Last year, Amini, a Kenya-based climate tech startup using data from satellites to offer insights on crop health and track farming progress, announced pre-seed and seed rounds six months apart. Not only did the startup manage to raise rounds in quick succession, which was commonplace a few years back but now rare even for early-stage startups, but it also pulled in some heavy backers, including Salesforce Ventures, Female Founders Fund, and Pale Blue Dot. This scenario reflects events of the fintech boom, only this time, climate tech is the trendy investment opportunity now.
Key Takeaway
Rally Cap VC, known for its focus on emerging markets fintech, has launched a $5 million climate tech fund, reflecting the increasing trend of investors exploring climate investments in emerging markets.
Rally Cap VC’s Move into Climate Tech
Over the last three years, climate tech has tailed fintech as Africa’s second most funded sector, simultaneously a consequence and result of the several climate-focused funds emerging within that timeframe. With funds such as Novastar, Satgana, Equator and AfricaGoGreen Fund (AAGF) catering to seed- to growth-stage startups, fintech-focused Rally Cap VC has joined the likes of Satgana and Catalyst Fund at pre-seed and seed stages. The firm has reached the first close of Rally Cap Climate, its climate tech fund, at $2.5 million; it expects a final close of $5 million.
Why the Shift to Climate Tech?
Rally Cap’s general partner Hayden Simmons explained that the firm found many exciting opportunities in the climate tech space, leading to the decision to expand its mandate beyond fintech. The firm is drawn to a certain founder type that climate tech offers: experienced senior executives-turned-founders whose products serve business customers.
Commercial Attractiveness of Climate Investments
Many emerging market-focused investors are increasingly exploring climate investments, seeing them as commercially attractive and venture-backable rather than solely philanthropic endeavors. Additionally, there’s a growing urgency for enterprises, governments and consumers to adapt to climate change, driving the demand for cleantech solutions between countries and regions.
Rally Cap’s Approach
Rally Cap aims to provide cross-border support for climate tech startups in Africa and globally, aligning with the growing trend of investors exploring climate investments in emerging markets. The firm’s climate fund prefers backing adaptation strategies, usually software solutions, due to easier market entry and less capital requirements. It invests between $50,000 and $100,000 in its portfolio companies while providing its limited partners with co-invest opportunities in some deals.
Conclusion
Rally Cap VC’s move into climate tech reflects the increasing trend of investors exploring climate investments in emerging markets. With the launch of its $5 million climate fund, the firm aims to provide support for climate tech startups in Africa and globally, aligning with the growing urgency for enterprises, governments, and consumers to adapt to climate change.
