Novastar Ventures Raises $147M for African Climate Tech

Novastar Ventures has successfully closed its third fund, the Africa People and Planet Fund III, amassing a substantial $147 million. This significant capital raise marks a 40% increase over its previous $108 million fund, underscoring growing investor confidence in Africa's transformative business potential, particularly within the climate and social impact sectors.

The fund's impressive close was bolstered by significant commitments from a consortium of prominent Japanese financial institutions. Key contributors include Mitsubishi Corporation, Sumitomo Mitsui Banking Corporation (SMBC), Toyota Ventures, SBI Holdings, Mitsui O.S.K. Lines, and the Japan International Cooperation Agency (JICA). These strategic partnerships are designed to foster deeper engagement with African innovation, offering co-investment rights that align with the investors' objectives for both strategic market access and commercial returns.

This influx of Japanese capital highlights a broader trend of increasing interest from Japanese corporations in African startup ecosystems. Facing slower domestic growth and low-interest rate environments, Japanese entities are actively seeking high-growth opportunities abroad. Data indicates a notable uptick, with over 190 African startup deals involving more than 60 Japanese investors in the past year, signaling a robust "Japan-Africa bridge" being actively constructed by firms like Novastar.

Beyond the Japanese contingent, the fund also attracted backing from established development finance institutions and impact investors. These include British International Investment, Norfund, Swedfund, Proparco, and Cofides, further validating the fund's dual mandate of generating financial returns alongside measurable social and environmental impact.

With a pan-African investment strategy, the Africa People and Planet Fund III will target initial investments ranging from $1 million to $8 million. The fund's scope extends beyond Novastar's traditional East and West Africa focus, now encompassing opportunities across the continent. A significant emphasis will be placed on green technology and climate-linked enterprises, supporting businesses that drive financial, social, and environmental value creation.

Novastar Ventures has already begun deploying capital from the new fund, with early investments in companies such as Kenya's electric bus manufacturer BasiGo, EV fleet manager Greenwheels, battery-swapping venture ARC Ride, Egypt-based quick commerce platform Breadfast, Nigerian food delivery service Chowdeck, and agritech firm Sistema.bio. The firm is actively exploring new ventures, with South Africa now a key target region for future investments.

This successful fundraising effort arrives at a critical juncture for African venture capital. Amidst a global slowdown in VC fundraising, which saw African firms raise only $107 million in the last reported period according to the Africa Venture Capital Association, Novastar's achievement stands out as a testament to the enduring appeal of the continent's innovation potential and the firm's strategic focus on impactful growth sectors.