An equity investment to the tune of $25 million has been made by the United States International Development Finance Corporation (DFC) in a new fund managed by the Pan-African venture capital firm Novastar Ventures.
The purpose of this investment is to support founders who are working on agriculture and climate solutions.
During its most recent update explaining the transactions it had approved over the past few months, the DFC disclosed the specifics of the transaction in question, as well as Novastar’s newly established investment vehicle known as the Africa People + Planet Fund.
A source was unable to develop the details of other limited partners that made commitments. However, sources familiar with the fund stated that the Nairobi and Lagos-based venture capital firm aims to raise more than $200 million, which would make it one of the largest funds in the region.
After raising 108 million dollars for the Africa Fund II, Novastar expanded its geographic reach to include West Africa. As a result, the company has established its third pool, the Africa People + Planet Fund.
Its first pool of capital, known as the East Africa Fund, consisted of an investment pool with a total value of $80 million and a co-investment facility with a value of $12.5 million. This pool of capital was used to make investments in 15 local startups.
The first two funds that Novastar has ever raised have been used to invest in tech-enabled startups that serve the mass market in a variety of industries, such as agriculture, education, and off-grid renewable energy.
Read also: World Bank approves $390m for Kenya’s digital economy
Investments of Novastar Ventures
Among the companies that Novastar has invested in are TradeDepot, an e-commerce scaleup; Turaco, an insurance technology company; Moniepoint (formerly TeamApt), a financial technology company; mPharma, a health technology company; MoKo, a furniture startup; and iProcure, an agricultural technology company.
“Going forward, we are looking to build on this experience and use the same tools and strategies to support sustainable, planet-positive, mass-market business models across Africa that the rest of the world can learn from,” Andrew Carruthers, co-founder and managing partner of Novastar, said.
The venture capital company announced that it would invest its newly established fund in climate technologies, clean technologies, marketplaces, and initiatives that contribute to the resiliency of communities through the delivery of financial and supply chain services.
According to Andrew Carruthers, “We see opportunities in all three categories, driven by clear megatrends such as immense population growth, rapid urbanisation, and the vast amount of arable land on the continent.”
The Focus of the Investment
The startups that are being targeted include those that provide financial and supply chain services, as well as marketplaces, with the goal of “enabling access to market and resilience for the many in the face of climate change.”
According to Carruthers, the venture capital firm plans to invest in clean technologies that will “help decarbonize the growth that we will see on the continent in the next 10 to 20 years.” These clean technologies include those that deal with clean utilities, clean construction technologies, electric mobility, smart logistics, the circular economy, and alternative materials.
In addition, Novastar will invest in climate technologies that use innovative business models “to deploy regenerative forestry, agriculture and aquaculture, biofuels, and biochar, that protect biodiversity, improve soil health, and capture carbon,” while at the same time generating more opportunities for smallholder farming.
The venture capital firm is increasing the amount of funding that is available for clean technologies in Africa. In 2022, clean technologies were the second most funded startups in the region, behind only fintechs.
This move would ensure a sustainable and healthy environment in Africa.