Each climate-focused enterprise capital agency operates with the assumption that “if local weather change doesn’t get us, our lack of innovation will.” Africa is most susceptible to local weather change, going through heatwaves, heavy rains, floods, tropical cyclones, and extended droughts. 

For Satgana, a VC agency that has backed seven climate-tech startups throughout Africa, growing options to deal with the continent’s rising local weather issues is existential.

Based in September 2020 by Romain Diaz, Satgana invests between €100k ($105,000) and €300k ($315,000) in early-stage, category-defining local weather tech startups throughout sectors like agriculture, carbon removing, business and constructing, and mobility in each Europe and Africa. The agency goals to speed up local weather objectives on the continent whereas creating jobs. Up to now, Satgana has backed 17 corporations, together with Kubik, an Ethiopian cleantech startup, and Mazi Mobility, a Kenyan mobility startup.

Whereas Satgana invests in conventional local weather tech sectors like vitality, mobility, and waste administration, the agency prioritises underserved areas. A latest report by Huge Deal revealed that local weather tech startups raised 35% of all funding in 2024 (roughly $500 million), with vitality alone accounting for $300 million. Spiro, a frontrunner in e-mobility, raised $50 million in the identical interval.

Satgana believes that investing in underserved areas of local weather tech will result in each environmentally impactful and economically viable options. The agency can be championing the thought of “inexperienced reductions” to speed up the adoption of local weather tech by making sustainable options extra inexpensive.

In March 2024, Satgana closed its first fund ($8.6 million) to help no less than 30 startups. Diaz acknowledges the problem of balancing affordability with sustainability. He notes that climate-friendly options are typically costlier than conventional alternate options. Nevertheless, he believes local weather tech founders ought to deal with alternatives that each scale back prices and create important influence.

On this interview with TechCabal, Diaz discusses the untapped alternatives in Africa’s local weather tech sector, what excites Satgana, and the qualities the agency appears to be like for in founders and companies it backs.

(This interview has been flippantly edited for readability)

TC: What information impressed the choice to turn out to be a climate-focused VC fund?

Africa has traditionally contributed simply 2% to three% of worldwide greenhouse fuel emissions, but it stays essentially the most susceptible continent to local weather change. From a enterprise perspective, there’s a important alternative to develop inexperienced applied sciences on the continent. Africa’s rising vitality demand, mixed with its entrepreneurial inhabitants, creates room for each social and environmental innovation. By channeling capital from the worldwide North to the South, we purpose to help Africa’s progress and problem the narrative that the continent can solely thrive by means of charity.

TC: What kind of innovation in local weather tech excites you essentially the most proper now?

We’re significantly excited by improvements that deal with real-world issues in underserved areas, corresponding to sustainable agriculture, vitality, and building. For instance, in Kenya, local weather change has disrupted farming attributable to erratic climate patterns, which is why we deal with options like resilient crops, precision agriculture, and farm administration applied sciences that promote sustainability.

TC: What are the opposite underserved areas that pose business scale?

Different areas of curiosity embody electrical mobility and local weather information techniques.

TC: Up to now, Satgana has invested in local weather startups targeted on information, upcycling, and mobility in Africa. Are there different sub-sectors that Satgana desires to discover subsequent?

Certainly, when it comes to rising traits, we’re at present exploring alternatives within the biodiversity area. One space of explicit curiosity is nature-based options. 

TC: Nature-based options (NBS) contain utilizing pure processes to deal with societal challenges corresponding to biodiversity loss and catastrophe danger by means of carbon seize, and inexperienced infrastructure amongst others. As a VC agency, what do you consider these options scaling?

Africa’s wealthy biodiversity and pure sources supply immense potential, however there’s a niche between how nature grows and enterprise capital’s expectations. Nature-based options, like afforestation and reforestation, supply important advantages, however nature’s incremental progress doesn’t align with the everyday VC goal of 25% IRR or a 10x return. This mismatch makes scaling nature-based options difficult.

What excites me is exploring fashions that bridge this hole. For instance, Carbo Tradition, a Finnish startup producing biochar, has efficiently raised over $27 million by structuring financing at each the holding firm degree and thru project-specific funding. This twin method might function a mannequin for scaling nature-based options.

TC:  Given the distinctive challenges local weather startups may face in Africa, what fashions do you suppose are most scalable?

One key perception we have now seen, typically popularised by Invoice Gates about inexperienced applied sciences, is that the inexperienced possibility tends to be costlier than the normal one. However once we have a look at alternatives in Africa, we search for what we name a “inexperienced low cost”—the place the inexperienced answer is cheaper than the incumbent.

Let me provide you with a few examples. One of many corporations we invested in is Revivo, which refurbishes digital gadgets. These are extra inexpensive as a result of they scale back waste and keep away from the manufacturing of latest telephones and laptops. It reduces environmental influence and gives a lower cost than new gadgets. This “inexperienced low cost” mannequin makes loads of sense.

Equally, we have now invested in Kubik, an organization in Ethiopia that makes round building supplies. Their merchandise are 20% cheaper than conventional cement. Most of these companies are constructed across the idea of providing a inexperienced answer that’s extra inexpensive, which is one thing we all the time search for.

In the case of scalable fashions, we sometimes favour modular and replicable options. Microgrids are an instance of a scalable, decentralised answer. 

TC: Past the founder, how does Satgana consider a possible startup?

When evaluating startups, we prioritize the power of the founding staff, ideally with two co-founders whose expertise and expertise complement one another. That stated, we do spend money on solo founders if they’ve complementary expertise inside their staff. We search for a stability between visionary pondering and execution potential, valuing resilience, ardour, and dedication. The flexibility to adapt and persevere by means of challenges is essential.

TC: What international locations will you be taking a look at to spend money on subsequent? 

Our subsequent goal nation is South Africa. Having lived there for seven years, I’ve a powerful connection to the nation and consider there are nice alternatives for us to make an influence.

TC: What elements do you contemplate most important for scaling a local weather tech startup in Africa?

One essential factor is having sturdy groups. The perfect enterprise fashions can solely succeed with nice administration. Constructing partnerships is one other key facet. Public-private partnerships and company collaborations may also assist deliver inexperienced companies to scale. It’s necessary to adapt to the native context—each African nation is exclusive, and adapting to every market’s particular wants is important.

Lastly, we advocate pulling from various sources of capital. Whereas fairness is necessary (and that’s the place we are available), it’s equally essential to discover quasi-equity, asset financing, debt, grants, and revenue-based financing. These varied funding sources might help deliver extra capital into the inexperienced sectors of Africa, enabling them to scale.

TC: Is there a startup you want Satgana invested in? 

Whereas we have now no regrets with our present fund, we’d have liked to be a part of the sooner wave of local weather startups in Africa, like Daylight, M-KOPA or Solar Tradition however we didn’t even exist then. After we miss a possibility we all the time analyse what we might have missed or finished in a different way. 

We observe a “no remorse” coverage, which means that once we cross on a possibility and see it succeed, we’re comfortable as a result of it’s good for the local weather.