African venture capital firm Equator has successfully raised $55 million for its inaugural fund, aiming to support climate tech startups during one of their most challenging phases: the early stage.
Unlike startups in developed economies that benefit from government subsidies, climate tech ventures in Africa face a much tougher funding landscape. Many rely on development finance institutions (DFIs), foundations, and endowments, making them especially vulnerable to shifts in global capital flows.
As aid and development finance budgets shrink, DFIs are deploying less capital, increasing pressure on African startups. Climate tech firms are particularly affected due to their higher capital requirements compared to traditional tech startups. Equator believes its new fund can help bridge this financing gap and support scalable solutions capable of attracting private capital.
“We are needed more than ever to invest in technology and scalable ventures tackling fundamental climate challenges,” said Nijhad Jamal, managing partner at Equator. “These investments will help reduce dependence on aid and instead bring more global private capital into the region.”
Despite its goal of reducing reliance on DFIs, Equator’s limited partners (LPs) still include major development institutions such as British International Investment (BII), Proparco, and the International Finance Corporation (IFC). Additional support comes from foundations and endowments, including the Global Energy Alliance for People and Planet (funded by IKEA, the Rockefeller Foundation, and Jeff Bezos’ Earth Fund) and the Shell Foundation.
Equator plans to invest in 15 to 18 startups, providing:
- $750,000 to $1 million for Seed-stage companies.
- $2 million for those at Series A.
Beyond capital, Equator aims to assist startups with:
- Unit economics and governance.
- Regional expansion strategies.
- Follow-on investments and later-stage funding.
- Mobilizing LPs as co-investors to provide equity, debt, or blended financing.
“In several of our portfolio companies, we’re the only Africa-focused investor on the cap table — that’s the role we see ourselves playing in this ecosystem,” Jamal explained. “Until our most recent investments, we had a 100% success rate in bringing our investors directly into the ventures we backed.”
Shifting Market Dynamics and the Future of Climate Tech
Africa contributes less than 3% of global CO2 emissions, yet it suffers some of the most severe climate impact. Equator is dedicated to backing companies addressing economic and sustainability challenges arising from these issues.
When Equator initially closed the fund in 2023, climate tech was Africa’s second-largest VC sector after fintech. However, market dynamics have since shifted. Previously, investors focused mainly on impact, but now the emphasis is on commercial viability.
“The narrative has shifted,” Jamal noted. “It’s no longer just about development and impact. It’s about mobilizing private capital for scalable ventures that solve problems.”
Startups must now prove their solutions provide clear economic value to paying customers. Examples of scalable climate solutions include:
- Affordable electric vehicles that cost less than fuel-powered alternatives.
- Climate insurance that effectively covers extreme weather events.
- AI-powered logistics optimization to improve efficiency for businesses.
Equator has already backed startups such as Roam Electric, Ibisa, and Leta, which are developing these solutions.
Mergers, Acquisitions, and Smarter Capital Structuring
Jamal believes today’s climate tech startups differ from early cleantech pioneers like Sun King, M-KOPA, and d.light, which raised billions and are now approaching IPO status.
Newer startups operate in a more mature ecosystem, making them more attractive for acquisitions rather than billion-dollar IPOs. Jamal predicts $100 million exits will become the norm, still delivering strong returns for investors.
Recent mergers and acquisitions in the sector include:
- BBOXX’s acquisition of PEG Africa (2022).
- SteamaCo’s merger with Shyft Power Solutions (2023).
Jamal also stresses the importance of capital structuring. Last year, climate tech attracted the most debt financing, but startups must balance their capital mix to avoid excessive dilution.
“If equity is used for everything, including working capital, dilution will be too high for investors or founders to see meaningful returns,” he said. “But as debt and other financial instruments become more available, we’ll start seeing commercial exits, even if they’re more bite-sized.”
Jamal, who previously worked at BlackRock and impact investor Acumen Fund, leads Equator alongside partner Morgan DeFoort. Before founding Equator, Jamal launched Moja Capital, a personal fund focused on early-stage investments that align with Equator’s strategy.
One of his early investments was SunCulture, a Kenya-based off-grid solar company backed by the Schmidt Family Foundation, which Equator has since supported. Other notable investments include SoftBank-backed Apollo Agriculture and Odyssey Energy Solutions.
With its first fund now fully raised, Equator is positioning itself as a key player in Africa’s climate tech landscape, supporting startups with both capital and strategic expertise.
The future of African climate tech isn’t just about impact anymore—it’s about scalability, profitability, and smart capital allocation.
