With a £22m exit under her belt, Karen Darby is back with a brand new venture. She tells GB about her ambitions for Call Britannia, why you can’t have a social impact without profit and why she has no time for limiting definitions of social enterprise
“The skills you learn in telesales are the skills you need in life. Common sense, confidence, how to sell, to build rapport: these are welcome in any business.”
Karen Darby is describing the ‘epiphany’ behind new call centre business, Call Britannia. After selling price comparison service SimplySwitch to the Daily Mail and General Trust for £22m in 2006, she was looking for a new project. Possibilities in TV beckoned; meetings took place with production companies and screen tests were held. But her brief foray into the TV world left her realising that she wanted to “set up a proper business. And help people as well”.
Call Britannia was born in November last year and provides UK-based call centres for its clients. It is also the vehicle through which Darby intends to create 10,000 jobs. Wanting to help the unemployed as the recession began to take hold, she realised that she could positively discriminate in favour of “those who have been excluded from contributing” – the long term unemployed, the over 50s, the disabled or those with a criminal record – when staffing a call centre.
Unusually, front line staff are then encouraged and helped to move on to a ‘better’ job after between six months and a year of intensive training and working to learn the skills Darby calls “a firm foundation for life”.
Furthermore, 2.5% – soon to increase to 5% – of the business’ revenues go into a Foundation – cash reserved for helping Call Britannia graduates, whether in getting a new job, setting up their own business, going back to college or just tiding them over while they make the adjustment.
A bankable entrepreneur
To make all this happen, Darby needed funding. Despite a forbidding general funding environment, ironically, her timing was spot on. In November 2008, Bridges Ventures, which had previously funded SimplySwitch, set up its Social Entrepreneurs Fund. It has so far raised £8.5m to provide investment to businesses delivering “high social impacts and operating sustainable business models”, with the aim of making a reasonable financial return to demonstrate a sustainable funding source for social enterprises.
The Big Issue Invest’s Social Enterprise Investment Fund, a £10m fund purely for businesses that would provide financial returns and measured social impact, had also been recently launched. Its aim? To demonstrate the viability of social investing to the wider investment community.
Through such funds, Darby was able to find investment from sources where the company’s commercial viability and its ability to create jobs where they are needed were of equal importance.
With SimplySwitch under her belt, Darby was, in her words, “a bankable entrepreneur”. Ed Siegel, director of investment at Big Issue Invest, explains: “There are plenty of well intended social entrepreneurs but they’re not all well rounded managers. When the businessperson has had a successful business before, you go in with a lot more confidence that you’ll be successful from a financial standpoint.”
Darby’s ambition for Call Britannia was another attraction: she plans to have built 10 new call centres in areas of social deprivation in five to seven years. “And then we’ll take the 10,000 new jobs to 100,000,” she says. “And then we might go to America, who knows?”
It’s a sharp contrast to the aims of many social enterprise managers, who, says Siegel, “are generally conservative; they try and preserve the business rather than expand it”.
This ‘hybrid’ model of ambitious commercialism and equally ambitious social targets proved very attractive to the new funds. Bridges Social Entrepreneurs Fund invested £500,000 while Big Issue Invest committed £350,000 – both funds’ first investment. This was topped up by £292,500 from the government’s Future Jobs Fund, and £150,000 from the management team, headed by Darby.
Social targets
“Of the £350,000 that was invested, about £20,000 was in equity and the rest was in loan finance,” says Siegel. “The investment involved a number of requirements to assure us that the social mission would be deliberate and would perpetuate in the event of the business being sold.”
These requirements were based around the numbers of unemployed people Call Britannia hired, the proportion of these who were long term unemployed or who were disadvantaged in other ways – the disabled, single mothers and so on – and the amount of revenue that went into the Foundation.
“If the business doesn’t meet these requirements, we’d require the loan to be paid back. That’s the stick. The carrot is that that if they meet the targets in the event of them selling, the management team will benefit from bonus shares. They’re incentivised financially to perform socially.”
Darby agrees, with 51% of equity still held by the management team. “Equity is important to incentivise and to get good people,” she stresses.
The investors take an active involvement in Call Britannia, sitting on the board and with a say in whoever it will be sold to in the event of an exit. This means that, unlike with SimplySwitch, where, Darby notes, “we could have sold it to the devil”, any buyer would have to continue to operate in the same way.
Darby admits it’s not always easy keeping shareholders happy on two fronts – both financially and socially. “It is difficult to serve two masters and there will sometimes be compromise. But you can’t have any social impact without profit.”