There are varying types of impact enterprises in CEE, with different financial needs, and their funding is indeed an extreme challenge. Why? Firstly, the countries of CEE are small in population, with differing levels of economic development, legal and political conditions and stability; therefore, it is hard to find “one-size-fits-all” solutions. Secondly, the impact economy itself is a niche of these small economies, with many different personas with different financial needs, and the business models of these enterprises are also challenged by many factors.
During the almost 80 in-depth interviews that were run with impact economy stakeholders, experts and target enterprises, we found that traditional grouping criteria like legal form, size, maturity level, etc., do not characterise the diverse group of impact enterprises in CEE well enough to uncover the clusters of their financial needs. Therefore, we created the following personas with well-defined and relatively similar financial needs:
| Persona | Short description of persona | Short description of the most typical financial needs |
| NPO with Business Activity | NPOs that intend to make their impact, but also not to be fully grant-funded. They cover at least 50% of their expenses out of business income, with a sound business model. | Funds with smaller ticket sizes, with a clear and supported application process and without extensive risks. Prefer a longer grace period, impact incentives, and need business mentoring. |
| Social Enterprise for Employment (WISE) | Uplift disadvantaged employees by offering them jobs. They mostly operate with state subsidies, and their business model assumes a consumer upcharge to balance lower production efficiency. | Need higher ticket sizes and can offer collateral, but still very risk-averse. Trust in the impact-appreciative funder is key. Prefer a longer grace period, impact incentives, and need business mentoring. |
| Organic, Natural, Traditional Enterprise | Family/small farms or food production/ commerce enterprises, craftsmanship with intent for a small environmental footprint, natural, traditional values. Scale-up is not pursued at the expense of values. | They either prefer to grow from their own incomes or need micro-financing. Franchise-type scaling models may need financial support. Business mentoring and help in consumer education are appreciated. |
| Impact First Enterprise | Dynamic, innovative, non-tech impact enterprises that are often squeezed into the start-up category but realistically can only grow linearly, not exponentially. They prioritise generating impact while making a profit. | Willing to take risks and burdens for medium ticket size funding but lack collateral and cannot break even for min 2-3 years. Pushed into equity but would prefer to keep ownership if a loan is available, even without an impact incentive. |
| Tech Start-Up with Impact | Tech start-ups with meaningful environmental or social impact. After a large initial investment, exponential growth is targeted, with profit as important as impact. | Mid to high ticket size, no collateral, funding badly needed at almost any risk and condition. Equity preferred, but founders want to keep the majority and ensure impact orientation for their investor. |
| For-Profit Business with Impact (Spin-off) | Traditional for-profit SMEs that either switch to an impact operation or come up with a significant impact spin-off. We saw extremely few examples of this in CEE. | Too few examples for sound conclusions. Normal commercial funding options seem acceptable and feasible here. |
Pursuant to the findings of this comprehensive market research, an impact financing product is recommended, where impact incentives are provided to reward the positive ecological or societal change that these enterprises achieve.
Second, building a strong ecosystem of the diverse intermediaries and alliances that are present in CEE is required: i) umbrella and network organisations with creative offerings and support systems, ii) impact investors or ventures with creative funding schemes, iii) state/EU or international funding institutions that drive this economy iv) banks and non-bank financial institutions with currently rather limited impact economy offers, v) the impact enterprises themselves. These intermediaries may be built on, supported or leveraged in many ways to drive growth in this economy.
We also recommend supporting the CEE impact economy via capacity-building programs. Capacity building programs are critical in this region as founders and leaders are less educated, either on how to build strong business models, to build strong networks, marketing and sales, scale or measure their impact or on their funding options and considerations.
Read our full report for further information!
