Ecuador secures $40 million in commitments for fund targeting climate tech startups in Africa

by MMC
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Image credits: Ecuador

Africa contributes less than 3% of global energy-related carbon dioxide emissions, but the continent will be one of the hardest hit by the adverse effects of climate change. Some explanations for Africa’s vulnerability include poor diffusion of relevant technologies and information to support adaptation, typically provided by clean or climate technology companies.

Despite the clear role that technologies such as renewable energy, recycling and green transportation play in improving the global environmental footprint, raising venture capital has proven particularly difficult for the companies backing them these days. last years. However, investor appetite has increased in recent times. In 2021, climate tech startups raised more than 60 billion dollars, about 14% of venture capital dollars raised that year; in Africa, clean technologies represented 15% to 18% (around $863 million) of the total funding that venture capitalists poured into the region last year in companies such as Sun Kingplacing cleantech second after fintech.

Development finance institutions (DFIs), including British international investment (BII), FMO and Norfund are active cleantech investors, 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 the first close of its first fund with $40 million in commitments. Its sponsor partners include BII, the Global Energy Alliance for People and Planet (GEAPP), the Shell Foundation and impact investor DOEN Participaties, according to the company’s release.

Equator supports seed and Series A startups in the energy, agriculture and mobility sectors. On a call with TechCrunch, managing partner Nijhad Jamal said the company is interested in these sectors because of the many untapped market opportunities. He also noted that deploying capital at the seed and Series A stages allows Equator to serve as a bridge between startups’ early checks (at the pre-seed stage) and growth capital, which could come from its sponsors.

“The challenge for many of these large international funds and investors is that they tend to come in when the risks have already been reduced and proven. At the seed and Series A stage, there is a shortage of capital and institutional investors to support companies at this stage of their life cycle and journey,” commented Jamal. “The hope is that by investing at these stages, we will be able to raise capital at the Series B and growth capital stages from large regional funds, global climate technology funds and companies excited about the sector and the region. »

Jamal, before joining Equator, worked multiple times at asset manager BlackRock and impact investing Acumen Fund, where he led the company’s cleantech group. At Moja Capital, a personal fund he founded, Jamal has made seed and Series A investments in several sectors, including those central to Ecuador’s strategy: clean energy, agriculture and mobility. SunCulture, a Kenya-based off-grid solar technology aimed at small-scale farmers, was one of Jamal’s investments. Equator has made a follow-on investment in SunCulture and other startups backed by the company’s operators, including Morgan DeFortpartner at Equator and founder of Factor(e) Ventures; Apollon Agriculture; Odyssey energy solutions; and wander.

From left to right: Nijhad Jamal and Morgan DeFoort. Image credits: Ecuador

According to Jamal, Ecuador wants to support tech companies that bring some element of technology, whether it’s hardware, software or business model innovation, to a region where innovation might be lacking. As such, the fund will focus on technical founders with domain expertise who are building solutions around clean energy, agriculture and mobility, and who ultimately tackle the the impact of climate change on income inequalities in Africa.

“There is evidence that climate change and income inequality are directly correlated. Data shows that the gap between the economic output of the world’s richest and poorest countries is now 25% larger than it would have been without global warming,” noted Jamal. “Climate change has therefore worsened income inequality globally and we see this very acutely in sub-Saharan Africa. And the businesses and innovation we invest in is an important part of addressing some of these challenges.

Equator, which hopes to make up to 15 investments over the lifecycle of this fund, says it will participate in round sizes of $10 million or less, which is typical of pre-Series B cleantech startups in Sub-Saharan Africa. For seed stages, cleantech venture capital invests between $1 million and $2 million; for Series A stages, it cut checks to between $2 million and $4 million. The company, which has teams in Nairobi, Lagos, London and Colorado, will also benefit from the support of Postman Companies, an organization of venture capitalists and pre-seed investors. Although the two companies operate independently, Equator and Factor(e) collaborate to source deals and conduct due diligence, and share a post-investment support platform to deliver value to portfolio companies as ‘they evolve.

“The reality is that capital alone is only part of the problem. Companies also need very active and committed investors to help them reach the growth phase of their trajectory,” DeFoort added.

Overall, Ecuador hopes to take advantage of the current shift in global discourse on the importance of climate technology and its impact on climate change. Investments in the sector, despite lagging significantly in fintech, are gradually being channeled towards reducing the cost of technologies such as solar systems and batteries, while allowing greater access to individuals and businesses through payment models to use. Jamal says these trends could make the sector more investment-friendly 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 will continue to follow in these footsteps, as more capital, talent and innovation are needed to develop more holistic solutions to space challenges climatic.

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