Rob Katz

Root Capital, E+Co Tap Major New Funding

It must be the (giving) season. Just this week, NextBillion allies and SME investment pioneers Root Capital and E+Co announced $14M each of new investments and grants. Congrats to our friends and colleauges at both Root and E+Co – who have done pioneering work in the agricultural finance and energy finance sectors, respectively. Here’s the latest funding rundown:

Root Capital – $14M USD from the Bill & Melinda Gates Foundation. According to the press release (PDF), this is the first program-related investment (PRI) from Gates’ Agricultural Development initiative. Root is getting a six-year, $10 million PRI as loan capital to scale its operations in Sub-Saharan Africa and a $4 million operating grant that will support the organization’s five-year growth plan to achieve a financially self-sustainable lending program by 2013.

Gates did their homework – Root is a long-running, well-known and quite successful player in the small and growing business arena. Since its founding in 1999, Root Capital has provided more than $175 million in loans to 255 small and growing businesses, representing more than 370,000 farmers in 30 countries throughout Sub-Saharan Africa and Latin America. They partner with global buyers (including Green Mountain Coffee Roasters, Starbucks, and The Body Shop) to strengthen global supply chains for sustainable natural products such as coffee, cocoa, chili peppers, and honey.

E+Co (1) – $6.65M USD and EUR 500K from the Dutch development agency, FMO (link to blog post announcement). FMO, which is the entrepreneurial development bank of the Netherlands, created a clean energy investment facility that will be managed by E+Co. Funding also includes a capacity development facility for entrepreneurs in the amount of EUR 500,000.

E+Co (2) – $7.5M USD from Norfund. This announcement has not hit the web yet, apparently – I received an e-mail from E+Co’s Tracy Smith yesterday, so you’ll have to take my word for it. Norfund – the Norwegian Investment Fund for Developing Countries – invests in businesses, helping to promote sustainable economic development and reduce poverty in developing countries. Norfund’s investment in E+Co of USD 7.5 million will help increase access to clean energy services.

E+Co works with local entrepreneurs with a special focus on small and medium sized enterprises. Their clients are often located in rural and semi-rural areas that are considered some of the toughest markets in the world. E+Co’s current investment portfolio of nearly $30M USD includes over 150 active energy SMEs and is projecting a return of 8.4% IRR (based on E+Co projections accessed today).

Congratulations again to both Root Capital and E+Co. These three investments – totalling more than $28M USD – represent a doubling down on the bet that patient capital, invested in small and growing businesses, can effectively address poverty. We will be sure to update the NextBillion community as further funding news comes our way and with details on Root’s and E+Co’s operations.

business development