African venture capital firm Equator has raised $55 million for its first fund, which will back climate tech startups through one of the most difficult and often overlooked phases in their journey: the early stage.

Climate tech startups in African countries have to navigate a tougher funding landscape than their counterparts in more developed economies, where governments often subsidize companies working on greener technologies. They have to instead rely heavily 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 deploy less capital, which adds to the pressure on African startups. The situation is worse for climate tech companies, which require more capital than traditional tech startups.

With its fund, Equator feels it can bridge this gap and back scalable solutions that can attract private capital.

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

That’s a lofty goal to aim for, but like many Africa-focused funds, Equator’s base of limited partners still is composed of the very institutions it aims to wean startups off. Its backers include 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.

‘The narrative has shifted’

Equator plans to invest the fund in 15 to 18 startups, writing $750,000 to $1 million checks for companies at the Seed stage, and $2 million for those at Series A.

Aside from capital, the firm wants to help founders figure out unit economics, governance and regional expansion. The fund wants to also reserve capital for follow-on investments and later-stage rounds, and aims to mobilize its LPs 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,” Jamal said. “Until our most recent investments, we had a 100% success rate in bringing our investors directly into the ventures we backed.”

Africa accounts for less than 3% of global energy-related CO2 emissions, but bears some of the harshest climate impacts. Equator wants to address that, saying it invests in ventures “addressing economic and sustainability challenges emerging from these impacts.”

When we covered the firm in 2023 after it had reached the first close for this fund, Jamal stressed the importance of backing technical founders building in the energy, agriculture and mobility sectors. At the time, investments in climate tech had surged, making it Africa’s No. 2 VC sector after fintech.

The market has changed since then, however, and investor conversations have evolved alongside those changes. Initially, founders and investors mainly focused on impact; now, Jamal says, the emphasis is shifting to sales — climate solutions must deliver clear economic value to customers with purchasing power.

Listing examples of such solutions, Jamal pointed to electric vehicles that cost less than fuel-powered ones; climate insurance that accurately covers extreme weather; or AI-powered logistics optimization for businesses. Some of Equator’s portfolio companies, Roam Electric, Ibisa, and Leta, are building these solutions.

“The narrative has shifted,” Jamal said. “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.”

A renewed focus on M&A

Jamal feels 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 looking ready for IPOs.

These new startups, he said, operate in a more mature ecosystem, allowing them to use capital and time more efficiently — key factors in becoming attractive acquisition targets. Rather than billion-dollar IPOs, Jamal anticipates $100 million exits, saying that can still deliver strong returns for investors.

The space is already seeing some consolidation, though most of it is not being announced. We did see notable M&A, like BBOXX’s acquisition of PEG Africa in 2022, and more recently, Equator-backed SteamaCo merged with Shyft Power Solutions last year.

As the sector hopes to see more exits, Jamal stressed the importance of capital structuring. Climate tech attracted the most debt financing last year, and he argues 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 said. 

Jamal previously held roles at BlackRock and impact investor Acumen Fund, where he led the clean tech group. He later founded Moja Capital, a personal fund through which he made early-stage investments aligned with Equator’s current strategy. He 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. Equator has also invested in other growth-stage startups like SoftBank-backed Apollo Agriculture, and Odyssey Energy Solutions.