How innovative solutions can help solve some our biggest social challenges.
The world’s population is undeniably ageing. The population of the elderly in the EU27 is forecast to increase from 90 million in 2019 to 130 million by 2050. And a report by the United Nations Department for Economic and Social Affairs estimates that by 2100, more than 60% of the world’s population will be over 65. A report by AgeUK projects that the number of people aged 50 or over in England, who are often lonely will increase to two million by 2026 if no action is taken.
To tackle this issue, Nesta has, in partnership with UKRI, launched a hybrid equity-grant funding model, the Healthy Ageing Challenge, for enterprises that focus on supporting healthy ageing. Nesta was an early pioneer of impact investment and we remain at the forefront of testing new models in this area. Here, we look at why this model of funding and partnership could change the game in the impact investment space and what has been achieved so far.
Starting this year, Nesta has earmarked £3 million of funding capital for equity investments in companies that offer solutions to increase healthy life expectancy and reduce health inequalities. Each equity investment that is made by Nesta will be aligned to an equal amount of grant capital from UKRI to help companies to develop and scale their solutions. The BEIS innovation strategy states that investor-partnership programmes are an effective tool for driving greater investment into innovative businesses. Although Nesta has always used grant and equity funding to support socially-minded innovation, simultaneously combining the two in partnership with another organisation is new to Nesta, and we are excited about it.
Equity-grant funding offers several advantages for early stage companies over straightforward equity financing. Firstly, the model creates greater security for those companies that we do back and the chance to take more time to develop their ideas. Secondly, by adding non-dilutive grant funding to Nesta’s equity, founders can retain a greater equity stake in their business. Thirdly, by offering financing in partnership with the UKRI, another organisation with societal outcomes as a priority, we will extend our collective reach to fresh commercial ideas tackling this growing challenge.
At Nesta we invest in companies with big ambitions so that we can support products and services with the potential to have a positive impact on millions of people. And we look for companies with high potential to make money, or financial return. We look for companies at Seed to Series A stage, which can demonstrate that customers really want (and need) what they have to offer. At Nesta we offer patient capital and stick with our investee companies for the long term. Some companies developing these new solutions might have a slower growth curve than equity investments would normally allow for. The addition of a grant alongside equity will help enhance our longer-term approach to generating social impact, and encourage solutions that benefit the most disadvantaged. This hybrid funding package enables us to find and work with businesses that we may not otherwise be able to fund purely through equity. We would encourage applications from any company with a relevant healthy ageing solution that could accelerate its growth and impact with this funding. It could be a healthy ageing solution that is part of a broader portfolio of products or the central focus of the business. The grant funding would be allocated to R&D projects that focus tightly on the theme.
Nesta has a wealth of experience in the Healthy Ageing sector including through our Healthy Ageing Fund. Current Nesta investment recipients include Reconnections, a company that works to reduce loneliness amongst older people. In a recent evaluation by the LSE, participants reported a reduction in the level of loneliness which continued for up to 18 months after the end of the programme. Oomph, a Nesta investment since 2013, provides services including a media channel for care home staff training as well as a service offering trips, outings and exercise classes for care home residents.
Both Nesta and UKRI have expertise in innovation for social benefit as well as blending commercial success with strong impact. Companies that are successful in gaining funding from this scheme join an environment where they can not only increase their social impact but are also helped to measure it more effectively and are supported by a dedicated Community of Practice. In addition, they can benefit from Nesta’s range of expertise in data science, behavioural science, experimentation and evaluation, and extensive networks in the public and private sector, all of which bolster our capacity to support nascent companies and accelerate their success.
We have growing evidence that the hybrid funding model is generating fresh ideas. In the first few months of the partnership, we received interest from over 50 companies, ranging from companies that use technology to monitor vulnerable older adults’ wellbeing, to ones developing mobility solutions, VR or food tech to enable healthy ageing.
We would love to see more innovations like these. Our priority themes are innovations that extend working lives, support social connections to tackle loneliness and help older people maintain independence for longer. We would like to support innovation in re-skilling older people to reduce unemployment in later years, an issue that has been perpetuated by the ongoing pandemic.
If you are a founder or company working on solutions that address healthy ageing, if you have existing customers and initial evidence of social impact, you can find out more about how to apply for funding here.