African venture capital firm Novastar Ventures has announced the final close of its Africa People and Planet Fund III (NVIII) at $147m.

While the final close falls short of the fund’s initial $200m target — a reflection of the broader macroeconomic squeeze on global venture capital — it still represents a 40% increase in size compared to the firm’s second fund.

The successful close makes NVIII one of the largest climate-focused venture capital funds operating on the continent. Operating since 2014 with over $200m in existing assets under management, Novastar operates out of offices in Lagos and Nairobi.

A pan-African expansion

Historically focused on established tech hubs in East and West Africa (specifically Kenya, Rwanda, and Nigeria), Novastar is using Fund III to expand its footprint. For the first time, the firm’s mandate will officially include North and South Africa, targeting ecosystem hubs in Egypt and South Africa.

The capital will be channeled into early and growth-stage companies operating across three primary climate verticals:

• Adaptation and resilience: Services protecting climate-vulnerable populations.
• Clean tech: Infrastructure and software supporting the decarbonisation of economic growth.
• Natural resource management: Innovative climate technology for agriculture and land use.

Novastar has already begun deploying capital from the new vehicle into several regional startups, including Egyptian grocery delivery platform Breadfast, Nigerian food delivery service Chowdeck, electric mobility companies ARC Ride and Greenwheels, device financing platform MoPhones, and biogas infrastructure provider Sistema.bio.

A significant narrative behind Fund III is the attempt to bridge a severe shortfall in African climate finance. According to climate finance estimates, Africa requires approximately $2.8 trillion between 2020 and 2030 to implement its Nationally Determined Contributions (NDCs). However, in recent years, the continent has secured only 12% to 15% of that required investment.

To help mitigate the perceived risks that typically deter private capital — such as currency volatility, political instability, and historically weak exit environments — the Green Climate Fund (GCF) stepped in with a $40m equity commitment. The GCF’s mandate is to act as a catalytic anchor, de-risking the broader fund for institutional and private investors.

The composition of Novastar’s Limited Partners (LPs) for NVIII highlights an evolving trend in African VC: the growing participation of Japanese corporate capital.

While the fund secured commitments from the expected roster of European Development Finance Institutions (DFIs) — including the UK’s British International Investment (BII), Norway’s Norfund, Swedfund International, France’s Proparco, and Spain’s COFIDES — its corporate syndicate stands out.

The LP base includes major Japanese entities making strategic plays into African sustainability and tech. Backers include Japan’s second-largest bank, Sumitomo Mitsui Banking Corporation (SMBC), shipping giant Mitsui O.S.K. Lines (MOL), Mitsubishi Corporation, SBI Investment, and the Japan International Cooperation Agency (JICA).

The heavy involvement of Japanese conglomerates suggests a growing strategic appetite for emerging, high-growth sustainability sectors in the Global South, moving beyond traditional infrastructure and debt financing into direct venture capital.