Africa contributes less than 3% of global energy-related carbon dioxide emissions, but the continent will be among those hardest hit by the adverse effects of climate change. Some explanations for Africa’s vulnerability include the poor dissemination of relevant technologies and information to support adaptation, usually provided by climate or cleantech companies.
Despite the precise role that technologies such as renewable energy, recycling, and green transportation play in improving the global environmental footprint, raising venture capital has primarily proven difficult for the companies that back them in recent years. However, investor appetite has improved of late. In 2021, climate tech startups raised more than $60 billion, about 14% of the venture capital dollars raised that year; In Africa, clean tech accounted for 15-18% (about $863 million) of the total funding that venture capitalists invested in the region last year in companies like Sun King, making clean tech a second only to fintech.
Development Finance Institutions (DFIs), including British International Investment (BII), FMO and Norfund, are active investors in the cleantech space, as are cleantech-focused funds such as All On, Ambo Ventures and Catalyst Fund. In the latest development, Ecuador, a climate technology venture capital firm focused on sub-Saharan Africa, has reached an initial close on its first fund with $40 million in commitments. Its limited partners include BII, the Global Energy Alliance for People and Planet (GEAPP), the Shell Foundation and impact investor DOEN Participates, according to the company statement.
Equator supports seed and Series A start-ups in the energy, agriculture and mobility sectors. On a call with TechCrunch, Managing Partner nijhad jamal He said the firm is interested in these sectors because of the many untapped market opportunities. He also noted that the deployment of capital in the seed and Series A stages allows Equator to act as a bridge between the early checks of new companies (in the pre-seed stage) and growth capital, which could come from its partners. limited.
“The challenge for many of those larger funds and international investors is that they tend to come in when things have already been stripped and tested. At the seed stage and Series A, there is a dearth of capital and institutional investors to support companies at that stage of their life cycle and journey,” Jamal commented. “The hope is that by investing in these stages, we can mobilize capital in Series B and growth capital stages from large regional funds, global climate technology funds, and corporations excited about the sector and the region.”
Jamal, prior to joining Equator, worked multiple times at asset manager BlackRock and impact investing Acumen Fund, where he managed the company’s cleantech group. At Moja Capital, a personal fund he founded, Jamal made seed and Series A investments in various sectors, including those central to Equator’s strategy: clean energy, agriculture and mobility. SunCulture, a Kenya-based off-grid solar technology for smallholder farmers, was one of Jamal’s investments. Equator made a follow-up investment in SunCulture and other startups backed by the company’s operators, including morgan defootpartner of Equator and founder of Factor[e] companies; Apollo Agriculture; Odyssey Power Solutions; and roaming.
L-R: Nijhad Jamal and Morgan DeFoort
According to Jamal, Equator wants to back tech companies that bring some element of technology, be it hardware or software or business model innovation, to influence a region where innovation might be lacking. As such, the fund will pay attention to technical founders with domain expertise who are building solutions around clean energy, agriculture and mobility, and ultimately addressing the impact of climate change on income inequality. in Africa.
“Climate change and income inequality have been shown to be directly related. The data shows that the gap between the economic output of the world’s richest and poorest countries is 25% larger today than it would have been without global warming,” Jamal said. “So climate change has worsened global income inequality and we are seeing it very acutely in sub-Saharan Africa. And the companies and innovation that we are investing in are an important component in addressing some of these challenges.”
Equator, hoping to make up to 15 investments over the lifecycle of this fund, says it participates in rounds of $10 million or less, which is typical for pre-Series B cleantech startups in Sub-Saharan Africa. For the seed stages, the cleantech VC invests between $1 million and $2 million; for the Series A legs, he cut checks between $2 million and $4 million. The firm, which has teams in Nairobi, Lagos, London and Colorado, will also take advantage of the support of Factor[e] companies, an organization of start-ups and pre-seed investors. Although both companies operate independently, Equator and Factor[e] they collaborate on securing deals and conducting due diligence, and share a platform of post-investment support to deliver value to portfolio companies as they scale.
“The reality is that capital alone is only part of the problem. Companies also need highly active and committed investors to help them reach the growth stage of their journey,” added DeFoort.
In all, Equator hopes to take advantage of the current shift in the global narrative about the importance of climate technology and its impact on climate change. Investments entering the sector, despite lagging fintech by a mile, are being progressively channeled to lower the cost of technologies such as solar systems and batteries, while enabling better access for individuals and companies with business models. pay per use. Jamal says these trends could make the sector more investable and, in many ways, more exciting. “We are optimistic about the role we have to play in this ecosystem. I hope this is the first of many funds that continue to follow these steps because more capital, talent and innovation are needed to develop more holistic solutions to challenges in the climate space.”
