Profiling Root Capital, Impact Investor
One of the highlights of the Social Enterprise Conference at Harvard in early March was the keynote speech from William Foote, Founder and CEO of Root Capital, a nonprofit social investment fund focused on rural communities in the developing world. His organization has provided $256 million in credit to 320 small and growing businesses in 30 countries since it was founded in 1999.
At heart is Root Capital’s belief that leadership for alleviating poverty already resides in local communities, what Foote calls “leadership in the bush”. The role of the impact investor is to bring critical resources and networks to bear on viable opportunities, and in so doing, to overcome systemic constraints to rural development and small business.
Foote’s priority is to ensure that Root Capitals’ investments have a profound impact. The organization focuses on isolated and under-capitalized rural enterprises that are too large for micro-finance, and too small for conventional lending. They must have the potential to scale and catalyze the growth of robust industries, thereby improving the well-being of entire communities.
Success for Root Capital lies in eventually withdrawing the investment, to be replaced by traditional sources of capital. In this way, its investments serve to reduce risk for traditional investors by building assets, skills and networks to overcome the isolation and underdevelopment of these communities. According to Foote, the data indicates that this approach is twice as effective as NGOs at alleviating rural poverty.
The organization’s focus is laser-like in achieving its objectives. “You must close doors on what won’t work”, Foote emphasized, explaining that at times this can be very difficult because there’s so much need. To succeed, an organization must keep its mission central and stick to what it’s good at.
In practice, this means that Root Capital runs every project as a collaboration with other organizations that bring complementary skills to ensure that Root Capital can focus on its core capabilities - project leadership, investment management and coordinating a global network of buyers. Foote calls these collaborations “creative clusters”. They are built uniquely for each project, bringing the necessary resources of money, skills, market access and local knowledge.
For example, a creative cluster created to work with a coop of vanilla farmers in Peru included, among others, TechnoServe for capacity-building skills and General Mills, the agribusiness multinational, for global market access. By building trustworthy relationships throughout the value chain, Foote believes that Root Capital’s model provides a better chance for sustainability as well as impact.
Foote believes that although there is a trade-off between financial and social returns, both objectives are attainable. Impact investing can have a substantial societal impact by focusing on simple solutions and seeing them through to scale. Implicit in Root Capital’s story is the importance of not only commitment but a burning passion to overcome tremendous obstacles in the struggle to drive impact in the real world. Foote demonstrates these qualities in spades, at a personal as well as professional level. The combination of leadership and commitment at both the investor and local community level drives Root Capital’s success, and ultimately, real social impact.