African VC Equator raises $55 million to fund emerging climate tech startups

Equator, an African venture capital firm, has raised a $55 million fund structured at backing African climate tech startups through their early-stage position.

The venture capitalist plans to invest the fund across 15 to 18 startups where $750,000 to $1 million checks will be allocated for companies at the Seed stage, and $2 million for those in the Series A category.

Aside from funding, Equator is aiming to provide assistance in areas such as economics, governance, and regional expansion. It will also set aside capital for follow-on investments and later-stage rounds, where it will make use of its leading partners as co-investors to bring in 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. Until our most recent investments, we had a 100% success rate in bringing our investors directly into the ventures we backed,” said the firm’s managing partner, Nijhad Jamal.

In addition, Equator said it wants to invest in ventures “addressing economic and sustainability challenges emerging from these impacts.

Currently, Africa accounts for less than 3% of global energy-related CO2 emissions. However, the region bears some of the harshest climate impacts. Equator has invested in other growth-stage startups like SoftBank-backed Apollo Agriculture, and Odyssey Energy Solutions.

Also Read: Despite 2 new unicorns, venture funding into Africa declined by 25% in 2024.

Equator’s target: the funding gap

Compared to their counterparts in a more developed economy where governments often subsidize companies working on greener technologies, climate tech startups in Africa face a tougher funding range. Most time, they depend on development finance institutions (DFIs), foundations, and endowment which exposes them to shifts in global capital flows.

With the depletion of aid and development finance budgets, DFIs deploy less capital which puts additional pressure on African startups. The scenario becomes worse for climate tech companies who require more capital than traditional tech startups.

Coming through, Equator has in its plans to bridge this gap and effect a solution that seeks to attract private capital with its funds.

“We are needed more than ever to invest in technology and scalable ventures tackling fundamental climate challenges. These investments will help reduce dependence on aid and instead bring more global private capital into the region,” Jamal added.

In a twist-like, Equator’s line of limited partners is composed of backers from DFIs such as British International Investment (BII), Proparco, and IFC, as well as foundations and endowments like the Global Energy Alliance for People and Planet (funded by IKEA, Rockefeller, and Jeff Bezos’ Earth Fund) and the Shell Foundation.

From impact to sale

In 2023, when Equator reached the first close for this fund, it focused on backing technical founders building in the energy, agriculture, and mobility sectors. Investment in climate tech was Africa’s No. 2 VC sector after fintech.

The market seems to have changed now with evolving flows.

Jamal noted that as compared to then when founders and investors focused on impacts, the attention has now circled sales. In this regard, climate solutions must deliver economic value to customers with purchasing power ability.

He also pointed at electric vehicles that cost less than fuel-powered ones; climate insurance that accurately covers extreme weather; or AI-powered logistics optimization for businesses where some of Equator’s portfolio companies, Roam Electric, Ibisa, and Leta, are building these solutions.

“The narrative has shifted. It’s no longer just about development and impact. It’s about mobilizing private capital for scalable ventures that solve problems. The focus today is even more on things like unit economics and the path to profitability, because people know there isn’t just [enough] capital to throw at ventures to scale without thinking about monetization, real economics, profitability or exits,” Jamal said.

The managing partner was of the notion that climate tech startups today are different from their first-generation cleantech counterparts like Sun King, M-KOPA, and d.light, which raised billions and are now projecting to scale high.

As new startups now operate in a more mature condition, this allows them to use capital and other resources efficiently making them susceptible to acquisition. Jamal expressed that about $100 million worth of exits is anticipated which translates to a strong return for investors.

A number of acquisitions have already taken place such as BBOXX’s acquisition of PEG Africa in 2022, and the recent Equator-backed SteamaCo merger with Shyft Power Solutions in 2024. 

On solution, Jamal pointed out the importance of capital structuring where startups need the right mix to avoid excessive equity dilution. 

“If equity is used for everything, including working capital, dilution will be too high for investors or founders to see meaningful returns. But as debt and other financial instruments become more available, we’ll start seeing commercial exits, even if they’re more bite-sized,” he added. 

Jamal runs Equator alongside partner Morgan DeFoort. One of Jamal’s early bets was SunCulture, a Kenya-based, off-grid solar company backed by the Schmidt Family Foundation, which Equator has since supported. Jamal holds a BSc. from the Massachusetts Institute of Technology (MIT) and an MBA from Harvard Business School.