In a bold move reflecting the shifting tides of investment trends, Rally Cap VC, known for its focus on fintech in emerging markets, is set to launch a $5 million climate fund spinoff named Rally Cap Climate. The move comes as climate tech gains prominence, with the fintech investor recognizing the growing potential in this sector.
Kenya-based climate tech startup, Amini, serves as an exemplary case, securing pre-seed and seed rounds within six months, a feat rarely achieved in the current startup landscape. Amini attracted substantial backing from influential players like Salesforce Ventures, Female Founders Fund, and Pale Blue Dot, signaling a significant shift of interest towards climate tech as the new frontier for investments.
Over the past three years, climate tech has rapidly become Africa’s second most funded sector, trailing closely behind fintech. The surge can be attributed to the emergence of various climate-focused funds, including Novastar, Satgana, Equator, and AfricaGoGreen Fund (AAGF), actively supporting startups from seed to growth stages. Rally Cap VC, traditionally focused on fintech, is now venturing into the climate tech space with its Rally Cap Climate fund, which has already secured a first close at $2.5 million and aims for a final close of $5 million.
Hayden Simmons, General Partner at Rally Cap VC, shared insights into the decision-making process, stating, “On the pull side, we just found that, increasingly, many of the most exciting calls we were having with founders were on the climate side — and that dovetailed alongside our internal initiative to kind of expand our mandate beyond fintech.”
Despite maintaining a commitment to fintech investments, Rally Cap VC is drawn to a specific type of founder that climate tech attracts — experienced senior executives-turned-founders creating products for business customers. The firm’s strategic move aligns with a broader trend where emerging market-focused investors recognize the commercial attractiveness and venture-backable nature of climate investments.
Kyane Kassiri, Partner at Rally Cap VC, emphasized the firm’s dedication to maintaining its identity even as it explores global opportunities in climate tech. “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,” Kassiri said.
Rally Cap VC’s portfolio includes notable climate tech startups like Amini, Circadian, Solfium, and Eli, reflecting a diversified approach across different regions and sectors within the climate tech landscape. The firm is currently finalizing a deal in a Brazilian cleantech, demonstrating its commitment to global climate solutions.
While climate tech startups often fall into the categories of mitigation or adaptation, Rally Cap Climate leans towards adaptation strategies, particularly focusing on software solutions. This approach allows for easier market entry and requires less capital compared to some mitigation strategies that involve significant hardware components.
Simmons clarified, “Some hardware is okay if that’s the wedge. Circadian and Amini both have hardware components, for example. However, the real recurring revenue and IP reside at the software layer. That’s really what we’re investing in, and that’s where we think we can generate the real sort of fintech-esque returns in this market.”
Rally Cap Climate intends to invest between $50,000 and $100,000 in its portfolio companies while providing co-investment opportunities to its limited partners. With a goal of making 50 investments, the fund aims to capitalize on the growing demand for climate solutions while leveraging its existing expertise and networks in emerging markets.
As climate tech continues to gain momentum, Rally Cap VC’s foray into this space reflects a strategic move to stay ahead of the curve and contribute to the global efforts addressing climate change. The $5 million climate fund spinoff is poised to make a significant impact on the emerging markets’ climate tech scene, fostering innovation and sustainability across diverse regions.