Venture capital activity around climate tech has been heating up in Africa despite the global VC funding cooldown.
The continent’s climate tech startups secured over $860 million in equity funding, largely driven by clean energy technologies, representing 3.5x growth amid macroeconomic headwinds last year, data shows, making climate Africa’s most funded sector after fintech.
This seems to be just the beginning: The past few months have seen a slew of new funds dedicated to investing in the space, indicating that funding for climate tech startups will persist for a while.
Pan-African venture firm Novastar was last week reported to be raising over $200 million for its third fund, Africa People + Planet Fund, which will invest in startups developing agriculture and climate solutions on the continent. Around the same time, climate tech venture capital firm Equator announced the initial close of its fund to back seed and Series A startups in the energy, agriculture and mobility sectors. Catalyst Fund’s new climate-focused $30 million kitty has also hit the ground running and is now investing in its first cohort of startups.
Satgana, a new climate tech firm launched late last year, plans to allocate up to 40% of its funds in “planet-positive” startups in Africa. Other African climate-focused investment vehicles that have raised capital recently include the $250 million AfricaGoGreen Fund (AAGF), which closed the second tranche of its fundraise in February, and the Energy Entrepreneurs Growth Fund (EEGF), which raised over $110 million last year.
The AAGF finances “climate-friendly” projects and counts pay-as-you-go solar providers BBOXX and Solarise as part of its portfolio. Similarly, the Shell-backed EEGF fund invests in startups that increase access to clean and reliable energy to households and businesses on the continent. Oxfam Novib and Goodwell have also launched a new fund to provide venture debt to startups in this space.
The rise of so many new funds shows that even amid the capital crunch, there will be some dedicated pools for founders building startups that can lead energy-transition efforts and offer solutions to mitigate the effects of climate change. The timing of the funding couldn’t be better.
“The importance of having funds that back founders in Africa working on climate solutions cannot be overstated, particularly given the current funding slowdown,” said Anil Maguru, investment director at Satgana. “Africa is one of the regions that are most vulnerable to climate change, with severe impacts on the continent’s natural resources, ecosystems and communities. It is also the region with the least resources to adapt to the effects of climate change,” Maguru told TechCrunch+.
Funding for African climate solutions, he says, can support tailored solutions for everything from renewable energy systems and climate-smart agriculture and forestry practices to sustainable water management and low-carbon transportation.
Satgana will write checks of up to €300,000 to startups working in mobility, food and agriculture, energy, industry, buildings and the circular economy (a system that is restorative and regenerative).
Novastar has its eyes on the circular economy, too. Its targets include climate tech startups that “use natural assets on the continent” to generate opportunities for smallholder farming, according to the fund’s co-founder and managing partner Andrew Carruthers. Novastar will also back providers of financial services, supply chain services and relevant marketplaces.
What these new funds are focusing on points to a shift in investment trends within the climate space, as most climate funding in Africa has historically gone to pay-as-you-go solar energy providers. This is set to pave the way for a new range of solutions, especially in some of the fast-growing areas in climate and sustainability such as sustainable agriculture and agritech, waste management and circular economy products, electric mobility and smart living, according to a recent Briter Bridges report.
The shift is welcome, given that 35 of the 50 countries most vulnerable to climate change are in Africa. The continent will need to shift to climate-smart agrifood systems to feed its growing population, for instance, and increase forest cover, said Ruth Bertens, co-founder and managing partner of Pyramidia Ventures.
“Africa also has enormous potential to scale regenerative agrifood solutions. It has a massive base of natural assets for ecosystem restoration and carbon sinks … [and] a low-emission base to scale solutions from,” Bertens said.
Notably, change is already underway. Kenyan aquaculture tech scaleup Victory Farms last week said it raised $38 million in Series B funding. It joins Komaza, a Kenya-based smallholder forestry platform that has attracted VC interest and raised $58 million, according to Crunchbase. Other climate-focused startups that have raised significant funding in recent years include Aerobotics, which provides intelligent tools for the agriculture industry; Inseco, an alternative protein startup; and Kenyan EV startups Roam (formerly Opibus) and BasiGo.
“Overall, we can expect to see a diverse range of climate solutions emerge from Africa as more funding becomes available to founders,” Maguru said. “With the right support, African climate solutions have the potential to transform the continent and contribute to a more sustainable and equitable future for all.”
