In 2023, Climate Tech Emerges Strong: 1 in Every $3 Invested in African Startups Allocated to Climate Solutions

Climate tech startups in Africa have defied the broader trend in the venture capital space, securing an impressive $1 billion in funding amid a general fall-off in funding in 2023. According to data tracker "Africa: The Big Deal," approximately one in three dollars invested in startups on the continent during the forecast period went to climate tech startups.

The strength of the climate tech sector in Africa, as highlighted by the data, underscores both the potential of green investments in the region and the increasing focus of investors on sustainability. While energy and water startups received the majority of funding, agtech is noted to dominate the early-stage pipeline. This suggests a growing recognition of the need for innovation across various sectors to adapt to climate impacts.

The significant funding and investor interest in African climate tech startups not only showcase the sector's potential for growth and impact but also signal a positive shift towards sustainable and resilient solutions in response to climate challenges on the continent.

The increasing investor interest in regional climate tech aligns with the findings from the 2023 Africa Climate Awareness Report by bird story agency, which revealed a growing preference for cleaner solutions among the population.

The report highlighted a strong inclination among Africans toward green solutions, such as solar-PV and electric vehicles. These cleaner solutions are gradually entering the market, particularly in countries like Kenya, Nigeria, South Africa, Egypt, and some Maghreb states.

According to Partech Africa trackers, African tech startups secured a total of $3.5 billion in funding (combining equity and debt) in 2023, representing a 46% decline from the previous year. This funding was spread across 547 deals. Despite a 22% drop in the overall funding amount raised by the climate tech sector between 2022 and 2023 (falling from $1.6 billion to $1.2 billion), the sector managed a modest increase in the number of debt deals, rising from 71 in 2022 to 74 in 2023. This indicates continued resilience and investor support for climate tech startups in the region, even in the face of broader funding challenges.

The resilience of the climate tech sector in Africa can be attributed, in part, to the availability and diversification of funding sources. Impact investors, development finance institutions, corporate venture capitalists, and philanthropic organizations are keen on supporting climate tech startups. The sector's adaptability and innovation in business models, such as pay-as-you-go, have made these startups more bankable. Additionally, the integration of technologies like artificial intelligence and the Internet of Things has enabled scalability, allowing these startups to reach more customers.

In a notable development, several climate tech startups from Africa were featured in the inaugural Google for Startups Accelerator late last year. These startups provided solutions for energy, agriculture, and transportation, leveraging data, AI, and clean energy. Examples include NeedEnergy, a Zimbabwean startup using data intelligence for smart and clean energy solutions, and Octavia Carbon, a Kenyan startup designing machines to directly capture CO2 from the atmosphere.

Other featured startups included Seabex from Tunisia, offering an AI-driven sensorless precision irrigation solution, and SolarTaxi from Ghana, providing locally assembled electric vehicles to promote sustainable transportation.

International support for climate tech companies in Africa has been on the rise. At COP27, several UN agencies launched a program to drive new capital flow into climate tech, aiming to help African states build and harness renewable energy systems for economic development. Climate tech is viewed as a crucial element in accelerating Africa's transition from high-pollution industries to adopting clean sources, aligning with the goal of achieving a 1.5-degree transition.