Equator, a venture capital firm focused on Africa, has successfully raised $55 million for its inaugural fund, which aims to support climate tech startups during their early stages, a critical yet often neglected phase in their development.

Climate tech startups in Africa face a more challenging funding landscape compared to their counterparts in more developed economies, where governments frequently provide subsidies for companies working on environmentally friendly technologies. Instead, they must heavily rely on development finance institutions (DFIs), foundations, and endowments, making them particularly vulnerable to fluctuations in global capital flows.

As aid and development finance budgets decrease, DFIs deploy less capital, exacerbating the pressure on African startups. This situation is even more dire for climate tech companies, which require more capital than traditional tech startups.

Equator’s fund seeks to bridge this gap by supporting scalable solutions that can attract private capital.

“The need for investment in technology and scalable ventures addressing fundamental climate challenges is more pressing than ever,” stated Nijhad Jamal, the firm’s managing partner. “These investments will contribute to reducing dependence on aid and instead, bring more global private capital into the region.”

Although this goal is ambitious, like many Africa-focused funds, Equator’s base of limited partners still comprises 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, providing $750,000 to $1 million for companies at the Seed stage and $2 million for those at Series A.

In addition to capital, the firm intends to assist founders in determining unit economics, governance, and regional expansion. The fund also aims to reserve capital for follow-on investments and later-stage rounds, mobilizing 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 stated. “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 aims to address this by investing in ventures “addressing economic and sustainability challenges emerging from these impacts.”

When we previously covered the firm in 2023 after it had reached the first close for this fund, Jamal emphasized 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.

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

Jamal cited examples of such solutions, including 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, such as Roam Electric, Ibisa, and Leta, are developing these solutions.

“The narrative has shifted,” Jamal stated. “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 believes that climate tech startups today differ from their first-generation cleantech counterparts, such as Sun King, M-KOPA, and d.light, which raised billions and are now preparing for IPOs.

These new startups, he said, operate in a more mature ecosystem, enabling 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, which can still deliver strong returns for investors.

The space is already witnessing some consolidation, although most of it is not publicly announced. Notable M&A deals include BBOXX’s acquisition of PEG Africa in 2022 and Equator-backed SteamaCo’s merger 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 that 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. However, as debt and other financial instruments become more available, we’ll start seeing commercial exits, even if they’re more modest,” 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, such as SoftBank-backed Apollo Agriculture and Odyssey Energy Solutions.