Climate tech startups in Africa : Africa, although contributing less than 3% to the world’s carbon dioxide emissions, is vulnerable to the adverse effects of climate change. The diffusion of relevant information and technologies provided by clean or climate tech companies is poor in Africa. Technologies like renewable energy, recycling, and green transportation can improve the world’s environmental footprint.
However, raising venture capital has been difficult for companies in these areas. In recent years, investor appetite for climate tech companies has increased globally, with climate tech start-ups raising over $60 billion in 2021, of which 15% to 18% (about $863 million) was invested in clean tech start-ups in Africa, making clean tech second only to fintech in terms of funding. Several development finance institutions and cleantech-focused funds are investing in the clean tech space in Africa.
Equator, a climate tech venture capital firm focused on sub-Saharan Africa, has reached an initial close of its first fund with $40 million in commitments. Its limited partners include the British International Investment (BII), FMO, Norfund, the Global Energy Alliance for People and Planet (GEAPP), the Shell Foundation, and impact investor DOEN Participaties. The Equator is interested in the energy, agriculture, and mobility sectors, as it believes numerous untapped market opportunities exist. By investing in seed and Series A stages, Equator aims to mobilize capital at Series B and growth equity stages from significant regional funds, global climate tech funds, and corporations excited about the sector and region.
Equator hopes to make up to 15 investments throughout this fund’s life cycle, participating in round sizes of $10 million or less, typical for pre-Series B cleantech startups in sub-Saharan Africa. For seed stages, the clean tech VC invests between $1 million and $2 million; for Series A stages, it cuts checks between $2 million and $4 million. The Equator wants to back tech-enabled ventures that bring some element of technology, whether hardware, software, or business model innovation, to bear in a region where innovation might be lacking. The company will pay attention to technical founders with domain expertise who are building solutions around clean energy, agriculture, and mobility, addressing the impact of climate change on income inequality in Africa.
According to Equator’s managing partner, Nijhad Jamal, climate change and income inequality are directly correlated. The ventures and innovation the Equator invests in are a material component to addressing these challenges. The Equator operates independently but collaborates with Factor[e] Ventures, an organization of venture builders and pre-seed investors. Both companies collaborate on sourcing deals and undertaking due diligence and share a post-investment support platform to provide value to portfolio companies as they scale. The Equator is optimistic about the role it has to play in the ecosystem, hoping that its initiative will encourage others to invest in the sector.