When we launched our impact investment funds at Figurative, our primary metrics for success were straightforward: loan repayment rates, development of new revenue streams, achievement of intended impact outcomes, and the ability to leverage additional funding. However, as we reflect on our portfolio of 53 loans to cultural and creative organisations, a striking pattern emerges: over a third of our investments have catalysed significant organisational transformation, with another 15% showing early promise.
But what do we mean by transformation? The changes we’ve witnessed span a broad spectrum. Some organisations have achieved remarkable growth in both revenue and physical presence. Others have undergone significant professionalisation of their operations. We’ve seen organisations dramatically reduce costs through energy-efficient infrastructure investments, while others have completely reimagined their business models through strategic asset acquisition or the creation of innovative revenue streams. Take, for instance, a dance company that transformed its new headquarters into a community hub, incorporating rentable rehearsal spaces and accommodation that generated substantial additional income.
The scale of investment matters significantly in driving transformation. Our analysis shows that larger loans tend to correlate with more substantive organisational change. However, this doesn’t diminish the value of smaller investments, which often serve crucial purposes like cashflow management or moderate but meaningful improvements to operations. It’s also worth noting that transformation is only something that can be seen in the rear view mirror, with the benefit of sufficient elapsed time in which to make the assessment; for our newer investments, it’s simply too early to tell.
What distinguishes the organisations that achieve transformative outcomes? The common thread is leadership competency, particularly in financial thinking. The most successful projects are led by individuals who can effectively adopt an investor’s perspective, thoroughly addressing assumptions, risks, and contingencies in their planning. These leaders demonstrate not just vision, but a practical understanding of what makes an investment viable.
Of course, not every investment yields transformation, and these cases offer equally valuable insights. Some investments lead to more moderate gains where, for example, organisational stabilisation or cashflow management is the priority. Some projects simply faced bad luck despite sound planning. In other instances, we’ve learned that debt financing wasn’t the appropriate tool, or we lacked sufficient understanding of a new venture’s target market to make an objective appraisal. Communication breakdowns and unfocused management have also contributed to less successful outcomes.
These lessons have refined our approach to impact investment in the cultural sector. While transformation isn’t our sole criterion for success, understanding the conditions that enable it helps us better support organisations in achieving their ambitions. Whether through major capital projects or smaller operational improvements, our experience shows that impact investment can be a powerful catalyst for positive change in arts and culture organisations – when the right elements align.
Find out more about our impact investing here.
