African climate startups are a bright spot as global startup funding decreases and climate tech-focused funds appear.
African climate tech startups are set to receive a boost as venture capital (VC) activity in the space heats up, despite the global VC funding slowdown. According to data compiled by TechCrunch, the continent’s climate tech startups received over USD 860 million in equity funding in 2020, representing a 3.5x growth despite macroeconomic headwinds, with most of the funding focused on clean energy technologies. This trend is expected to continue, as a series of new funds have been dedicated to investing in climate tech startups.
New funds for African climate tech startups
Pan-African venture firm, Novastar, is raising over USD 200 million for its third fund, the Africa People + Planet Fund, which will invest in startups developing agriculture and climate solutions on the continent. Similarly, climate tech venture capital firm Equator has announced the initial close of its fund to back seed and Series A startups in the energy, agriculture, and mobility sectors. Catalyst Fund has launched a new climate-focused USD 30 million fund, which 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 recently raised capital include the USD 250 million AfricaGoGreen Fund (AAGF), which finances “climate-friendly” projects and counts pay-as-you-go solar providers BBOXX and Solarise among its portfolio, and the Energy Entrepreneurs Growth Fund (EEGF), which raised over USD 110 million last year. Oxfam Novib and Goodwell have also launched a new fund to provide venture debt to startups in this space.
“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
Shift in investment trends
The shift in investment trends within the climate space is a welcome development, as most climate funding in Africa has historically gone to pay-as-you-go solar energy providers, according to TechCrunch. This new focus will pave the way for a new range of solutions, particularly in fast-growing areas such as sustainable agriculture and agritech, waste management and circular economy products, electric mobility, and smart living.
Climate tech’s impact
35 of the 50 countries most vulnerable to climate change are in Africa, making it crucial for the continent to shift to climate-smart agrifood systems to feed its growing population and increase forest cover. 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.
“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,” said Ruth Bertens, co-founder and Managing Partner of Pyramidia Ventures.
According to analysis, agritech startups in Africa are set to raise USD 1 billion in funding over the next 5 years.