Root Capital’s focus and creativity has produced a way to grow rural prosperity and land preservation by investing in agricultural businesses that build sustainable communities. Root Capital’s specific focus is demonstrated in their target market, methods, and talent that they have acquired to carry out their mission. Root Capital’s target market can be labeled as a niche within a niche or what they descried as the “missing middle.” These farmers are too large for micro finance loans and do not qualify for regular bank loans because their lack of assets and their rural location labels them as being too risky. Out of necessity these farmers are usually forced to sell their harvest to local middlemen at a large loss, which in turn keeps the farmer and the community in a constant cycle of poverty. The problem lies not in the product being produced, but the great disconnect between the farmers and the market of potential consumers.
Root ...view middle of the document...
The loan repayment schedule has allowed Root Capital to create the maximum social impact. The relatively short, multiple repayments allow them to capitalize on the structure and number of loans while increasing their own financial sustainability. The cyclical returns also present Root Capital the unique opportunity to diversify their investments. Being very specific allows Root Capital to gain familiarity and industry knowledge to evaluate the potential risk that may be involved in the investment. The human capital that Root Capital acquires is also very focused on agriculture and the Latin American community to create familiarity with the farmers and community. Willy Foote created Root Capital because of his unique personal experiences that generated a passion to help the rural farmers; and he looks for the same qualities in its employees.
As Root Capital looks to expand, I think it is critical to stay focused on their initial mission. An expansion strategy that includes other industries and locations would dilute Root Capital’s overall mission and add a large financial responsibility In order to have the same success in other industries and locations, Root Capital would have to hire individuals with expertise in the chosen expansion areas to continue generating such high success rates. Instead of different products or expanding to locations other than Latin America, Root Capital should view expansion in terms of adding to their education program. An expansion in any direction other than their current path would also contradict their established exit strategy. With the objective of attracting other financial institutions to aid in the development of the rural areas, their goal is to eventually eliminate any needs that could potentially require their services. So, if Root Capital is successful they will have no option but to expand if they are to exist. While creating the maximum social impact is the overall goal of Root Capital, I think that will be best served by limiting itself to specific agricultural products that are produced in Latin America for the immediate future. The market will be the greatest indicator in telling Root Capital when its time to expand to other industries and countries.