Equator secures $40M in commitments for fund targeting climate tech startups in Africa

Africa contributes less than 3% of the world’s energy-related carbon dioxide emissions but the continent will be one of the most impacted by the adverse effects of climate change. Some explanations for Africa’s vulnerability include poor diffusion of technologies and information relevant to supporting adaptation, usually provided by clean or climate tech companies.

Despite the precise role that technologies such as renewable energy, recycling and green transportation play in improving the world’s environmental footprint, raising venture capital has proved chiefly hard for the companies behind them in years past. However, investor appetite has been enhanced in recent times. In 2021, climate tech startups raised over $60 billion, about 14% of VC dollars raised that year; in Africa, clean tech accounted for 15% to 18% (about $863 million) of the total funding that venture capitalists poured into the region last year in companies such as Sun King, making clean tech second only to fintech.

Development finance institutions (DFIs), including the British International Investment (BII), FMO and Norfund, are active investors in the clean tech space, as are clean tech–focused funds such as All On, Ambo Ventures and Catalyst Fund. In the latest development, Equator, a climate tech venture capital firm focused on sub-Saharan Africa, has reached an initial close of 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 Participaties, according to the company’s statement.

Equator backs seed and Series A startups across energy, agriculture and mobility sectors. On a call with TechCrunch, managing partner Nijhad Jamal said the firm is interested in these sectors because of numerous untapped market opportunities. He also noted that deploying capital at seed and Series A stages allow Equator to act as a bridge between startups’ earliest checks (at the pre-seed stage) and growth capital, which could come from its limited partners.

“The challenge for many of those larger funds and international investors is that they tend to come in when things have already been de-risked and proven out. At the seed and Series A stage, there is a shortage of capital and institutional investors supporting companies at that stage of their life cycle and journey,” commented Jamal. “The hope is that by investing at these stages, we can mobilize capital at Series B and growth equity stages from large regional funds, global climate tech funds, and corporations excited about the sector and region.”

Jamal, before joining Equator, had several stints with asset manager BlackRock and impact investment Acumen Fund, where he managed the firm’s clean tech group. At Moja Capital, a personal fund he founded, Jamal made seed and Series A investments across several sectors, including those central to Equator’s strategy: clean energy, agriculture and mobility. SunCulture, a Kenya-based off-grid solar tech for smallholder farmers, was one of Jamal’s investments. Equator made a follow-on investment in SunCulture and other startups backed by the firm’s operators, including Morgan DeFoort, partner at Equator and founder of Factor[e] Ventures; Apollo Agriculture; Odyssey Energy Solutions; and Roam.

According to Jamal, Equator wants to back tech-enabled ventures that bring some element of technology, whether hardware or software or business model innovation, to bear in 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 who ultimately address the impact of climate change on income inequality in Africa.

“Climate change and income inequality are proven to be directly correlated. 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 remarked. “So climate change has worsened global income inequality and we’re seeing that very acutely in sub-Saharan Africa. And the ventures and innovation that we’re investing in is a material component to addressing some of these challenges.”

Equator, hoping to make up to 15 investments throughout this fund’s life cycle, says it participates in round sizes of $10 million or less, which is typical for pre-Series B clean tech startups in sub-Saharan Africa. For seed stages, the clean tech VC invests between $1 million and $2 million; for Series A stages, it cut checks between $2 million and $4 million. The firm, which has teams in Nairobi, Lagos, London and Colorado, will also leverage support from Factor[e] Ventures, an organization of venture builders and pre-seed investors. While both companies operate independently, Equator and Factor[e] collaborate on sourcing deals and undertaking due diligence, and they share a post-investment support platform to provide value to portfolio companies as they scale.

“The reality is that capital alone is only part of the problem. Ventures also need highly active and engaged investors to help them reach the growth stage of their trajectory,” added DeFoort.

In all, Equator will be expecting to leverage the current shift in the global narrative about climate tech’s importance and its impact on climate change. The investments coming into the sector, despite lagging fintech by a mile, are progressively being funneled into reducing the cost of technologies such as solar systems and batteries while enabling better access for individuals and businesses with pay-as-you-go models. Jamal says these trends could make the sector more investable and, in many ways, more exciting. “We’re optimistic about the role that we have to play in this ecosystem. I hope this is the first of many funds that continue to follow in these footsteps because more capital, talent and innovation are needed to develop more holistic solutions to the challenges in the climate space.”

Equator secures $40M in commitments for fund targeting climate tech startups in Africa by Tage Kene-Okafor originally published on TechCrunch

SunFi aims to be the fastest way for Nigerians to find, finance and manage solar

SunFi, the Nigerian clean tech startup that connects people and businesses who want solar energy access to payment plans that match their needs, has raised $2.325 million in seed funding.

The self-described energy financial tech platform received backing from lead investors Nairobi-based Factor[e] and SCM Capital Asset Management and participating investors such as Voltron Capital, Norrsken Impact Accelerator, Ventures Platform and Sovereign Capital.

On a call with TechCrunch, CEO Rotimi Thomas said the investment will help SunFi grow its operations and improve its capabilities to recommend the best systems at the lowest cost to customers. 

SunFi isn’t Thomas’ first rodeo at the helm of an energy startup. In 2018, he co-founded Aspire, a solar installation company based on the knowledge he acquired in college on renewable energy and working in several roles relating to energy, gas and power projects across Nigeria and other African countries, including a five-year stint at Siemens as head of market development. Though this business morphed into SunFi three years later, launching Aspire was the first of a lifelong journey that Thomas had envisioned in trying to fix the electricity issues individuals and businesses face in Nigeria, he said on the call.

Nigerian households and businesses have little or no access to affordable and reliable solar technology, which reduces their reliance on grid-based power that suffers from insufficient generation capacity and fails to serve most of Nigeria’s 200 million people who live in rural areas. Turning to off-grid solutions that use solar energy is an option for these people who need electricity for simple necessities like lighting, heating and communication. And that’s what Rotimi’s previous upstart did. Aspire ran a power-as-a-service business model that helped install more than 500 solar systems for individuals and businesses. But despite being marketed as a cheap option, rural electrification in the form of microgrids and solar systems can be expensive to these sub-consumers because of their low spending power. 

“Customers would always ask us if there was a way for them to pay for the solar systems in installments,” Thomas said. “Because of that, we went to the banks and tried to work with them to finance this kind of payment, but we realized that banks also had a problem: they couldn’t dash out credit to customers to finance retail solar systems when they didn’t understand the technical risks involved in owning them.”

Further market research revealed that other solar providers faced the same issue of customers requesting to pay in installments. Thomas and his co-founders — COO Tomiwa Igun and CTO Olaoluwa Faniyi — decided to provide credit and began leasing these systems in what later became SunFi. They believed that as an outfit, they could manage the technical risk involved with solar systems and that it was highly likely that customers would pay because they valued solar systems and saw them as critical pieces of power infrastructure.

Think about it. Retail solar systems are marketed via word of mouth, but with distribution being fragmented and minimal avenues to provide financing, platforms like SunFi that act as aggregators become appealing to customers. 

“The challenge customers face with solar providers is that they want solutions they can pay small for; however, these solar platforms can’t offer. Because banks are afraid of the technical risk involved, they need something in between to talk with good solar providers and do the installation work while providing good capital to customers looking for the right solution. We’re the guys in the middle of all this,” Thomas said.

SunFi creates value for these clean energy investors by de-risking the technical and credit risk involved in financing portfolios of solar solutions, opening avenues for lending as a service play for clean energy providers. Since its official launch last February, SunFi has onboarded over 40 solar system vendors to its platform at various stages of vetting; 10 are its core providers, which have served more than 129 customers. Within the past year, the one-year-old energy startup has deployed more than $600,000 to these customers via its partnerships with financial institutions.  

The Nigeria-based energy company provides customers with two payment methods: a lease to own, where after an initial deposit, customers make payments in installments before owing the solar system, and a subscription model, where customers pay to use the solar system monthly. SunFi’s revenues are from the margin on the lease-to-own model and subscription fees from the latter. The company said it is working on a third revenue stream where it will assist solar providers with inventory financing. 

Some startups already finance solar systems with one or multiple entities, such as Carbon. But Thomas doesn’t regard them as competitors; the same goes for solar system providers. Instead, most of these platforms are partners since they already fill a need in the market and SunFi’s job aggregates them. “Because we have a unique experience having been a solar provider initially and seeing the frustration and challenges of installations in Nigeria, we’ve taken all that technical and credit knowledge to build a system that hopefully works for customers, solar providers and banks,” said the chief executive. 

“SunFi also has a portal for the solar provider to log in, track and manage their business of building several types of products to market to customers and get access to financing. Investors have their dashboard to manage their portal to track how their money is spent in terms of being deployed to manage portfolios or retail customers. So we’re built as a fintech for the clean tech space, which doesn’t exist in Nigeria.”

The clean tech with fintech features will be looking to enhance its platform over the next 12-18 months with this financing. It also intends to convert more than 4,000 customers within that same time frame as the 29-person team continues to grow. The clean tech is in talks to raise additional third-party capital, most likely debt, from commercial banks and other financing partners to channel that money through the system and finance all the energy platform’s demands to take care of this year.

“SunFi has the ability to transform the way clean energy is accessed by households and businesses across Nigeria by creating a marketplace of clean energy products combined with flexible payment options — all of which are personalized to the customer’s financial and energy needs,” said Lyndsay Holley-Handler, partner and chief venture builder at Factor[e] on the investment. “Platforms like these have unlocked access to clean energy in other markets but don’t yet exist in Africa. This type of innovation and disruption is why we decided to be part of SunFi’s journey…”

SunFi aims to be the fastest way for Nigerians to find, finance and manage solar by Tage Kene-Okafor originally published on TechCrunch