Homes and cities that support healthy ageing need finance. The technology and services that will make those homes and cities suitable for ageing need finance too. There are currently gaps in the funding needed to enable the businesses in this sector to grow.
Funding is needed to enable organisations to grow from early stage to ‘investment ready’ ventures of sufficient scale and maturity to be operationally sound, commercially viable and proven to achieve impact. Research by the Centre for Ageing Better and Big Society Capital demonstrated weakness in the market for providing investment at this early growth stage.
Achieving scale is a particular challenge for products and services that aim to achieve significant social as well as economic impact. Positive social outcomes are not recognised in the prices paid for goods and services. The prevailing venture capital business model relies on supporting companies with the potential to achieve very large scale very quickly. Businesses attempting to address a complex social need, while being perfectly viable, may not be strong bets for such a growth trajectory and therefore fall outside the narrow types considered by the most successful commercial venture funds.
Specialist, social, strategic and public investments are needed
The answer may in part be specialist funds focused on supporting ageing innovations to achieve scale over a longer-term. Such funds will require investors willing to take a longer perspective and to value positive social outcomes as well as financial returns. Some social or strategic investors are prepared to take this longer view. For other investments, perhaps with higher risks, some government support, is both necessary and appropriate given the large public benefits involved. This could be through tax relief, funding research or by supporting funds directly.
There is also a potential tension between inclusion and commercialisation. Many companies seek to become viable by developing ‘premium products’ that attract a higher-paying customer. This ‘trickle-down’ approach is limited and often ventures struggle to reach sufficient scale to penetrate the mass market. Without the right incentives, they often remain high-end and don’t address a broad range of need.
Therefore, we need to develop financing solutions that work for investors while addressing social needs across the whole population. We are starting to see models emerging, that combine commercial disciplines with public funding where appropriate (such as for research) and socially motivated investors. We would like to hear from other potential partners on this journey.
Stephen Muers is Head of Strategy and Market Development at Big Society Capital. You can find out more about Big Society Capital’s work in housing on their website here.
As part of our Housing Innovation Programme, Connected Places Catapult is hosting a breakfast talk on 19 February on Financing Homes for Healthy Ageing to further explore the challenges and opportunities in housing for an ageing population. Follow this link to register.
We’re also launching our latest report on Homes and Healthy Ageing on 26 February. If this is subject that interests you, please be sure to sign up using this link.
This blog is one in a series and is part of our Future of Housing programme. Find out more about our work in this area by visiting our new Future of Housing knowledge hub.
Our Future of Housing blog series is intended as a platform for open debate. Views expressed are not necessarily those of Connected Places Catapult.