A Collaboration between Satgana and Climate Insider
As Climate Tech VC investments gain global momentum, understanding regional nuances becomes crucial. In this inaugural piece of our “Building Bridges Between Europe and Africa” multi-part series with Satgana, we embark on a journey through the Climate Tech ecosystems of Europe and Africa. From exploring market maturity to innovation focus, we’ll seek to provide insightful comparisons in this mini-series over the coming months.
Central to VC Fund’s Satgana’s Theory of Change and long-term mission is building a bridge between Europe —known for its environmental stewardship and rapidly developing Climate Tech VC ecosystem— and Africa —home to the world’s youngest and fastest-growing population with vast renewable energy potential, natural resources essential for the energy transition, and the largest area of uncultivated arable land in the world. This bridge encompasses not only capital but also the exchange of ideas, knowledge, experience, and networks between the two regions.
By allocating 70% of the first fund’s capital to startups in Europe and 30% to startups in Africa, Satgana’s strategy is to build a strong foundation and track record across both continents. It is also one of their various differentiating factors in a rapidly evolving Climate Tech ecosystem globally, positioning them as a unique player able to foster innovation, access opportunities, and share expertise in both markets.
And this is just the beginning. Satgana’s long-term strategy envisions future funds investing in Europe and Africa separately through different investment vehicles while leveraging the relationships and knowledge they have developed over time across both continents. Nothing reinforces this strategy more than knowing that a few of their European portfolio companies have expressed keen interest in expanding to African markets in the future or noticing how entrepreneurs in Africa are benefiting from access to their global network of LPs and founders.
After having completed 16 investments since 2022 with the likes of Orbio Earth, Estuaire, Onima, Fullsoon, Fermify, Arda Bio or Brineworks in Europe, and the likes of Amini, Kubik, Wattnow, and Revivo in Africa, Satgana is also well underway of developing an in-depth understanding of the nuances of investing in Climate Tech across each region. Some of their main insights, which we will dig deeper into during the course of this mini-series, include:
- Innovation looks different in Africa: While many Climate Tech startups in the U.S. and Europe are developing Deep Tech solutions or first-of-its-kind products to address previously unsolved technical or scientific problems, innovation in Africa often takes a different approach. It tends to focus more on getting the business model or Go-to-Market strategy right, ensuring that the environmentally beneficial option is also the most affordable and accessible one. Take Energy Management Systems (EMS) like Wattnow, Satgana’s most recent investment in Africa, as an example. While these types of systems have been established in Europe for years and might not immediately attract the attention of VC investors in developed markets anymore, they are still a novel solution in many parts of Africa. Therefore, an African startup that is able to demonstrate the need for such a solution and gain significant traction in underserved markets is an attractive opportunity in and of itself.
- You can not rely on green premiums in Africa: In markets where many people live hand to mouth, daily challenges naturally outweigh concerns about rising global temperatures. Consequently, most Climate Tech startups in Africa can not charge a green premium or appeal to the environmentally conscious consumer. Instead, they must ensure that their solution first and foremost saves money for the end consumer, as environmental consciousness alone won’t drive purchasing decisions. This reality drives companies like our portfolio startups Revivo and Mazi Mobility that not only have a clear positive environmental impact but also enable cost savings to the end-user. This stands in contrast to Europe, where many founders can structure their business models around green premiums or subsidies, enabling them to reach profitability or compete with conventional alternatives in this way.
- Don’t expect regulations to drive demand: In Europe, a growing number of new regulations such as the EU Green Deal, the Sustainable Financial Disclosure Regulation (SFDR), and the Corporate Sustainability Reporting Directive (CSRD) have been enforced to drive more sustainable business practices. This creates new business opportunities as well as a demand for products and services that seek to support companies on their decarbonization and sustainability journeys. In contrast, regulations across Africa are far more fragmented, with less cross-border cooperation and a stronger emphasis on social issues like poverty alleviation, access to water, health, and education. This lack of environmental regulatory pressure makes it more difficult to drive uniform change across the continent, creating a more challenging playing ground for startups operating in this space.
- Building takes time: Unlike European startups, which benefit from established infrastructure and tech-savvy consumers, African startups face a different reality. Founders must often conduct their own market research due to the lack of reliable market data, educate their customers (especially when new types of technology are involved), and sometimes even build supporting infrastructure around their core offering. As such, in Africa, scaling requires more legwork, and businesses frequently need a hardware component or physical presence to reach customers, driving up costs and time to scale in comparison to a business that solely relies on a software solution.
- Infrastructure Gaps present both a challenge and an opportunity: Building on the above, the need to build fundamental infrastructure and provide basic products and services to African markets also creates a wide range of business opportunities. Take for example Climate Tech startups building off-grid solutions (M-Kopa, D-Light, and Zola) offering customers an opportunity to leapfrog access to the grid by giving them access to decentralized energy solutions.
- Red Ocean vs. Blue Ocean: In comparison with the more established European market, there is a lot less competition in Africa – both for founders developing solutions and for VCs investing in the region. This also enhances the additionality of the capital invested. Furthermore, as mentioned above, many low-hanging environmental opportunities remain untapped in Africa, such as implementing energy efficiency solutions or scaling decentralized solar production to give two examples. While these solutions are de-risked from a product perspective, the main competitive edge for any African startup seeking to deliver these lies in their execution capabilities and ability to navigate a complex and unpredictable market.
- Access to Funding: The availability of funding in Europe (more than €60Bn in 2023 according to Dealroom) vs. in Africa (estimated $4.5bn including both Venture Capital and Venture Debt according to AVCA) translates into a >10x difference. This means that it is more challenging for entrepreneurs in Africa to raise capital but also that there are more opportunities for unique positioning as a VC investing in Climate Tech in Africa. Furthermore, while the capital stack is sophisticated in Europe (e.g. VC, grants, angel networks, infrastructure, debt, FOAK to NOAK, Private Equity, secondaries, public markets, etc.) it is still nascent in Africa, limiting entrepreneurs’ ability to raise the right type of capital suiting their needs at the right time. Therefore, it is crucial to the future development of the VC and startup ecosystem in African markets that more different types of capital come in to complement each other, moving towards the level of sophistication of the capital stack available to founders in Europe.
- Talent: In Europe, there is a high availability of skilled talent with expertise in various Climate Tech fields, supported by strong educational institutions and research centers. In Africa, while there is a growing pool of talent, there may be gaps in specialized expertise. However, many African entrepreneurs are highly innovative and adept at creating solutions tailored to their unique environments.
- Lack of exits: Recognizing that VC in Africa is still a relatively recent phenomenon as it only really started to gain momentum in the 2010s (in contrast to Europe’s VC ecosystem which took off in the 80s and 90s) in combination with that VC is inherently a numbers game likely contributes to the scarcity of exits across the continent. However, the lack of a liquid public market and an underdeveloped secondary market indicate that exits in Africa will need to take on different shapes and forms and that copy-pasting European exit strategies will not be sufficient. Investors will need to be creative and collaborate across the spectrum to generate greater liquidity in the ecosystem to ensure that private capital continues to flow into the region.
- Impact: While Europe can still afford to focus on climate change mitigation in and of itself, Africa is increasingly in a position where climate change adaptation must be equally prioritized as extreme weather events are increasingly and disproportionately affecting the region. Furthermore, with Africa responsible for only 3-5% of historical emissions, the focus is more on putting the continent on a path toward green growth and climate resilience alongside poverty reduction. This requires solutions that address both immediate development needs and long-term climate goals. It therefore also involves balancing investments in infrastructure, energy access, and economic development with strategies for enhancing climate resilience and reducing future emissions.
Summing up, Satgana believes that their investment strategy and continuous learning about what Climate Tech looks like, both in developed and developing markets, is poised to make a meaningful impact by forging a vital connection between Europe and Africa. By strategically allocating capital and leveraging the unique strengths of each continent, they aim to create an open and dynamic ecosystem where ideas, resources, and expertise flow freely between founders, LPs, and other ecosystem players.
Looking Forward:
This initial exploration of Climate Tech investments in Europe and Africa sets the stage for a deeper dive into these two dynamic markets. The contrasts are stark—from funding availability and exit landscapes to innovation focus and regulatory environments. Yet, there are also intriguing areas of overlap and potential for cross-regional collaboration.
In the upcoming installments of this series, we’ll build on this foundation, offering:
- In-depth analysis of each region’s unique challenges and opportunities
- Case studies from Satgana’s portfolio, illustrating real-world applications of our insights
Stay tuned as we continue to unpack these topics, providing valuable insights for investors navigating the complex yet promising world of climate tech across Europe and Africa.
