African climate startups see growing interest from VCs

When Priscillah Wakerera and Soinato Leboo founded Rhea, an agritech startup that provides soil testing to smallholder farmers in Kenya, in 2022, getting funding from investors was much harder.

Fintechs and e-commerce startups were still the darlings of VCs. Investments into climate and agri tech were low, while founders who managed to raise funds had to contend with lower valuations than other sectors.

Rhea, which collects and analyses soil samples to help farmers choose fertilisers and seeds suitable for their farms, is part of a constellation of African startups that caught the attention of investors at the just concluded AfricaArena climate summit in Nairobi. Rhea was awarded the best climate tech startup at the two-day event.

“It was challenging to attract investors because the focus on soil health improvement wasn’t mainstream. However, as we demonstrated traction in our core market and aligned with the growing focus on climate change, impact investing, and agricultural technology, we’ve seen more interest from both local and international investors,” Priscilla Wakarera, Rhea Co-Founder and CEO told TechCabal.

While VC funding for startups has been on a general decline, the proportion of money flowing to climate mitigation and adaptation startups is growing. Since 2019, the sector has raised over $3.5 billion.

In 2024 H1, the sector received 45% of the $325 million raised by African startups, reflecting the growing interest in the area. Climate tech firms offer solutions for water and sanitation, renewable energy, carbon removal, and land restoration.   

“The funding raised by everything related to agritech, climate mitigation and adaptation solutions is growing. This is the only sector that holds many promises for the future of African tech,” said Christophe Viarnaud, founder and CEO AfricArena, a tech accelerator.

Solutions such as clean energy, circular economy, predictive infrastructure and sustainable agriculture are attracting significant interest from VCs–and event donor funding. Since 2022, for example, the Kenya Climate Innovation Centre (KCIC), a non-profit organisation, has raised over $150 million in funding for small enterprises in the sector.

Gerishom Manyengo, a KCIC business analyst, told TechCabal that over 3,000 small businesses in its network are benefiting from a surge in funding for solutions in subsectors such as solar energy, waste management and reforestation.  

“There is strong interest in scaling up adoption and use of solar energy, and that’s why KCIC with support from Moot Foundation is implementing a solar energy programme in horticulture, dairy and aquaculture in Kenya, Uganda and Tanzania,” Manyengo said.

Climate VCs in Africa believe the continent has more potential as they expand their scope of interest to include food production and disaster management. Funding to the sector rose from $340 million in 2019 to $959 million in 2022, hitting $1.1 billion in 2023, according to The Big Deal.

Climate subsectors that have received more funding this year include logistics and transport ($215 million) and energy and water ($132 million).  Josh Romisher, CEO and co-founder of Holcene–an African-focused climate VC–believes that deals in the sectors will continue growing in the coming years.

“Africa is about to grow, it is about to consume and become a massive part of the global conversation on climate issues because we have to grow it differently and better. There are massive innovation opportunities that can be unlocked today,” Romisher said.