It is tough to raise funds in an immature market!

Dear ‘impact investor’, would you mind telling us what you want?

Webuye and Kapsabet, August 2017

Perhaps six months ago, as we were reaching our two-year anniversary and had been operating long enough in MVP-mode validating our hypotheses, we felt ready to press the accelerator pedal and grow! This means we needed money, a substantial enough amount to need to go out there looking for lenders and equity partners since the founders’ pocket aren’t that deep and selling on credit means tight cash flows!

This post is based on conversations over the last few months that we held with anyone that was kind enough to listen to us. Most of these people are so-called “impact investors” but also include intermediaries. We’re sure that we’re not the only ones facing these obstacles:

Asymmetric information

The first obstacle is to know who is who and what they do and want.In this unjust world, the cash-strapped start-up needs to be transparent as polished glass and needs to be prepared not only with one, three, five-minute pitches, power-point presentations but also financial models, bios, audited accounts etc in no time. But I often wonder: who I am trying to talk to? Who is going to listen to my one-minute pitch or read my in-depth financial model? Don’t they tell you: “know your audience first”?

Well, after spending a fair amount of time one eventually manages to collect a few names here and there and has a vague idea of what they do (from gossip, their website, twitter, a panel in an odd conference), but fundamentally one does not know anything yet, what they really do and want. How big is their fund? Most crucially do they still have money to invest? How much? What is their window of time before they have to return the money to investors? What is their target market? Surely, they must have one?! It emerges, however, many impact-investors, particularly family offices are just floating about – drifting between the funder’s vision and what’s en vogue right now.

Most of this information (what enterprises are targeted, investment amounts or expected returns) is more or less freely available in the normal VC world, for sake of comparison. Why is the impact investing space different from the normal investing space? We’ve been asked a number of times to share our financials in the first email. It’s a transparent start-up talking to ‘impact investor’ black holes. No information on their aims and what they are looking for escapes them.


Even equipped with a well-maintained potential funders list, advance research and intel, and a toe rather than a foot inside the blackhole, there comes the second barrier: language.

Because we operate in an emerging economy, or ‘frontier market’ if that’s your buzzword of choice, and are addressing an untapped market segment (rural women) with novel technology goods (solar, cookstoves, smartphones) we are often perceived by Westerners as a social enterprise or worse as a charity, this is of course before we can even say “hello … we’re doing X”.

They say first impressions last, and it must be true. We have had doors closed after one email exchange because we were classified as a square peg in a round box. Yes, I could have sent the same story using another language but if I don’t know if they speak French or Spanish all I can do is guess what will resonate with them (back to “know your audience”).

“Sorry, we’re not investing in the energy space any longer”. Well, did we get a chance to say that we’re not an energy business? Of course not. Drawer opened, Bidhaa Sasa filed as an ‘energy enterprise’, drawer closed. Ciao!

“The business model doesn’t yet show enough traction” Ciao! Well, how about you tell us what traction you would like to see? Is it measured by revenue, number of years operating, level of profits, number of staff, number of countries we have a presence in….What is enough traction? Is there a benchmark out there I was not aware of? I bet my bottom-dollar it’s different for everyone you meet and I know you invested in idea / pre-revenue businesses! How about an honest answer?!

Or on the very tricky subject of “impact”: I am sure any start-up founder, in rich or poor countries, wants to change the world for the better, and if you ask her if she thinks her business has a (positive) impact (on people) she will say ‘yes, of course’!

What’s a ‘social’ enterprise anyway, compared to an ‘evil’ one? Some help for reference is kindly offered here (from a dear friend) for reference.

But in our world impact can mean anything and nothing. Dear impact investor, you want what you called ‘deep impact’? Fair enough, could you tell me what you mean and so we can compare and talk whether perhaps we deliver enough ‘deep impact’? Nope, an intro-email of 2 paragraphs didn’t show enough deep-impact, ciao!

We are doing our best collecting data directly from our clients and employees to measure in essence their level of satisfaction. If our staff and clients are not happy with the business’ services there is no business, simple. Of course, we are also able to prove we are having positive impact on people’s lives: employees have a job (!), we hire lots of young women (75% of all staff, to be precise), we only sell high-quality product that will perform as claimed by the manufacturer, but fundamentally we are measuring all this for the sake of the business not for the hypothetical future deep or shallow impact investor who prefers to say no rather than explain what kind of ‘impact’ they are looking for anyway.

The competition excuse

So, one way or another we finally manage to engage in a conversation (real talking, imagine!) with a handful of players, yes, just a handful, the kindest of all perhaps (thanks for listening to us!). And maybe after a skype call and sending a power-point (oh those power-points!) and an excel file we finally manage to explain what we do:

We sell a range of household goods to mostly female consumers using payment plans in rural Kenya. Intrinsically they improve their quality of life and we live of the retail and credit margins to make that possible. To manage the credit risk we use group liability.

Then we wait and after some time of internal deliberation this has been their ubiquitous final feedback: There is competition out there and that is bad (eh? I thought competition was good, for the consumer definitively…).

It looks like we are competing with:

Anyone selling similar goods: “Despite the novel business model, there is market saturation”. We’re kindly inviting anyone talking about ‘market saturation’ to a visit out in Western Kenya and talk to some of our customers. Could the mention a few names of business selling solar and other goods they may have seen or heard on the radio? Of course, they do. Would they think they are ‘saturated’ with options and choice for their budget at their doorstep, hell no!! The stats tell us that 70% of people in rural Kenya are still using kerosene for lighting and most women still cook on the floor with wood or in very low-quality charcoal devices (calling them stoves would be a stretch). Betting that one business you may have read about will ‘saturate’ that market and therefore not to invest in a ‘late-comer’ to the party, such as Bidhaa Sasa, seems a little silly to us but, hey, it’s your money you’re investing.

Anyone doing consumer credit: “From previous experience in the MFI sector we don’t want to touch this.” This means we potentially compete with any rural bank, microfinance institutions and a few NGOs, which sounds there is no hope for our business. But guess what, rural women are still the most under-served consumers, with no credit histories, no bank accounts and so on. Ask any bank if they would lend to anyone without a credit history or collateral or stable income to buy just things for the house. The answer is no. Rural consumer finance in Kenya – it simply doesn’t exist.

Anyone doing B2B who may pivot to B2C in the future: “… there is a possibility for you to be competitive to [a B2B business we invested in] in the future”. Today one could count truly last-mile retailers with the fingers of one hand but oh no! Yes, there could be a potential undetermined number of players in the future! Any solar or stove wholesaler may one day decide to take the plunge and try their luck with the end user. Yes, of course they could.

To conclude we think that the reality is that our impact investors’ world is tiny and still very immature. We suspect investors:

Lessons learned

Favourite Steve Blank’s Manifesto line: “Communicate and Share Learning”.


Stay in the know

Subscribe to our newsletter to receive regular updates on our work