The Catalyst Fund by BFA Global has reached the first close of its $40 million fund intended for investment in climate startups in Africa. The fund announced today an initial close of $8.6 million with the backing of FSD Africa Investments (FSDAi), Cisco Foundation, USAID Prosper Africa, and tech investor Andrew Bredenkamp.
The fund plans to invest in agtechs, insurtechs, climate fintechs, and startups in fishery management, food systems, cold chain, waste management, and water management. The pan-African fund is targeting pre-seed startups and has already invested in 10 startups from six countries including Egypt, Senegal, and Morocco. It plans to invest in 20 startups this year, and a total of 40 startups in the long-run. Pre-seed startups will get an initial $200,000 follow-on investments of up to $500,000 at 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 Catalyst Fund managing partner, Maelis Carraro.
Carraro says the pre-seed investment includes $100,000 in “dedicated technical support from a team of experts and operators across all the functions that a startup needs.”
The Catalyst Fund was founded in 2016 as a pre-seed accelerator addressing challenges such as funding, talent and market access for startups. It did this through philanthropic partnerships with organizations such as the Bill & Melinda Gates Foundation, and UK Foreign Commonwealth and Development Office (FCDO).
However, last year it switched from an accelerator to a VC fund, a move Carraro says will ensure longer-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,” said Carraro.
“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,” she said.
Carraro said the challenges brought about by climate change made it natural for the fund to focus on solutions that build resilience and adaptation. The Fund targets a broad range of sectors because it believes that every sector of the economy will need to adapt to the impacts of climate change. Octavia Carbon; a direct air carbon capture startup, and Sand to Green, which is transforming deserts into arable lands, are some of the startups it has backed.
“We wanted to build our latest fund just 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.”