Equator, a climate tech venture capital firm focused on Sub-Saharan Africa, has closed its first fund with pledges totaling $40 million.
According to the company, its limited partners include BII, GEAPP, Shell Foundation, and impact investor, DOEN. Equator has representatives in Nairobi, Lagos, London, and Colorado.
Equator provides seed and series, and it is financing companies in the energy, agribusiness, and transportation areas. Nijhad Jamal, the company’s managing partner, indicated during a conversation with a source that the company is interested in these areas because there are several unknown market potentials.
He also stated that by investing money at the seed and Series A stages, Equator is able to act as a bridge between the initial checks that firms receive (at the pre-seed stage) and the expansion cash that its limited partners may provide.
“The issue for many of those larger funds and overseas investors is that they tend to come in after things have been de-risked and proven out.”
“There is a scarcity of funds and institutional investors supporting startups at the seed and Series A stage of their life cycle and journey,” Jamal remarked.
“We expect that by investing at these stages, we will be able to mobilise capital at the Series B and growth equity stages from significant regional funds, global climate tech funds, and corporations interested in the sector and region.”
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The Aim of Equator
According to Jamal, Equator is interested in providing financial support to businesses that are enabled by technology and that bring some aspect of technological innovation to a region where innovation may be lacking. This could take the form of hardware or software innovation, or it could take the form of an innovative business model. Therefore, the fund will give heed to technical founders with domain expertise who are developing solutions around clean energy, agriculture, and mobility and who ultimately address the impact that climate change will have on income inequality in Africa. These founders will build solutions around clean energy, agriculture, and mobility.
According to Jamal, Equator is interested in providing financial support to businesses that are enabled by technology and that bring some aspect of technological innovation to a region where innovation may be lacking. This could take the form of hardware or software innovation, or it could take the form of an innovative business model. Therefore, the fund will give heed to technical founders with domain expertise who are developing solutions around clean energy, agriculture, and mobility, and who ultimately address the impact that climate change will have on income inequality in Africa. These founders will build solutions around clean energy, agriculture, and mobility.
Jamal commented, “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.”
“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.”
The Investment Pattern of Equator
According to Equator, the company only invests in rounds with a size of ten million dollars or less, which is typical for pre-Series B clean technology businesses in sub-Saharan Africa. Equator hopes to make as many as fifteen investments over the course of this fund’s life cycle. The clean technology venture capital firm invests between $1 million and $2 million during the seed stage, and it writes checks for between $2 million and $4 million during the Series A stage. The company, which has teams in Nairobi, Lagos, London, and Colorado, will also utilise help from an organisation called Factor[e] Ventures, which is comprised of venture builders and pre-seed investors.
Equator and Factor[e] partner on sourcing deals and performing due diligence, and they maintain a post-investment support platform to give value to portfolio businesses as they scale. Although both organisations operate independently, they work together to source deals and perform due diligence.
Morgan DeFoort, the managing partner of Factor[e] Ventures said , “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.”
Overall, Equator will be looking to capitalise on the recent shift in the dominant global narrative on the significance of climate technology and the role it plays in driving climate change. In spite of the fact that cleantech is miles behind fintech in terms of investment, the money that is being poured into the industry is being used to cut the prices of various technologies, such as solar panels and batteries, and to make them more accessible to consumers and companies through pay-as-you-go business models. According to Jamal, these tendencies may make the industry more attractive to investors and, in many respects, more fascinating.
“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.”