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Social Investment
The Community Development Dilemma: Where are the Innovation Funds Going to Come From?

The Community Development Dilemma: Where are the Innovation Funds Going to Come From?

Community-led innovation has the potential to transform local economies, empower residents, and create long-term social value. Yet, as I have experienced firsthand, securing funding for these initiatives remains a significant challenge. The current funding landscape is riddled with gaps, making it incredibly difficult for entrepreneurial community projects to get off the ground.

The Public Sector’s Limited Approach

Despite acknowledging the importance of community innovation, the public sector lacks a direct mechanism to invest in these initiatives beyond traditional grant funding. Grants, while valuable in some contexts, are often:

  • Too small to make a meaningful impact on ambitious, long-term initiatives.
  • Tied to specific themes or priorities, making them inaccessible for broader, place-based innovation.
  • Limited flexibility restricts community-led projects’ ability to adapt and scale.

This means that many groundbreaking ideas are left unfunded, not because they lack merit but because they don’t fit neatly into predetermined funding categories.

Charitable and Lottery-Based Funding Falls Short

Many look to charitable foundations and organisations such as the National Lottery Community Fund or Comic Relief for support. However, these funding bodies prioritise low-risk projects that can deliver immediate, tangible results and generate positive PR.

While this approach has its place, it fails to support more ambitious community innovation efforts that require long-term investment, risk tolerance, and a willingness to embrace uncertainty.

Philanthropy: An Exclusive Club

Philanthropic funding could be a solution, but access is a significant barrier. Many funding opportunities are invitation-only, meaning you won’t even get to pitch your idea unless you have the right connections. Additionally, most philanthropists expect organisations to have a proven revenue stream, which creates a chicken-and-egg scenario—how do you generate revenue without the funding to get started?

The Investor Problem: CICs and the For-Profit Dilemma

Private investment, including angel investors and seed funders, could offer an alternative route. However, most investors avoid Community Interest Companies (CICs) because their legal structure prioritises social impact over shareholder returns.

This leaves social enterprises with a difficult decision:

  • Remain a CIC and struggle to attract private investment.
  • Register as a for-profit entity (potentially with an asset lock) and increase funding opportunities—but at the risk of compromising the social mission.

Even if a social enterprise does go for-profit, securing investment still requires a well-developed business plan and some initial revenue, which presents yet another hurdle for early-stage innovation projects.

The Shared Prosperity Fund: No Immediate Replacement in Sight

For those who saw the UK Shared Prosperity Fund as a vital source of support, the future looks uncertain. Any remaining funds must be spent by the end of March; as of now, there is no immediate replacement or new scheme from the government.

The new Labour government appears focused on empowering regional leaders to drive economic growth. The National Wealth Fund (NWF) and the Office for Investment are set to collaborate with regional mayors to develop tailored growth strategies, ensuring that investments align with local needs. This initiative will initially be trialled in Greater Manchester, West Yorkshire, the West Midlands, and the Glasgow City Region.

However, while this approach is being tested and refined, many other areas face a significant funding gap, particularly when it comes to supporting community-led innovation. Without immediate solutions, countless grassroots initiatives risk being stalled or abandoned altogether.

The Reality: A System Stacked Against Local Community Innovation

The current funding landscape is not set up to support innovative, entrepreneurial approaches to community wealth building and development. Without easy access to financial backing, many groundbreaking ideas are abandoned or forced into commercial models that may not align with their community-first mission.

Suppose we want to see real, transformative change in our communities. In that case, we need new funding mechanisms that recognise the value of long-term innovation, accept a degree of risk, and provide meaningful investment beyond small, short-term grants.

Moving Forward: Could a Community Wealth Fund Be the Answer?

Inspired by a recent blog post from Paul Norrish, Community Wealth Building Manager at Torbay and South Devon NHS Trust, I am encouraged by the idea of a dedicated wealth fund that truly supports community innovation. A funding model that offers flexible, long-term investment, prioritises social value and removes unnecessary barriers could be the key to unlocking the full potential of community-led initiatives.

This is a conversation worth having, and I’ll share more thoughts in the coming weeks. In the meantime, I’d love to hear from others facing similar challenges or with ideas on how we can drive change together.

Am I wrong in any of the above? Do you think Community Wealth Funds could become a solution? Let’s start the conversation!

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