In a recent report, The Catalyst Fund by BFA Global announced its successful first close, gathering $8.6 million out of its $40 million investment goal for African climate startups. This funding round received support from key backers, including FSD Africa Investments (FSDAi), Cisco Foundation, USAID Prosper Africa, and technology investor Andrew Bredenkamp.
While the primary mission of the Catalyst Fund is to support the growth of climate-focused startups across Africa, the fund is also open to investments in various sectors. These include agtech, insurtech, and climate fintech, as well as startups involved in fishery management, food systems, cold chain logistics, waste management, and water resource management.
With a broad scope, this pan-African fund has a particular interest in assisting pre-seed startups. To date, it has already extended support to ten startups from six different countries, including Egypt, Senegal, and Morocco.
The Catalyst Fund’s forward-looking strategy aims to invest in 20 startups this year and a total of 40 startups in the long term. For pre-seed startups, the Catalyst Fund provides 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, explained their approach, saying:
“Overall, having exposure of about $2.2 million for each startup makes sense because we are coming in super early to be the early catalyst for other investors to come in. The instrument we use at the pre-seed stage is a standard SAFE (simple agreement for future equity).”
Carraro also highlighted the comprehensive support offered to pre-seed startups, including an additional $100,000 allocated for “dedicated technical support from a team of experts and operators across all the functions that a startup needs.”
Read Also: Kotani Pay Secures $2m in Pre-Seed Funding Round
Catalyst Fund: Transitioning from Accelerator to VC Funding
Originally established in 2016 as a pre-seed accelerator, Catalyst Fund addressed critical challenges faced by startups, such as funding, talent acquisition, and market access. Their approach relied on 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, achieving successes with ventures like Turaco, Wasoko, Cowrywise, and FarMart in India. However, the fund underwent a transformation last year, transitioning from an accelerator to a full-fledged VC fund.
Carraro explained that this strategic shift aims to provide more sustained support to founders, stating:
“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 the growing trend of capital pools in Africa dedicated to addressing environmental challenges. Its comprehensive approach encompasses various sectors, reflecting the belief that every aspect of the economy must adapt to climate change impacts.
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