Equator closes $ 55 million to bring more private capital to African climate technology
African venture capital company Equator A collected $ 55 million for its first fund, which will support startups of climate technology through one of the most difficult and often neglected phases in their trip: the early stadium.
Climate technology startups in African countries must sail in a more difficult financing landscape than their counterparts in more developed economies, where governments often subsidize companies working on greener technologies. They should rather count strongly on development financing institutions (DFIS)Foundations and endowments, making them particularly vulnerable to changes in world capital flows.
As aid and development financing budgets shrinkDFIS deploy less capital, which adds to pressure on African startups. The situation is worse for climate technology companies, which require more capital than traditional technological startups.
With his fund, Equator believes that he can fill this gap and evolving back solutions that can attract private capital.
“We need more than ever to invest in technology and scalable companies that fall under basic climatic challenges,” said the general partner of the company, Nijhad Jamal. “These investments will help reduce dependence on aid and bring more world capital in the region.”
It is a high objective of aiming, but like many funds focused on Africa, the basis of limited partners in Equator is still made up of the institutions that it aims to wean startups. Its donors include DFIs such as British International Investment (BII), Proparco and IFC, as well as foundations and endowments such as the Global Energy Alliance for People and Planet (funded by Ikea, Rockefeller and Jeff Bezos’ Earth Fund) and the Shell Foundation.
“The story has changed”
Equator plans to invest the fund in 15 to 18 startups, writing checks from $ 750,000 to $ 1 million for companies at the seed stadium and $ 2 million for those in the A series.
Aside from capital, the company wishes to help the founders find the unit economy, governance and regional expansion. The fund also wishes to reserve capital for follow-up investments and subsequent cycles, and aims to mobilize its LPS as co-investors to provide equity, debt or mixed financing.
“In many of our portfolio companies, we are the only investor focused on Africa on the CAP table – this is the role we see each other in this ecosystem,” said Jamal. “Until our most recent investments, we have had a 100% success rate to bring our investors directly to the companies we have supported.”
Africa represents less than 3% Global CO2 emissions related to energy, but have some of the most difficult climatic impacts. Equator wants to solve this problem, saying that it is investing in companies “resolving economic and sustainable challenges emerging from these impacts”.
When We covered the company in 2023 after reaching the first fence of this fundJamal stressed the importance of supporting the technical construction founders in the energy, agriculture and mobility sectors. At the time, investments in climate technology had increased, which made it the VC n ° 2 sector in Africa after the Fintech.
However, the market has changed since then, and investor conversations have evolved in parallel with these changes. Initially, the founders and investors mainly focused on the impact; Now, says Jamal, the emphasis is on sales – climatic solutions must offer clear economic value to customers with purchasing power.
Listing examples of such solutions, Jamal underlined electric vehicles that cost less than those who feed the fuel; Climate insurance which covers extreme weather conditions precisely; or logistics optimization fueled by AI for companies. Some of the Equator portfolio companies, Roam ElectricIbisa and Leta, build these solutions.
“The story has changed,” said Jamal. “It is no longer only about development and impact. It is a question of mobilizing private capital for evolutionary companies that solve problems. The objective today is even more on things like the unitary economy and the path of profitability, because people know that there is not only [enough] Capital to launch companies on a scale without thinking of monetization, real economy, profitability or outings. »»
An accent renewed on mergers and acquisitions
Jamal believes that climate technology startups today are different from their own first generation counterparts like Sun King, M-Kopa and D. Light, who have raised billions and are now ready for stock market companies.
These new startups, he said, operate in a more mature ecosystem, allowing them to use capital and time more efficiently-key factors to become attractive acquisition objectives. Rather than $ 1 billion stock exchange, Jamal is planning $ 100 million outings, saying that this can still provide solid yields for investors.
The space already notes a certain consolidation, although most are not announced. We have seen notable mergers and acquisitions, such as Boxx’s acquisition of Peg Africa in 2022, and more recently, steamaco supported by the equator merged With Shyft Power Solutions last year.
As the sector hopes to see more outings, Jamal stressed the importance of the structuring of capital. Climate Tech attracted the most loan funding last year, and he maintains that startups need the right mix to avoid excessive dilution of equity.
“If equity is used for everything, including working capital, dilution will be too high for investors or founders to see significant yields. But as debt and other financial instruments become more available, we will start to see commercial outings, even if they are more of the size of a bite, “he said.
Jamal previously occupied roles at Blackrock and Impact Investor Acun Fund, where he managed the Clean technology group. He then founded Moja Capital, a personal fund through which he made investments in the start -up phase aligned on the current Equator strategy. He directs Equator alongside the partner Morgan Defoort.
One of Jamal’s first bets was Solar pantiesAn off -network solar company based in Kenya supported by the Schmidt family foundation, which Equator has since argued. Equator has also invested in other growth stadium startups such as sustained softbank Apollo agricultureAnd Odyssey Energy Solutions.
