- Financing by Venture Capital Firms (VC) are the leading sources for injecting capital into startups, accounting for 29% of the deals.
- Findings show that venture debt is becoming a crucial funding tool, especially for climate tech startups with limited access to traditional equity financing.
- The survey notes that to support this growth, investments in digital and energy infrastructure are essential.
Kenya is emerging as a leader in sourcing capital for its agricultural technology and food startups across the African continent. A large portion of capital for African startups still comes from foreign countries, with approximately 60 per cent, coming from international sources, primarily the United States and the United Kingdom.
On the continent, however, most investors are concentrated in Kenya, Nigeria, and South Africa, where innovation and funding activity are most prominent. Kenya’s dominance in the sector is partly driven by large-scale investments in solar energy solutions and precision agriculture.
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Climate and food innovators
According to the Evolution of Investment in Food and Climate Tech in Africa, released by Katapult Africa, the three countries maintained their top positions in both volume and total investment numbers.
“There are more than 800 investors that have invested at least one or more investments into climate and food innovators across Africa since 2014. There are notably often multiple investors involved in a single deal,” the report notes.
Of this Kenya, Nigeria, and South Africa lead the continent in attracting funding for climate and food solutions. Financing by Venture Capital Firms (VC) are the leading sources for injecting capital into startups, accounting for 29 percent of the deals.
Findings show that venture debt is becoming a crucial funding tool, especially for climate tech startups with limited access to traditional equity financing.
In 2023, African startups raised over $1.1 billion (Sh142 billion) in venture debt, doubling from the previous year, reflecting the growing demand for flexible financing options within Africa’s innovation-driven climate tech ecosystem.
Other models that investors are using to finance local startups are impact investments, which accounted for 11 per cent of the deals, and corporate (10per cent). Governments, banks, and private equity are the least preferred methods of financing startups.
The survey shows that the investment landscape in African food tech and climate tech is evolving, fueled by a rising demand for sustainable solutions and new funding mechanisms.
“The future of African food tech and climate tech is set for substantial growth, driven by emerging technologies and innovation hubs across the continent. Innovation hubs like Silicon Cape in South Africa and iHub in Kenya are fostering entrepreneurial ecosystems that provide access to funding, mentorship, and collaborative networks,” the report adds.
Eastern Africa is characterized by emerging startup ecosystems, with Nairobi at its center. The city has become a key hub for agritech and fintech startups, supported by incubators and accelerators like iHub and Nairobi Garage.
Venture Capital
The Eastern African region raised over $2.5 billion (Sh322.8 billion) in 540 rounds of funding for climate and food startups over the past decade.
Western Africa followed with over $1 billion (Sh129 billion) raised in 300 rounds, while Southern Africa came third with $230 million (Sh29.6 billion) in 80 rounds.
Going forward, the report says that the African green bond market is projected to reach $5 billion (Sh645.6 billion) by 2025, providing essential funding for sustainable agriculture, clean energy, and other climate-related projects.
Read also: July financing for startups in Africa hits record $420M as debt funding grows
Impact investing
Impact investing, which prioritises social and environmental outcomes alongside financial returns, is also expected to grow by 25 percent annually over the next five years.
“Global investors are increasingly focusing on sustainability, making African startups in climate tech attractive targets for impact capital.”
The application of artificial intelligence (AI) in agriculture is also expected to grow, with the market projected to reach $2.4 billion by 2026.
AI is already playing a role in enhancing crop yield predictions, pest control, and resource management, driving productivity and food security across Africa.
The survey notes that to support this growth, investments in digital and energy infrastructure are essential.
An estimated $100 billion (Sh12.9 trillion) will be required over the next decade to strengthen digital infrastructure, energy grids, and rural connectivity, paving the way for the broader adoption of new technologies.
