Grace Ashiru
When Priscillah Wakerera and Soinato Leboo established Rhea, an agritech startup that offers soil testing services to smallholder farmers in Kenya, in 2022 securing funding from investors proved to be significantly more challenging.
During that time, fintech and e-commerce startups remained the preferred choices for venture capitalists. Investments in climate and agritech were minimal, and founders who successfully raised funds often faced lower valuations compared to other sectors.
Rhea, which gathers and analyzes soil samples to assist farmers in selecting the appropriate fertilizers and seeds for their farms, is part of a network of African startups that attracted the attention of investors at the recently concluded AfricaArena climate summit in Nairobi. At the two-day event, Rhea received the accolade for the best climate tech startup.
It was difficult to attract investors because the emphasis on soil health improvement was not widely recognized. However, as we showcased traction in our core market and aligned ourselves with the increasing focus on climate change, impact investing, and agricultural technology, we have noticed a surge in interest from both local and international investors,” stated Priscillah Wakarera, Rhea Co-Founder and CEO, in an interview with TechCabal.
While VC funding for startups has generally been on the decline, the share of funds directed toward climate mitigation and adaptation startups is increasing. Since 2019, the sector has raised more than $3.5 billion.
In the first half of 2024, this sector accounted for 45% of the $325 million raised by African startups, indicating a rising interest in this area. Climate tech companies provide solutions for water and sanitation, renewable energy, carbon removal, and land restoration.
“The funding raised for initiatives related to agritech, climate mitigation, and adaptation solutions is on the rise. This is the only sector that holds significant promise for the future of African tech,” stated Christophe Viarnaud, founder and CEO of AfricArena, a tech accelerator.
Solutions like clean energy, circular economy, predictive infrastructure, and sustainable agriculture are garnering considerable interest from VCs and even donor funding. Since 2022, the Kenya Climate Innovation Centre (KCIC), a non-profit organization, has secured over $150 million in funding for small enterprises within this sector.
Gerishom Manyengo, a KCIC business analyst, informed TechCabal that more than 3,000 small businesses in its network are benefiting from an increase in funding for solutions in sub sectors such as solar energy, waste management, and reforestation.
“There is a strong interest in scaling up the adoption and use of solar energy, which is why KCIC, with support from the Moot Foundation, is implementing a solar energy program in horticulture, dairy, and aquaculture across Kenya, Uganda, and Tanzania,” Manyengo stated.
Climate VCs in Africa are increasingly recognizing the continent’s potential as they broaden their focus to encompass food production and disaster management. Funding in this sector surged from $340 million in 2019 to $959 million in 2022, reaching $1.1 billion in 2023, as reported by The Big Deal.
This year, climate sub sectors that have attracted more funding include logistics and transport with $215 million and energy and water with $132 million. Josh Romisher, CEO and co-founder of Holcene, an African-focused climate VC, believes that investments in these sectors will continue to expand in the upcoming years.
“Africa is on the verge of significant growth; it is about to consume and become a major player in the global discussion on climate issues because we need to grow in a different and better way. There are enormous innovation opportunities that can be tapped into today,” Romisher stated.
