Mauritius-based climate tech investor Persistent Energy secured $52 million for its Africa-focused climate venture builder fund, with backing from Japan International Cooperation Agency, the Soros Economic Development Fund, Impact Fund Denmark, the Schmidt Family Foundation, the Cottier Donzé Foundation and an undisclosed family office.

The fund was anchored by the Nordic Development Fund, the African Development Bank’s Sustainable Energy Fund for Africa and Financial Sector Deepening Africa Investments. Persistent is looking to raise $70 million.

Blended finance

Persistent spun out of the nonprofit clean energy impact investor E+Co back in 2012 with around $5 million in assets. The venture builder deployed most of the $10 million it raised a Series C equity round into a dozen startups. It reserved $3 million for deal warehousing for the climate fund.

The fund will cut checks of up to $1 million for pre-seed to Series A startups. It will focus on productive-use assets in energy, e-mobility and other emission-reduction technologies in transportation, commercial and industrial solar, AI, and predictive weather analytics.

Persistent is also looking to support ventures navigate a fragmented pipeline of climate finance, which has become more challenging in the current geopolitical environment, says Persistent’s Wairimu Karanja.

“With geopolitics, some of the feelings among world leaders have caused a drop in funding,” Karanja noted.

Shifting risk perceptions

Persistent’s climate fund uses a blended finance structure to mitigate risks and secure capital from private investors.

“Part of building on climate impact ambitions is making sure that everyone is able to contribute to impactful investments that are scalable and will also earn a profit,” Karanja said.

“In due diligence with our investors, we focused a lot on how we mitigate and demystify the risks,” she added. Investors often feel more comfortable investing in the West, despite a growing sense of political risk in the US especially. “It’s not seen as risky as much as Africa is seen as risky, and that’s something to demystify.” 

The fund will have a structured process for follow-on funding for portfolio companies, which was more difficult for Persistent to offer without the fund model.

“How we’ve invested so far has provided us with a lot of flexibility and nimbleness,” Persistent’s Tobias Ruckstuhl told ImpactAlpha. “It did mean that we have to fundraise very frequently, meaning availability for follow-on funding was not as plannable.”

“We are fortunate to have investors who understand that in Africa, you cannot separate climate impact with social economic impact,” Karanja added. “Building scalable businesses that build on resilience, adaptation or mitigation is an attractive business prospect.”