The African tech startup ecosystem has been gaining momentum and rapidly growing over the past few years, with an increasing number of startups emerging in various sectors, and several global investors and tech giants have shown an interest in tapping into the potential of the African market. However, despite the growth, the funding gap remains a significant challenge, particularly in the energy, agriculture, and mobility sectors, which have typically been ignored by investors. Delta40, the new venture studio launched by Factor[e] Ventures, is poised to change this by investing in and supporting early-stage startups in these sectors.
To address these challenges, Factor[e] Ventures, a team of venture builders that invests in early-stage companies in sub-Saharan Africa and Southeast Asia, has launched a new venture studio specifically for African startups. The new venture studio, Delta40, will invest $100,000 to $600,000 in African energy, agriculture, and mobility startups, providing co-founding support to startups, product testing, technology brokering, and early-stage commercialization, working side-by-side to increase the speed of venture building.
Delta40 secured early funding and strategic support from the Autodesk Foundation, the Global Energy Alliance for People and Planet (GEAPP), the IKEA Foundation, the Bezos Earth Fund, Wilson Sonisi, as well as government, private sector, and finance institutions. The venture studio will be based in Kenya, with operations in Nigeria.
The launch of Delta40 is expected to significantly impact the African tech startup ecosystem, with its unique approach to venture building and investment in sectors that have traditionally been ignored by investors. The venture studio aims to de-risk the energy, agriculture, and mobility sectors for other investors, reducing the effects of climate change in Africa.
Delta40 Targets the African Underserved Startups
According to Partech’s 2022 Africa tech VC report, the energy, agriculture, and mobility sectors accounted for less than 8% of total funding on the continent last year. This means that African startups in these sectors have struggled to secure funding, limiting their ability to scale their businesses and create meaningful impact. Delta40’s focus on these sectors is a game-changer for startups in these industries.
The venture studio’s unique approach to venture building is another significant factor that sets it apart from traditional VC firms. Rather than simply providing funding, Delta40 will act as a co-founder, offering product testing, technology brokering, and early-stage commercialization, working side-by-side with founders to increase the speed of venture building.
The venture studio model is still relatively new in Africa, compared to traditional VC firms, which have dominated the African tech startup ecosystem. However, this is starting to change, with several venture studios like Delta40 emerging across the continent. These venture studios have the potential to transform the African tech startup ecosystem, providing the necessary support and infrastructure to help startups scale their businesses and create meaningful impact.
Lyndsay Holley Handler, the co-founder and managing partner of Delta40, said that they took the venture studio route because of the speed at which it allows startups to grow. “After building Pan-African ventures for two decades, we are confident that the venture studio model can dramatically increase the speed and success of innovation from idea to scale to exit,” she said.
The launch of Delta40 is expected to significantly impact the African tech startup ecosystem, with the venture studio providing a much-needed support system for startups. By acting as a co-founder, Delta40 will help startups navigate the challenges of building a successful business, providing product testing, technology brokering, and early-stage commercialization.
De-Risking the Underserved Sector
Delta40’s focus on the energy, agriculture, and mobility sectors is also significant, as it will help derisk these sectors for other investors, encouraging more investment in these areas. This, in turn, will create more opportunities for startups in these sectors to secure funding and scale their businesses.
In addition to funding and co-founding, Delta40 also offers technology brokering services. This involves helping startups connect with technology providers that can help them accelerate their growth. By leveraging the expertise of a wide range of industry partners, Delta40 can connect startups with the best technology solutions, helping them scale more quickly and efficiently.
Delta40 also offers support in early-stage commercialization. This includes developing marketing and sales strategies, creating partnerships, and identifying potential customers. By helping startups to build strong commercialization plans, Delta40 can increase the chances of success for these companies and help them to become profitable more quickly.
The launch of Delta40 is a significant development for the African tech startup ecosystem. By offering a venture studio model, Delta40 is providing a new and innovative approach to supporting early-stage startups in the region. This is particularly important given the limited availability of venture studios in Africa, compared to more established startup ecosystems in other parts of the world.
The focus on the energy, agriculture, and mobility sectors is also notable. These sectors have historically been overlooked by investors, and the lack of funding in these areas has hampered the development of innovative solutions that could have a significant impact on the region. By providing funding and support in these sectors, Delta40 is helping to derisk these areas for other investors and promoting the development of technologies that can address some of the most pressing challenges facing the region.
Delta40 to Address Climate Concerns
The launch of Delta40 is also significant in terms of its potential impact on climate change. As Morgan DeFoort, the managing principal at Factor[e] Ventures, notes, although only 3% of global carbon emissions come from Africa, more than 60% of African households will be affected by climate change if action is not taken. By focusing on the energy, agriculture, and mobility sectors, Delta40 is supporting the development of technologies that can help to reduce emissions and mitigate the impact of climate change in the region.
The launch of Delta40 has been welcomed by stakeholders across the African tech startup ecosystem. In a statement, Erik Hersman, founder of the iHub and BRCK, said, “It’s great to see more venture building happening on the continent, especially in sectors that need it the most like energy, agriculture, and mobility. Having more options for funding, mentorship, and network will be critical for African entrepreneurs to have a better chance of success.”
The launch of Delta40 is also likely to have a ripple effect across the African tech startup ecosystem. By demonstrating the viability of the venture studio model in the region, Delta40 may inspire other investors and accelerators to adopt similar approaches. This, in turn, could lead to the development of a more robust ecosystem for early-stage startups in the region, helping to drive innovation, economic growth, and social impact across the continent.
In conclusion, Delta40’s launch is a significant development for the African tech startup ecosystem. By providing funding, hands-on support, and expertise to startups in critical sectors, the venture studio is addressing a critical funding gap and contributing to efforts to address climate change in Africa. Its launch is also likely to inspire more venture studios, offering a new model for supporting early-stage startups and unlocking more opportunities for innovation and growth.