Africa’s climate tech sector is booming, attracting a third of all startup funding on the continent. But beneath the headline numbers, a troubling pattern persists: capital is flowing to a handful of late-stage, well-known companies, leaving a critical “missing middle” of early-stage innovators unfunded.

This leaves a huge opportunity for new funds, but the traditional venture capital playbook of backing asset-light, software-driven models is often a poor fit for the continent’s needs.

Venture firm EchoVC spent two years exploring this gap with its $2.75M Eco Pilot Fund I, a targeted experiment run in partnership with Shell Foundation and UKaid. By making 15 early-stage investments, the firm developed a set of lessons that could serve as a blueprint for any debut climate fund looking to generate returns and impact in Africa.

Here’s the playbook.

The Problem: Find and Fund the “Missing Middle”

The first step is recognising that the market isn’t working as it should. While giants like SunKing and d.Light are successfully raising nine-figure debt and securitisation deals, the seed stage is a desert.

EchoVC’s analysis revealed a stark reality:

• Capital Concentration: Just 10 companies captured over 50% of all African climate tech investment between 2015 and 2024.
• The Funding Chasm: Fewer than 10% of deals fall in the $250k to $1M range. This is the critical bridge from a working pilot to a commercially viable business, and it’s where most local and women-led ventures die.
• Founder Skew: Male-only teams capture 85% of funding, while women-only teams secure less than 1%. This is despite data showing mixed-gender teams consistently outperform on both financial and impact metrics.

The result is a market where potentially transformative, hardware-based, or locally-rooted solutions are systematically starved of capital. To succeed, a fundamental deduction from this finding is that a new fund can’t just follow the crowd; it must be designed to fix these structural flaws.

The Thesis: Back Elite Founders in Invisible Markets

Instead of chasing crowded trends like fintech or PAYG solar, EchoVC’s strategy focused on two core principles.

1. Bet on the Founder, Not the Sector

The firm developed a clear archetype for the founders it backs, prioritising operational skill over a polished pitch deck. Their criteria favour “elite founders” with:

• Deep customer empathy and insight into local problems.
• Grit and adaptability, with a relentless focus on solving a problem, not just selling a product.
• A “hacker mentality” combined with the ability to attract top talent.
• Coachability and integrity.

This strategy involves backing founders with non-consensus — and often contrarian — insights into their markets, the kind that elude traditional analysis. While this focus on elite, visionary founders is powerful, its effectiveness is nuanced; Africa’s venture landscape has, in fact, seen major exits come from unexpected ‘outsiders,’ challenging a purely pedigree-driven model.

2. Target “Invisible Markets”

These are sectors with enormous potential that traditional VCs overlook due to perceived complexity, capital intensity, or a lack of familiar business models. In Africa, this often means ventures in energy storage, cooling, waste management, or sustainable mobility.

According to the VC, success in these markets often depends less on traditional Product-Led Growth (PLG) and more on Model-Led Growth (MLG) — innovating on the business model itself. This could mean adapting PAYG for new applications or creating distribution networks through informal channels. It requires investors to underwrite market creation, not just product scaling.

The Playbook: Four Rules for Early-Stage Investing

Running the pilot fund revealed four key lessons for EchoVC that challenge the conventional VC approach.

1. Ditch Equity-Only Term Sheets

Many climate solutions in Africa involve hardware, logistics, or other physical assets. Funding these with expensive, dilutive equity is inefficient. The solution is “multi-SKU financing” — using a blend of capital tailored to the company’s needs.

• Equity for scalable technology, IP, and core team operating expenses.
• Debt or asset financing for physical assets like batteries, vehicles, or solar panels.
• Grants for de-risking early-stage experiments, testing new markets, or covering regulatory compliance costs.

This blended approach keeps venture capital focused on high-growth potential while ensuring capital-intensive components are funded appropriately.

2. Get Your Hands Dirty

“Perfect” companies don’t exist at the pre-seed stage. EchoVC found that waiting for a flawless team with perfect unit economics is a losing strategy. Instead, the firm invested early and leaned heavily into operational support.

This means going beyond board meetings. Coordinated business development intros, for example, were found to accelerate a startup’s time-to-revenue more effectively than simply writing a larger equity check. A fund must act as a company builder, helping to bridge critical gaps in team composition, financial modelling, and go-to-market strategy.

3. Re-evaluate Your Risk Lens for Women Founders

EchoVC’s portfolio is 47% women-led or has mixed-gender founding teams. The firm reports these ventures consistently demonstrate superior capital efficiency and a stronger ability to adapt to market challenges.

However, these founders face systemic barriers and a narrower pipeline. To access this talent pool, funds need a deliberate sourcing strategy and a willingness to apply a different risk-on approach, recognising that traditional network-based sourcing will perpetuate the existing gender gap.

4. Treat Policy as Your Co-Investor

In Africa, government policy can create or destroy a market overnight. An investor must understand the regulatory landscape as well as they understand unit economics.

• Rwanda’s mandate for electric motorcycles created an instant market for e-mobility startups.
• Kenya’s solar tax exemptions and upcoming E-Mobility Policy have significantly de-risked investments in the renewables sector.
• Ethiopia’s ban on ICE vehicle imports provides a powerful tailwind for EV companies.

A fund that can anticipate and leverage these policy shifts has a significant competitive advantage.

The Next Step: Build a Platform, Not Just a Fund

Based on these learnings, EchoVC is evolving its model from a single fund to a multi-vehicle “EchoVC Eco Platform”. This structure is designed to provide the “multi-SKU financing” its portfolio companies need as they grow:

• Pilot Funds: To continue writing small, experimental pre-seed checks.
• A Seed Fund: A larger, $30M vehicle to back the most promising companies as they prepare for Series A.
• A Catalytic Vehicle: To offer blended finance, including small-scale debt, working capital, and grants.

This platform approach signals a move away from the rigid, one-size-fits-all generalist fund and towards a more flexible, specialised financial architecture tailored to the real needs of Africa’s climate entrepreneurs. The ultimate goal is to prove that backing underrepresented founders in overlooked sectors isn’t just an impact strategy — it’s a path to capturing outsized financial returns.