Amini, a Kenyan-based climate tech startup using satellite data to offer insights on crop health and monitor farming activities, raised funds in two rounds just six months apart last year. This is something that used to be common for startups but is now rare. The startup also attracted significant backers, such as Salesforce Ventures, Female Founders Fund, and Pale Blue Dot, mirroring the funding interest once seen in the fintech boom.
Over the past three years, climate tech has become Africa’s second most funded sector after fintech. As a result, several climate-focused funds have emerged, including Novastar, Satgana, Equator, and AfricaGoGreen Fund (AAGF). Rally Cap VC, originally a fintech-focused firm, has joined these funds with its first Rally Cap Climate fund closing at $2.5 million, aiming for a final close of $5 million.
General partner Hayden Simmons explained their move into climate tech, stating that many of their most engaging conversations with founders were about climate. While they still believe in their fintech investment and continue to support their portfolio, the shift reflects their interest in the type of founder that climate tech attracts: experienced senior executives-turned-founders who create products for business customers.
Many investors focusing on emerging markets are beginning to see climate investments as commercially viable opportunities rather than just philanthropic endeavors, a shift from previous years. Additionally, the increasing need for businesses, governments, and consumers to adjust to climate change is driving the demand for cleantech solutions globally.
Rally Cap has responded to this trend by setting up a separate vehicle to support climate tech startups in Africa and further afield. The firm also offers cross-border support, including co-investment opportunities.
Rally Cap VC partner, Kyane Kassiri, stated in an interview, “We’re still keeping our African LatAm and emerging market DNA, and that’s our positioning even with U.S. or European founders. We stand out from other climate investors in that whenever global climate startups are ready for their solutions to be applied or expanded to Africa or LatAm, we know which doors to knock.”
Among Rally Cap VC’s portfolio companies are Amini, a Kenya-based agri-tech startup; Circadian, a Nigeria-based energy management software provider for tower operators; Solfium, a solar financing marketplace in Mexico; and Eli, a U.S.-based electrification infrastructure platform. The company is also finalizing a deal with a Brazilian cleantech firm.
Climate tech startups typically fall into one of two categories in terms of their approach to addressing climate change: mitigation or adaptation. Mitigation, which involves reducing greenhouse gas emissions or developing deep tech solutions, often requires substantial capital. On the other hand, Rally Cap VC prefers to back adaptation strategies, which primarily involve software solutions, due to their lower entry barriers and capital requirements.
“While some hardware is acceptable if it’s the wedge, the recurring revenue and IP primarily reside at the software layer”, explained Simmons, general partner at Rally Cap VC. He added that this is their main area of investment and the key to generating substantial returns in the market.
Rally Cap Climate typically invests between $50,000 and $100,000 in its portfolio companies and offers its limited partners co-investment opportunities in some deals. The partners stated that the fund intends to make around 50 investments. This is consistent with the strategy of other funds within the firm. Its proof of concept fund made over 50 investments, and its fintech fund, Rally Cap VC, which is seen as a priority and currently has a 2x multiple on invested capital, has invested in 15 startups.
