Siemens Stiftung: Impact investors often complain that they struggle to find suitable companies to invest in. How do you currently find your investees?
Karen: Very importantly, wherever we are actively investing, we have our own local Yunus Social Business (YSB) teams on the ground. Hence, our main source is the local network. We are not looking from here in Berlin for a company in Africa, but we are very well connected with incubators, acceleration programs, and organizations – all of these platforms that connect investors and companies. Databases of foundations in the sec-tor are certainly also an important source. And then, of course, it is a lot of direct referral from our investees to other investees, for example. It is a small community.
Siemens Stiftung: What are the main challenges when it comes to financing social entrepreneurs?
Karen: On the funding side, there is really an increasing competition in impact investing and the expectations of funders are sometimes unrealistically high in terms of what and how quickly one can achieve impact and financial sustainability, let alone financial returns. On the investment side, due diligence can obviously be quite challenging. It is important that you have access to the right data and that you are familiar with the local situation and context. On the portfolio management side, once you have invested, of course you have typical problems like helping businesses to move from entrepreneur-centered organizations to ones with proper structures and processes that are scalable. Finally, of course you need to have stable surroundings. If you do not have proper laws and political stability, that makes it much more difficult for the business to operate.