A $30 million fund has been closed by Satgana, a European venture capital (VC) company with its headquarters in Luxembourg, to support entrepreneurs that address climate change issues in Africa. The fund will accomplish this by investing up to €500K in entrepreneurs in Europe and Africa throughout their pre-seed and seed stages.
Along with providing capital, the VC will make use of its network and that of some of its investors to assist founders with direct operational and strategic support on matters such as fundraising, hiring, and technological development. In its efforts to decarbonize the entire economy, Satgana will focus on food, agriculture, energy, mobility, industry, buildings, carbon removal, and the circular economy.
The fund has invested in three climate tech startups: Mazi Mobility, a Kenyan company developing a network of electric motorcycles and battery-swapping infrastructure in East Africa; Orbio Earth, a German company developing methane intelligence software to assist energy providers monitor and reduce methane emissions with the use of satellites; and Yeasty, a French company developing an alternative protein utilizing beer yeast with a circular model.
The majority of African nations are not well-prepared for natural disasters brought on by climate change, hence Satgana’s method of funding climate tech firms is greatly required throughout the continent. Most notably, Nigeria, the second-best startup destination in Africa after South Africa, has been hit by floods that have displaced over a million people.
As droughts ravaged the Horn of Africa in July, more than 18.5 million people in Ethiopia, Kenya, Somalia, and Djibouti faced a humanitarian disaster. Africa contains seven of the ten nations that are most at risk from climate change.
TechCabal spoke with Romain Diaz, Satgana’s CEO, on how the fund will invest in businesses in Africa in order to better understand how Satgana intends to contribute to reducing climate change in Africa.
Africa is the most susceptible continent, although making less of a contribution to global warming than other continents. How would Satgana’s strategy lessen the vulnerability of Africa?
Despite producing less than 3% of the planet-warming greenhouse gases, Africa is the most vulnerable continent to climate change, putting its development in jeopardy. Seven of the ten countries most at danger from climate change – including threats to infrastructure, food insecurity, floods, droughts, and public health issues – are located on the continent.
In Sub-Saharan Africa alone, climate disasters forced more than 2.6 million people to leave their homes in 2021, and the IPCC predicts that number would increase to 700 million by 2030. This means that in addition to making sure that Africa is on a path toward green growth, we also need to discover solutions that promote climate resilience.
Even if there are several solutions that need to be created and executed, only 7% of expenditures related to climate change are being made. Regenerative agriculture, climate-resilient crops, early warning systems for extreme weather events, coastal barriers, water desalination, hydroponic agriculture, improved cooling and insulation systems, and modular housing made from waste are a few examples of these models that we are looking into at Satgana. It is important to note that several of these models combine social co-benefits, biodiversity, and mitigation and adaptation to climate change.
It typically takes early-stage startups some time before they have a significant impact.
Why is Satgana’s concentration on early-stage startups for such a widespread issue?
In essence, startups initially have little impact, which can be both good and bad. However, the businesses that are successful are those that can make a difference by creating desperately needed technologies or by repurposing those that currently exist in novel ways, in novel markets, and for novel objectives. Our economy will require a range of stakeholders to contribute if we are to cut emissions in half by 2030 and reach net zero by 2050. Startups alone won’t be sufficient in this regard.
Fortunately, the climate agenda has taken center stage, and we eagerly await the conclusions of COP 27, where Satgana will participate in a panel discussion to address the role of venture capital in combating climate change.
It is important to take into account other environmental elements, such as biodiversity, which is currently undervalued while being as important to halting climate change. To restore planetary health, startups tackling these issues are critically needed.
Early-stage businesses on the continent require assistance connecting to a support network in addition to funding. What kind of assistance will Satgana provide?
A major factor is funding. We need trillions of dollars more in funding to get to net zero, and some of that money must come from supporting entrepreneurs. African climate investments are a very small portion of other verticals, like fintech, which have received the majority of VC funding to date. We are confident that this is about to change as the climate agenda takes center stage for all countries and businesses.
As you correctly point out, entrepreneurs require more than just money, and at Satgana, we’ve developed our value proposition specifically on this gap analysis. Depending on the needs of each startup, we provide knowledge, networks, and hands-on help after investing.
This typically takes the form of assistance with the creation of new technologies, impact management, marketing, financial modeling, recruitment (especially with regard to hiring for diversity and inclusion), and reliance on raising their subsequent round of funding.
We have successfully closed deals in a number of situations because founders desire to collaborate with us, believe our values are compatible, and believe we will operate as true partners. To ensure their success, we provide them with as much firepower as we can.
What kind of influence does the fund hope to have on Africa?
This 10-year life fund seeks to make investments in at least 30 impact entrepreneurs that are working on cutting-edge technologies to prevent or address environmental and climate calamities. Each business is evaluated based on a variety of criteria, such as its potential impact, team, deal conditions, and commercial feasibility.
Regarding the latter, we concur with the founders that environmental and social impact KPIs (key performance indicators) should be considered on a deal-by-deal basis. Although we also consider other environmental metrics like biodiversity, resource use, and plastic reduction, our primary focus is on CO2 reduction. We also attempt to advance the gender agenda while investing, using a gender perspective in at least 30% of our portfolio’s female-founded businesses.
It is commonly accepted that investing in women is the most financially advantageous course of action over the long term, in addition to being the right thing to do from an ethical one. We look forward to getting in touch with more business owners and investors in this field because, as the group most vulnerable to climate change, women are also the most logical candidates for investments at the nexus of climate and gender.
What made you realize that the climate change presents an opportunity for Africans?
It is obvious that Africa needs to be on a route to green growth from the start given its wealth of solar and wind resources, as well as geothermal in the case of Kenya. Rapid urbanization across the continent necessitates effective planning in every sector, including transportation (adoption of electric vehicles), waste management (use of circular models to recycle plastics), building (energy efficiency), energy (microgrids), food (solar-powered cold storage containers), agriculture (vertical farming), etc.
Although consumer pull is currently less powerful than in markets with greater development, like Europe, this will alter over time. The majority of climate-positive innovations in the interim will be primarily driven by governments, enterprises, and technologies that don’t come with a green price premium—that is, those that simply benefit the end user more than the environment.
What standards or measurements must startups meet in order to be eligible for Satgana’s fund?
We support entrepreneurs with a clear sense of purpose who develop technological solutions to prevent or respond to environmental and climatic problems. When entrepreneurs first start their businesses, they often have little more than a firm understanding of the market, an MVP, and some early customer validation. This is when we work with them.
We focus on the founding team first, evaluating them based on both hard and soft competence standards. Like any other VC, we evaluate the commercial potential and scalability. Then, in an effort to be as direct and significant as possible, we consider the potential impact on the environmental KPIs that the startup is addressing.
We carefully examine the agreement’s provisions as well. We typically invest in pre-seed stage firms as a lead or co-investor for sums ranging from €50k to €500k, depending on the stage of development and the dynamics of the round.