA in the Impact Investing space. That's funding large scale projects.

We recently funded one down in Tasmania, which is Australia's first suburban village, which is designed specifically for people with dementia. It's got 15 or so tailored houses. It's got supermarkets, cinema, café, gardens set around this suburban village-type setting. So I think there are really promising shoots there.

There is, I think, some really good progress being made in the social procurement space, and that is starting to translate into increased demand for capital, as the social enterprises and so on look to scale up to meet these contracts.

And then finally, I think social impact bonds are increasing in number. And are evolving as governments tend to explore new ways of funding solutions to really challenging problems. There's some good progress areas.

I think just to quickly call out a couple of areas where I think we haven't made as much progress as possible.

In the social enterprise space, there is still a limited amount of capital, which is available for early-stage social enterprises. And I think that continues to be a problem.

I think in the last few years there have been some really outstanding investments made, and capital raised. Typically at the biggest scale. Recently I can think of the Food Connect Shed in Brisbane. You've got Matt Pfahlert of ACRE, who led a $2.5 million community buyback of the old Beechworth Jail. And even Vanguard Laundry.

I think, though, that some of the key supports for this early-stage investment are perhaps even smaller than five years ago.

For instance, five years ago we had the government's set of programmes that was a Social Enterprise Development and Investment Fund. Which was a $20 million government fund, which was designed to stimulate Impact Investing, much of which has now been invested. And there hasn't been a follow on in that field.

So I think there are some really good green shoots. But there are areas where I think we can do more, and I think anyone working in this space is always trying to grow it, and feels a sense of frustration when things aren't as fast as they would like.

Alex Oppes visiting STREAT’s Cromwell site.

Absolutely. Do you see any other really strong opportunities for the social enterprise sector more broadly in Australia? And if so, what do you believe is needed to really build on the current momentum?

One of the things that I touched on in that previous response was the idea of social procurement. And hopefully that's something that's familiar to most of your listeners. But for those who aren't familiar, social procurement is typically when businesses or governments purchase a good or service from a social enterprise.

And in doing so, they get not just the service, but they create a social good that goes along with it. So that might be creating employment opportunities for people who would otherwise be excluded from the labour force. Or it might be purchasing from a fair trade supplier, for instance, and increasing incomes to farmers.

So in the social procurement space, I think there is a huge opportunity for social enterprises.

Typically, in the business to business space, or business to government.

Some of the really exciting opportunities which have been popping up in the last couple of years, and I think there's a lot of momentum around them; first of all, down in Victoria, the government has introduced social procurement targets for at least one major infrastructure project. And has started to encourage or require that bidders put together a social procurement strategy for others. So there's certainly a lot of progress there.

And more recently, the Victorian government has introduced a whole of government social procurement policy, which is basically asking each of the departments of government to come up with their own strategies to how they can incorporate social enterprises and various other minority businesses into their supply chain.

I think what that does, is it creates a whole lot of new business opportunities for social enterprises. And that then allows them to really scale up, and to do more of their mission, whether that be employing people that are otherwise excluded or some other form of social mission.

In terms of what's needed to build this, I think there's a couple of things. Just quickly, off the top of my head, I think that perhaps more could be done to really turbocharge that demand.

I would love to see, for instance, a voluntary social procurement target agreed to by corporate Australia. I think that there's real potential for that to happen.

I think that on the supply side of things, that there's a lot of capacity-building support, which is needed to help to grow the capabilities of social enterprises.

I'm a bit of an evidence nerd. So I think that there's still a lack of really good solid independent evidence, which looks at the costs and the benefits of social procurement. I've got a gut feeling and a hunch that there is a really positive case to be made. But I think to really entrench it into policy on the longterm basis, we need that solid evidence base.

So there's just a couple of the things I'd love to see done to really make the most of the social procurement opportunity.

We recently spoke to Matthew Taylor, who's been working with the Victorian government in that social procurement space. He was explaining some ins and outs of that as well. We’ll publish that interview shortly.

To change topics slightly, Alex, when you work with social entrepreneurs in helping them to get investment, where do you typically see them falling short?

So, I think the way to think about investment readiness is as a sort of spectrum. You've got different investors that are willing to invest at different points along the spectrum. At that really early stage, it's typically the three Fs: Family, Friends, and Fools. That's kind of common.

And right at the other end of the spectrum, you've got big, institutional investors like superannuation funds that have a lower risk tolerance, and that they are looking for larger investments that tick more of the investment readiness boxes.

And then obviously, there are investors all the way along that spectrum, and some that invest in earlier stage organisations and some that prefer later stage organisations.

To share SVA’s [focus], we typically look to invest in social enterprises that have about $500,000 of annualised revenue, or about $40,000 per month of revenue.

And what that means, in terms of what we look for, is organisations that have developed a product or an offering, that have gone out there to market and have tested it and have got some of those early customers.

Many times they might have already pivoted, so they've refined their ideas and they've gone back to market. And they've come up with something that they think is really capable of scaling up. And it's that growth stage in capital that we look for.

In terms of the social entrepreneurs that approach us, that are not quite right, I would say it's those that are typically earlier stage than what we are able to invest in.

I would advise social entrepreneurs to get out there and if possible, get out and test their product in the market before investing a whole lot of capital.

Come up with a sensible financial model. In a previous life, I was an entrepreneur myself.

And people would always tell me that business plans take twice as long, and cost twice as much as what you've got written in your presentation. But it's true. And I think that if you’ve been too aggressive with some of the assumptions in the financial model, you can land in hot water.

And then the final point I would say is really start to think about how you would go about measuring your social impact.

And there are some great tools and frameworks out there for doing that.

You have some great insights there, Alex. So, you've spoken about some really inspiring other social enterprises in Australia at the start of the podcast. Are there any other projects or initiatives that you've come across recently which are really creating some great positive social change?

One of the privileges of the job is getting to see quite a broad range of really inspiring projects. And so a couple that come to mind… First of all, recently, I've spent some time in South Australia. I've spent quite a lot of time there with some Aboriginal Corporations that are working on really interesting projects that involved the sustainable harvesting of all sorts of native products.

Things like seafoods and native flowers. And these are, I think, just fantastic businesses. First of all, they're really attractive from a business perspective. High margins and growing markets. But they are also creating Aboriginal jobs and training on country. They're driving economic independence. They're getting native foods and flowers out there into the houses and restaurants, and really getting them into the popular culture and the tastes of the country.

I find that just really inspiring. That nice nexus between working on country, sustainability, economic independence, jobs and training. I think that that's a really interesting area. And I think I'd like to see more of that continue to develop, and I'm sure it will. That's really inspiring for me.

I think the other thing is around the social procurement space. I'm lucky enough to speak recently with a number of outstanding organisations that are doing really great things.

And just to name a couple of them, I think there's organisations like Outlook Environmental, which is operating a bunch of the land transfer stations down in Melbourne. And is winning a lot of the work through the major infrastructure projects in Victoria, and creating a significant number of jobs. And I think that's really inspiring, going out there and seeing that.

Probably a bit biassed here, but Vanguard Laundry as well. We've really started to hit our straps, and we've transitioned about 15 staff to new jobs beyond Vanguard in the last six months alone. So we're really starting to impact a significant number of people's lives.

Thanks for sharing those. So to finish things off then, Alex, could you please recommend a few great books or blogs or podcasts for our listeners?

The thing that I've been doing a bit recently is trying to learn a bit more about Aboriginal history and culture. I think looking back to my school education, there is just a huge gaping hole there in terms of my knowledge of that area.

So I've been reading a couple of classics, like Henry Reynolds's book The Other Side of the Frontier. Which I think is a really good starting point for people wanting to understand the basic situation pre- and post-European settlement.

Recently what I've been doing is actually an online learning course, which is run by the Centre for Cultural Competence Australia. It's an Aboriginal and Torres Strait Islander cultural competence course.

And while it's not really a book, it's more of an online multimedia thing. It's just been really rich and detailed, well researched. It's really compelling and it's just been great to see and learn so much by a different way.

And finally, so I'm a bit of both a Paul Keating and a Kerry O'Brien tragic. So I recommend Keating by Kerry O'Brien. And I found that Keating's vision for a reconciled modern Australia was really compelling.