About The Young Academy Investment Fund

There is a long-evidenced ‘missing middle’ in terms of finance for entrepreneurs and business ventures.

This is the gap between start-up funds – which may come from small grants, entrepreneurs’ own savings, or contributions from friends and family – and funds from investors. The latter require substantial evidence about a venture’s prospects before being willing to invest.

The road between starting up and winning investment can be long and bumpy. Ventures undergo research and development, piloting, market-testing, launch, refinement and growth of the product or service – and many fail because, through all that work, they simply run out of funds before they reach the investors waiting for them at the other end.

Filling the gap

The Young Academy Investment Fund sought to fill this gap by providing the finance early-stage ventures need to scale up.

The fund was a pilot fund, testing different financing options and sharing learnings with the sector. It is an ‘impact first’ fund, and investments were only made to organisations making a difference for disadvantaged young people in the education system.

Investments were made using a convertible loan note (CLN). The note accrued simple interest at 7% per year and, after two years, converted either to equity (ideally as part of a second investment round) or to a revenue participation agreement, where the balance of the loan continues to accrue interest and is repaid at a fixed percentage of the venture’s revenue over five years.

The Young Academy Investment Fund was grant-funded, with 50% of the total budget provided by the Cabinet Office’s Social Incubator Fund. The investment fund capital was match-funded by UBS.

‘Driving quality and impact’

UBS continues to support The Young Academy’s ongoing fund management costs. In addition, UBS provides employee volunteer roles on the investment committee, and pro bono support to ventures that have been critical in driving quality and impact.

The fund measures its impact at two levels: both the impact that portfolio ventures have on educational inequality; and the impact the fund itself has by supporting ventures through the initial investment and its fund support.

Overall, launched as a practical solution to a pressing need, the fund is committed to sharing learnings and impact with the social investment sector.