The Catalyst Fund, a renowned pre-seed accelerator turned venture capital fund, has reached the first close of its $40 million fund aimed at investing in climate-tech startups in Africa. With an initial close of $8.6 million, the fund has garnered support from notable backers including FSD Africa Investments, Cisco Foundation, USAID Prosper Africa, and tech investor Andrew Bredenkamp.
Key Takeaway
The Catalyst Fund has reached the first close of its $40 million fund to invest in climate-tech startups in Africa. With an initial close of $8.6 million, the fund aims to support pre-seed startups in sectors such as agtech, insurtech, and climate fintech, as well as fishery and water management. The fund’s transition from an accelerator to a venture capital fund ensures prolonged support for founders. Catalyst Fund is focused on backing startups that build a climate resilient future and aims to make communities in Africa more resilient to the impacts of climate change.
Investing in Climate Solutions
The Catalyst Fund intends to invest in a wide range of sectors, including agtech, insurtech, climate fintech, fishery management, food systems, cold chain, waste management, and water management. The pan-African fund is specifically targeting pre-seed startups and has already made investments in 10 startups from six different countries such as Egypt, Senegal, and Morocco. The fund plans to invest in 20 startups this year and eventually support a total of 40 startups in the long run. Pre-seed startups will receive an initial investment of $200,000, followed by potential follow-on investments of up to $500,000 in the seed stage and $1.5 million in series A rounds.
“Overall, having exposure of about $2.2 million for each startup makes sense because we are coming in super early to be the early catalyzer for other investors to come in. The instrument we use at the pre-seed stage is a standard SAFE (simple agreement for future equity),” said Maelis Carraro, Managing Partner of Catalyst Fund.
In addition to financial support, pre-seed startups will also benefit from extensive technical assistance provided by a team of experts and operators across all the functions that a startup needs.
A Shift towards VC Funding
The Catalyst Fund was initially established in 2016 as a pre-seed accelerator that addressed challenges faced by startups, such as funding, talent acquisition, and market access. It collaborated with philanthropic organizations like the Bill & Melinda Gates Foundation and the UK Foreign Commonwealth and Development Office. However, last year, the fund transitioned into a venture capital fund to ensure long-term commitment to founders.
“The transition from an accelerator to a VC fund for us was quite a natural one. We have quite a unique model because we will continue to provide very hands-on venture building support at pre-seed,” explained Carraro.
She further added, “The reason we did this transition was that we wanted to actually be able to support founders for the long haul because when you are a grant accelerator, your support is usually time bound; you have a six-month program and then you’re done. What we saw was a continuous need for capital and support.”
Supporting Climate Change Solutions
The Catalyst Fund is one of the many capital pools dedicated to addressing climate change in Africa. Other initiatives, such as the Africa People + Planet Fund by Novastar Ventures, Equator, and Satgana, share a similar focus. Carraro emphasized that the challenges presented by climate change have made it imperative to support startups that develop resilience and adaptation solutions. The fund targets various sectors, as it believes that every sector of the economy needs to adapt to climate change impacts. Notable startups that Catalyst Fund has backed include Octavia Carbon, a direct air carbon capture company, and Sand to Green, which aims to transform deserts into arable lands.
“We wanted to build our latest fund focused on backing tech startups that build a climate resilient future. We are so focused on climate adaptation solutions across sectors, and the goal is to make communities more resilient to the impacts of climate change. The first closure of our venture fund is an incredible milestone because very few accelerators that come from philanthropy are able to do this transition,” concluded Carraro.
