1 Could you walk us through the investment thesis, for the Yunus Social Business Fund, for its India focused portfolio, both for equity and debt investing?

Yunus Social Business Fund invests non-dilutive patient capital in growth-oriented early-stage enterprises (pre-series A, Series A and above) with a focus on creating social impact.

Investment Focus • YSB's investment themes center around Zero Poverty, Zero Unemployment, and Zero Net Carbon Emissions, in line with Prof. Muhammed Yunus’ philosophy. The fund targets companies that provide essential products and services such as education, healthcare, waste management, and water to low-income households, aiming to uplift communities. Investments also focus on creating self-employment opportunities, improving job conditions, and providing demand-based skilling to enhance livelihoods. Additionally, YSB promotes green solutions to reduce carbon emissions and support communities vulnerable to climate change impact.

Sector Focus • YSB's sector focus includes Agriculture and Food Systems, Waste Management, WASH (Water, Sanitation, and Hygiene), Vocational EdTech, Craft and Handmade, Healthcare, and Green Technology and Mobility. These sectors aim to improve smallholder farming practices, waste management, access to clean water and sanitation, technology-enabled vocational training, artisan incomes, primary healthcare access, and affordable energy solutions for low-income households. The goal is to create sustainable impact and improve the quality of life for underserved communities.

2 YSB has always emphasized the importance of integrating tech into the investment thesis. In this context, what are some of the emerging technologies across sectors that the Fund is aiming to invest in? Based on your experience, what do you think would it take for these technologies to graduate to the next level of growth?

YSB is focusing on several emerging technologies across various sectors to drive impact and innovation.

In Agriculture and Food Systems, technologies like precision agriculture using IoT sensors, drones, and data analytics, blockchain for traceability, supply chain transparency, and agro-processing innovations are key areas of investment.

In Waste Management, the fund targets AI and robotics for automated sorting and recycling, biodegradable materials as eco-friendly alternatives to plastics, and waste-to-energy technologies.

For WASH (Water, Sanitation, and Hygiene), advanced water purification systems, innovative sanitation solutions, and IoT-based smart water management systems are prioritized.

In Vocational EdTech, YSB invests in online learning platforms leveraging AI, VR and AR for vocational training, and AI-driven skill assessment tools. The Craft and Handmade sector focus on e-commerce platforms connecting artisans to global markets, product development software, and financial technologies for access to credit.

In Healthcare, YSB supports telemedicine for remote healthcare services, wearable health devices for monitoring conditions, and AI diagnostics for early disease detection.

In the Green Technology and Mobility sector, investments include renewable energy solutions like solar, wind, and bioenergy, innovations in electric vehicles, and energy-efficient appliances for smart homes. By focusing on these technologies, YSB aims to create sustainable impact, improve the quality of life for underserved communities, and drive the next level of growth for these emerging solutions.

3 You have been working with early-stage founders, helping them align their product offering to the market, especially in sectors like WASH and waste management which are relatively under-funded.

From your experience, what are some of the critical challenges that they face that the impact investing ecosystem needs to take cognizance of?

When we experience and research into the sector, we understand that the early-stage founders in the WASH and Waste Management sectors face significant challenges in scaling their operations due to the decentralized and remote nature of these markets.

The fragmented distribution systems in rural and underdeveloped areas present logistical and operational difficulties that hinder growth. Additionally, the dependence on government and local bodies creates regulatory hurdles and policy instability, making it difficult for businesses to navigate the complex landscape and secure necessary approvals.

The heavy reliance on government funding and grants discourages private investors, leading to a scarcity of capital. The high perceived risk and lower return potential of these sectors further deter private investment.

Moreover, there is often limited awareness and understanding of the benefits of WASH and waste management solutions among target communities, compounded by the challenge of changing long-established habits and practices related to hygiene and waste management

When we speak about the under-funded sectors which hold high-impact potential, what should be some of the priority areas that the ecosystem needs to address, to build a pipeline of investable enterprises?

We believe that to build a pipeline of investable enterprises in under-funded sectors like WASH and waste management, the impact investing ecosystem should prioritize providing patient and catalytic capital. This involves offering long-term investments with longer horizons to allow early-stage enterprises the time needed to develop and scale, as well as catalytic funding to de-risk investments and encourage private sector participation through first-loss capital, blended finance models, and guarantees. Establishing sector-specific incubation (similar to Water.org or WASH Innovation Hub) and acceleration programs (such as with NSRCEL, Upaya Social Ventures) can provide tailored support, while grants and technical assistance can help enterprises improve their business models and enhance investment readiness. Facilitating public-private partnerships and leveraging shared infrastructure can reduce costs and improve operational efficiency. Implementing community engagement initiatives and behavior change campaigns can raise awareness and drive adoption of WASH and waste management solutions.

Additionally, developing standardized impact measurement frameworks and ensuring transparency and accountability in reporting can build investor confidence and demonstrate the effectiveness of interventions. By addressing these areas, the ecosystem can create a supportive environment for early-stage enterprises, enabling them to scale and attract private investment.

4 Over the last two years, in 2022 and 2023, we have observed that the EdTech industry has been witnessing a slowdown in investments in the last two years. What has been your assessment of this space?

There has been a slowdown in investments in the EdTech space over the last two years.

Our assessment is the following:

• The hype created during the Covid period for education, largely moving to an Online mode, fizzled out in 2022 and 2023. Offline mode returned to being the preferred channel.
• Basis the hype, significant investment in the EdTech space flowed in during 2020-21 creating a large base of investments. Comparatively, 2022 and 2023 was a slowdown in % terms as well as absolute investments.
• The slowdown has majorly been in growth and late-stage companies and not necessarily in seed and early-stage companies. Investors seem to be willing to bet on newer models and in sub-sectors such as upskilling, professional courses and test preparation.

Do you believe it is important to graduate investing to skilling and employability focused solutions?

We definitely believe that Skilling and Employability focused solutions need to be key areas of investment. This is not just for freshers but also for lateral hires and other professionals.

• Many industries continue to face skill gaps where the demand for specific skills outstrips supply. These gaps can be addressed, ensuring that industries have the talent they need to thrive
• Investments should also focus on skilling and employability in regions with high unemployment rates or significant migration

YSB was the first institutional investor in Virohan, a skilling and employability focused social enterprise offering various paramedical and healthcare courses across India. Virohan today has over 8,000+ students trained with 98% placement rate across its 1,100+ job partners

Could you share some of your learning from your investee companies like Virohan and BridgeLabz?

• Addressing crucial gaps in the value chain: Virohan observed that there was a crucial gap in the availability of certified and trained Allied Health Professionals (AHP) in India. There was also no regulator / authority to certify any courses offered in this space in India. They piloted offering certificate and diploma courses for AHPs, with a vision to strengthen Healthcare education in India. Today, their courses are affiliated with National Skill Development Corporation (NSDC), Indian Medical Association (IMA), and University Grants Commission – Rabindranath Tagore University.
• Job-ready and Industry-Relevant Curriculum: Both Virohan and Bridgelabz have collaborated well with industry partners and to design programs and curriculum specific to industry needs and demands. Additionally, career counselling, soft skills training, and placement assistance ensure students are well-prepared for the job market.
• Technology integration and omnichannel delivery: Both organizations have leveraged technology extensively to enhance learning experiences, track progress, and make education more accessible and personalized to their students. Virohan uses a blended model of online and offline learning to deliver training allowing for flexibility and accessibility.
• Affordable and Accessible Education: Both organizations focus on skilling and employability for students from underserved communities, economically backward backgrounds, tier 2 and tier 3 towns of India. They have proven and established that there are business opportunities with working with the underserved or bottom of the pyramid population.

Above all, both the organizations have been able to secure follow on rounds of funding from equity and debt investors post the investment from YSB. This goes to prove that social businesses are indeed scalable and eligible to secure funding from commercial investors in the medium - long run

5 How are you evolving your investment approach, going ahead? What are some of the focus areas that we can expect?

As we move forward, we are evolving our investment approach by continuing to invest in early-stage enterprises while maintaining a sector-agnostic stance. However, we are now placing a greater emphasis on developing theme-based funds to address specific areas of impact. Notably, we have established a SEBI-approved Alternative Investment Fund (AIF) focused on the WASH and Waste sectors. This AIF aims to fund early and growth-stage companies working in these sectors. By launching this pilot AIF, we seek to validate our investment thesis for these critical areas and plan to raise a larger fund within the next 12 months.

In addition to our focus on WASH and Waste, we are also looking to expand our investments into the sustainability and climate space. This includes sectors such as climate resilient agriculture, where we see significant opportunities for impact. We are developing a sector-specific Food Fund to target innovative solutions in the agricultural sector. This fund will focus on sustainable farming practices, food security, and agro-processing technologies that can drive significant social and environmental benefits.