Catalyst Fund secures $8.6m to invest in climate-focused African startups

The Catalyst Fund by BFA Global has achieved its first close, amassing $8.6 million out of its $40 million target intended for investment in African climate startups according to a report. This funding round was backed by, FSD Africa Investments (FSDAi), Cisco Foundation, USAID Prosper Africa, and tech investor Andrew Bredenkamp.

While the primary mission of the Catalyst Fund is to fuel the growth of climate-focused startups across the African continent, the fund is poised to invest in other sectors, encompassing agtech, insurtech, climate fintech, as well as startups engaged in fishery management, food systems, cold chain logistics, waste management, and water resource management.

Having cast its net wide, this pan-African fund is particularly keen on supporting pre-seed startups. Thus far, it has already extended its support to ten startups from six different countries, including Egypt, Senegal, and Morocco.

The Catalyst Fund’s forward-looking strategy envisions investments in 20 startups during the current year and a total of 40 startups in the long run. For pre-seed startups, the Catalyst Fund offers an initial investment of $200,000, follow-on investments of up to $500,000 at the seed stage, and $1.5 million in series A rounds.

Maelis Carraro, Managing Partner at Catalyst Fund, shed light on their approach, stating:

“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).”

Moreover, Carraro emphasized the holistic support provided to pre-seed startups, which includes an additional $100,000 earmarked for “dedicated technical support from a team of experts and operators across all the functions that a startup needs.”

Read Also: $2.8bn for climate change startups in Africa in 5 years, but will funding get better?

Catalyst Fund: From offering accelerator program to VC funding

Catalyst Fund originally came into being in 2016 as a pre-seed accelerator, addressing critical challenges faced by startups, including funding, talent acquisition, and market access. Their approach was rooted in philanthropic partnerships with prominent organizations like the Bill & Melinda Gates Foundation and the UK Foreign Commonwealth and Development Office (FCDO).

During its tenure as an accelerator, Catalyst Fund played a pivotal role in nurturing 61 startups across 15 emerging markets, boasting successes like Turaco, Wasoko, Cowrywise, and FarMart in India. However, the fund underwent a transformation last year, shifting gears from an accelerator to a full-fledged VC fund.

Carraro explained that this strategic transition is geared towards ensuring a more sustained commitment to founders. She further stated:

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.

The Catalyst Fund’s focus on climate change aligns with a growing trend of capital pools in Africa dedicated to addressing environmental challenges. Its expansive approach spans various sectors, as it firmly believes that every facet of the economy will need to adapt to climate change impacts.