In the second edition of The Investor’s Digest Series, we had the opportunity to speak with Hannes Van den Eeckhout, the Founder & Director and Faridah Nalunkuuma, the Talent Manager at Rootical, a venture studio focusing on regenerative agriculture and food systems in Uganda. Regenerative agriculture is a holistic approach to farming and land management that aims to restore and improve soil health, biodiversity, and ecosystem resilience while promoting natural and profitable farming practices.
Rootical stands out from traditional incubators and accelerators by building businesses from scratch and empowering Ugandan entrepreneurs to own and drive their regenerative agri-food ventures. By fostering entrepreneurship and implementing an alternative ownership model called steward ownership, Rootical aims to create commercially viable and impactful enterprises that contribute to a more inclusive and sustainable food system. Rootical invests up to shs 40 million in business they co-found in their studio.
Hello Hannes, thank you for agreeing to sit down and have a conversation with me for The Investor’s Digest. To kick off our conversation, what is Rootical?
We always introduce Rootical as a venture studio that powers Ugandan entrepreneurs to build and own their regenerative agriculture and food businesses. That really makes us different from incubators or accelerators. We don’t work with existing businesses. We focus on building businesses from scratch, based on a deep understanding of the food system and its challenges and opportunities.
Why is Rootical focusing on regenerative agriculture and food systems?
We see a growing concern about the triple planetary crisis we face as a global community. And the first crisis is land and environmental degradation closely linked with climate change, of course. For instance, about two-thirds of agricultural lands on the African continent are degraded. This is not only linked to climate change but also to the way we farm our land.
The second crisis is the growing inequality worldwide. This is linked to the way our companies and in our case, food companies are financed, managed and owned. So typically venture capitalism type of investments drive wealth accumulation and concentration in the hands of the very few. At Rootical, we will be working on an alternative ownership model.
And the third crisis is hunger and malnutrition, which have always been there. And unfortunately, they are not receding. Three billion people in the world cannot afford a healthy diet. And that includes three-quarters of all Africans, which is quite an alarming figure. So to solve that triple planetary crisis of environmental and land degradation, growing inequality and malnutrition, we propose, Rootical as a regenerative business builder.
What are the key pillars of Rootical?
We are convinced that regenerative agriculture and agroecology are the best paradigms for the way forwards and the future of our food systems. So we are recruiting founders and supporting them to build regenerative agri-food companies.
The second key pillar at Rootical is entrepreneurship. We think the key to addressing the mentioned crises is through entrepreneurship. And that implies we want to build commercially viable and impactful enterprises to do so. We want to make the food system in Uganda more regenerative and inclusive. By inclusive, that means we don’t necessarily want to build businesses that focus on exporting to Europe or the US. We rather build solutions that help farmers transition to regenerative agriculture and make more healthy food available and affordable for all.
Another pillar of ours is an alternative ownership model called steward ownership, which is a growing movement in the corporate world to rethink and redesign how companies are financed, managed and owned. Steward ownership has proven to be a really strong net model to increase the longevity of businesses and increase their average market value and profitability. And also, it’s intensely focused on employee ownership and brings a lot of benefits at the employee level, better retention of talent, and more employee satisfaction.
Other benefits for employees include a stronger sense of belonging, a stronger sense of ownership, better pay conditions, and higher average productivity.
How long have you been working on Rootical?
So, we are actually just launching our pilot in Uganda. Myself, personally, I have been preparing this for the past two years. From idea to fundraising, recruiting the team recently and really kicking off operations in early May. We are recruiting our first cohorts of future founders currently, people that will join our venture-building process. But we are working in a joint venture with Shona, a business development organization with over a decade of experience in building good businesses in Uganda. They are the lead partner for implementing Rootical in the country.
Another partner is Fresh Ventures, a venture studio in the Netherlands focusing on European food systems. We are kind of the Ugandan sister company of Fresh Ventures. They have been operating since 2021 and are currently running their second cohort. We are building on the experience and expertise of our partners to make Rootical a success.
What are the criteria for the founders that you want to admit in the first cohort?
One key thing we are looking for in founders is the entrepreneurial spirit. We will assess that in terms of what they have built before and how they run their own business. So we have come up with what we’re calling personas in three different groups of people.
The first group is young people with high potential who are keen and passionate about regenerative agriculture. We want to build businesses with them. Then the second group we are looking at is who we call “the failing-forward entrepreneurs.” These are founders who have started a business before but are not keen on where they are and are looking for support to create something new.
Then the last group we’re looking at are the seasoned corporates. These are people who have been dreaming about starting a business of their own and are just looking for that community and pathway to do that. For all these groups the entrepreneurial mindset is the constant. Past experiences with regenerative agriculture and agroecology are definitely a plus.
Agriculture, the backbone of Uganda’s economy, is hindered by issues such as land degradation, inadequate access to insufficient access to markets, technical and financial solutions, and limited value addition, impeding the sector’s potential for sustainable growth and nutrition security.
How will the first cohort run?
We have rolled out a call for applications. The first round is basically getting a self-scan for them. The prospective applicants need to figure out if our venture-building process is a match for them. There is a short form on our website. We encourage them to read what Rootical is about. If interested in applying, they will go ahead and fill in that short form before Sunday 18th of June. And then later on, we will invite them to do the full application.
We are looking at 40 individuals for our first step. The first step for us is what we are calling, “loving the problem”. We will do a deep dive into the food system for them to be able to understand, but also identify the challenges that they will work on later in the second stage. The second stage, we define it as the “systemic venture building” process. At this stage, we get hands-on. We will select 24 individuals out of the 40 from the first step. With these 24 individuals, we will work into identifying solutions and testing them for this second stage. We will also work on developing a team.
Later on, these individuals will move into what we call our studio for the third stage. And in the studio, we have six teams. We don’t want to have six individuals, but teams. The potential founder can meet their team members within the cohort or even outside. They will have a chance to tap into our extensive network of advisors, mentors, industry experts and investors. Within the studio, we will provide up to 40 million shillings in seed capital for each of the six teams
We’ll continue supporting them with business support, even after they leave the studio. The program is about a year and a half for these founders. And we want to work throughout the whole journey with these founders. So we are visualizing somebody who’s eager to build all the way through.
Why Uganda?
Uganda often prides itself on being the food basket of the region. There are still quite some favourable conditions for food production in the country, even though there are some challenges. The climate crisis is really affecting farmers across the country. But I really think that Uganda can be that food basket.
On the other hand, Uganda, with 210,000 organic farmers already, has the highest number of organic farmers in the world after India. But India is like a continent of its own. So I think Uganda really is a breeding ground for organic agriculture. It is also quite advanced in terms of organic legislation and so on. So I think that’s actually a favourable setting. In addition to that, Ugandans are hyper entrepreneurial which really helps with what we want to do.
What’s your commitment to Uganda? Is this something you went to for five years for a decade or is it something that you’re looking at short and long-term?
The idea is really to do this long-term and to set up a Rootical entity in Uganda that can host and run our startup studio model, ideally until the end of times. Rootical will be one of the co-founders in the companies that we will be building together with the founders we’re selecting at the moment, because that is basically our business model. It shows our skin in the game and long-term commitment.
We are well funded at the moment to run for the coming two years and to go through the full cycle of problem analysis, ideation, venture building and then launching those six businesses we will be co-funding next year. And then continuing to support them for 12 to 18 months.
Throughout the systemic venture-building process, Rootical’s future founders will be interacting and continuously challenged to innovate and think/build outside of the box
Do you have a follow-on funding that is lined up in case a startup successfully graduates from your studio?
We have at the moment a pocket of money available to invest as startup capital in each of the six businesses we will be selecting to co-found. And we are building our network. We are in good conversation with some foundations and investors. There is definitely a growing interest from the impact investing world in regenerative agriculture and food systems in East Africa. There’s quite some momentum building for agri-ecological entrepreneurship in East Africa. And Rootical wants to contribute to that and strengthen that momentum by building businesses from scratch.
There has been some criticism of the start-up studio model. And I think one of the big points is there is limited founder independence. The founders have limited control of things like decision-making, maybe equity ownership and some strategic direction. What does Rootical do differently to address this?
That is a fair point, but it depends on the studio model, investment scheme, and the stake/equity you take on. For Rootical, we look at steward ownership as our guiding ownership model and that has far-reaching implications for how we will set up our start-up studio and also the portfolio companies we will be building.
But I can say two things for now. First, Rootical does not intend to take a majority stake in the companies we will be co-founding. We will value our cash investment and also the in-kind contribution, and our venture-building process. And we will expect a return on that investment in the form of redeemable equity, or most likely, some kind of revenue-sharing loan repayment scheme. So once that return is paid back to the studio, those companies are fully independent or at least Rootical is out of the equation for them.
In terms of decision-making, good companies are really structured quite differently. Basically, what you do in steward ownership is separate the voting rights in a company from the financial rights. So if I put 80% of the money on the table as an investor or as a start-up studio in our case, in a steward-owned company that doesn’t mean I also own 80% of the decision rights in that company. You organize both of them separately. And the financial rights are organized in what’s called structured exits.
Also, the critics of the studio model, say that the fate of the company is directly tied to the fate of the studio. For example, if a studio goes bankrupt, then the companies in the studio will most likely go bankrupt as well unless they can attract outside funding. The same is true for all the other resources provided by the studio. How is Rootical mitigating this dependency?
That’s a really challenging question. Without being optimistic, we wouldn’t have started. So, first of all, there is a growing momentum for agroecological entrepreneurship in the region. Combining that with the opportunities of climate finance, the SDGs, and impact investing becoming mature, the future looks bright. We are already in good conversations with larger foundations and financial partners to look at the next phases of iterating and scaling out our startup studio model.
But what if we would go out of business as a studio? We are offering quite a substantial support system to the portfolio companies that we will be building together with the founders that we are recruiting at the moment. If we dropped away, they would lose that support obviously. Not just financial support, but access to our networks as well and that would definitely be a big blow. Yet, they will exist, and they will have a solid foundation and have jumped the first hoops already: problem validation, ideation, prototyping, business modelling, teaming, launch capital, incorporation, and getting to product-market fit. I am sure we could connect them with other opportunities, incubators and acceleration programs by then, and they would have a headstart compared to other participants there. But we are confident, Rootical will be around much longer than that!
You can leave any concluding remarks here.
In conclusion, Rootical is our way to power Ugandans to build Ugandan solutions to Ugandan food system problems. After our pilot, we aim to replicate this purpose-driven studio model in other parts of East Africa and beyond. Place-based investment and entrepreneurship are key levers for transforming the food system – let’s regenerate, one viable, scalable and impactful business at a time.
Do you want to join the Rootical Founder Journey?
Take the first step here before Sunday 18th.