Co-Investing for the Future in Armenia

For the past years, Impact Europe has been supporting Impact Hub Yerevan, its national partner in the EU-funded Collaborate For Impact-project, in developing a social economy ecosystem in Armenia. The focus of these efforts has always been centered around a few pillars: increasing the access to finance, building a community of investors and stakeholders, and increasing local and regional awareness of the social economy.

The main vehicle to make progress on these pillars has been the establishment of small impact funds in each of our partner countries. In Armenia, the VIA Fund was launched by Impact Hub Yerevan - the first impact fund of its kind. This, in itself, is a commendable achievement in a country where the impact investing ecosystem is still in full development. In the words of Gevorg Poghosyan, CEO of Impact Hub Yerevan, it “probably would have never existed if it weren’t for the Collaborate For Impact project”.

It's a good thing it does exist, though. A few years down the road, VIA Fund has provided funding to 15 organisations for an amount of 680.000 euros and has offered non-financial support to many more in the form of different capacity building programs. Many of these social enterprises would have been swallowed whole by the illustrious funding gap that early-stage enterprises, and social enterprises in particular, continue to face. This difficulty in finding access to funding is especially true in more vulnerable geographies.

Doing More

Financial aid provided by VIA Fund has, up until now, come predominantly in the form of grants with a ticket size of 10.000 to 30.000 euros. The VIA Fund quickly recognized the importance of building strategic partnerships - not only to successfully scale its impact, but also to take the next step in helping develop the social impact investment ecosystem in Armenia. They found a strong alignment in long-term goals and vision with the CQ Ampega Social Fund, which made them a natural and effective partner for this collaboration.

C-Quadrat Ampega is a leading asset management company in Armenia, primarily known for managing pension funds, with over EUR 1.3 billion in assets under management. Building on its strong foundation in institutional asset management, the company has been expanding its impact initiatives with the establishment of the CQ Ampega Social Fund in 2023 - crucial to our story. This non-public, contractual, interval, impact first investment fund was launched within the scope of the company’s corporate social responsibility strategy, aiming to contribute to the development of Armenia's social economy.

To achieve that goal, the CQ Ampega Social Fund uses a diverse range of investment vehicles — from public debt to private debt and equity instruments — each designed to meet the financing needs of enterprises at different stages of maturity and impact focus. Among these, private debt instruments play a particularly important role, as they offer flexible financing solutions tailored for small and growing social enterprises. This flexibility, combined with the alignment of impact objectives, enabled the fund to establish a productive cooperation with the VIA Fund.

More concretely, the partnership between the two funds is based on the following shared objectives:

• to provide access to finance to early stage and small scale social enterprises
• to support these enterprises by offering a structured framework
• and to help support regional development in more rural regions, where poverty rates are higher

The first outlines of a possible partnership started forming after a first conversation between representatives during the CEE Impact Days in Vienna, back in 2022. And while it took some time to hash out the details, it was pretty clear from the start that both parties didn’t just share a common interest. Instead, they complement each other quite perfectly.

From C-Quadrat Ampega’s point of view, their involvement with Impact Hub Yerevan and the VIA Fund allows them to lever the existing knowledge and network of these organisations to maximize the efficiency of their own efforts. It also allows them to better understand the needs of social entrepreneurs on the ground, as well as the local business landscape they operate in. These are areas where VIA Fund has acquired expertise over the last years.

For VIA Fund, on the other hand, it means an increased diversification of the financial instruments they can offer to the social entrepreneurs in their incubation and acceleration programs. Not only does the partnership agreement allow them to disburse more funding to approved entrepreneurs, but it also expand their blended approach. Introducing a repayment obligation can prove very beneficial to early-stage entrepreneurs, as it learns them how to structure their business in a way that is both realistic and growth-oriented.

Being an established asset manager at heart, C-Quadrat Ampega could also bring institutional expertise and non-financial support to the table when it comes to business management and financial planning. Knowledge sharing, in this sense, is an important part of the collaboration.

The Partnership in More Detail

Let us consider the recently established partnership in a bit more detail. The typical investment pipeline of the VIA Fund goes a little bit like this:

• An open call or application process is posted by the VIA Fund to find new social entrepreneurs to support
• A series of screening calls and due diligence processes are set up and conducted
• The deal structuring phase commences; usually, this phase goes hand in hand with an incubation/acceleration program that is aimed at making the participating social entrepreneurs more investment-ready. 
• A pitching session is held – enterprises have the chance to present their updated business plan and impact strategy to a panel of experts and potential investors.
• An Investment Committee reviews all applications and decides upon the fund allocation to eligible social enterprises, basing itself on a term sheet with a proposed deal structure composed by the participants. This marks the formal end of the deal structuring phase.

If successful, social entrepreneurs will receive a grant ranging from 10.000 to 30.000 euros, as well as a loan of up to 20.000 euros, to be repaid within two to three years.

While the majority of the selection process is hosted by the VIA Fund, the partnership with C-Quadrat Ampega has them present at different moments. Both parties agree in advance on a set of criteria that the social enterprises need to respond to, and what purposes any potential funding can serve. C-Quadrat Ampega plays a role in the early due diligence stages, as well as sharing their expertise with social enterprises during the incubation and acceleration programs. After all, helping them develop a sound business plan will also greatly affect their ability to pay back any loan offered. 

When it comes to judging the final applications, both VIA Fund and C-Quadrat Ampega have a representative in the Investment Committee and reserve the right to veto any application or withdraw the support for their component.

Finally, it is the VIA Fund that assumes primary responsibility for the monitoring, evaluating and reporting of the investees. They not only track the progress towards different impact objectives, but also towards business development milestones and financial results. A quarterly feedback session with C-Quadrat Ampega assures alignment between all parties.

Investments so far

So far, a total of five social enterprises has benefited from the joint offering presented by VIA Fund and C-Quadrat Ampega: