E3 Capital and Lion’s Head have announced the $48m first close of the E3 Low Carbon Economy Fund for Africa fund with backing from DFIs FMO, KfW, Swedfund and Proparco.
A fund targeting investment in low carbon businesses in Africa, run by E3 Capital and Lion’s Head Global Partners, has achieved a first close of $48.1m ($44.7m) and is targeting a final close of up to $100m within the next year.
The E3 Low Carbon Economy Fund for Africa is an early-stage venture fund that will focus on investment in entrepreneurs seeking to scale new low-carbon technologies and business models. The fund will hold significant capital for follow-on in later rounds, according to the firms.
This is the second fund launched by Nairobi-based E3 Capital team, since it was founded in 2015 by Paras Patel. The first was the €75m Energy Access Ventures Fund, which focused on energy infrastructure and invested in 15 companies in areas such as power, internet tech and cooling for businesses and individuals across Africa.
European DFIs
Lion’s Head, manager of the new fund, is an emerging and frontier market-focused asset manager with over $700m under management.
Those backing the Luxembourg-domiciled fund for to date are European development finance institutions (DFIs), including Germany’s KfW, Dutch entrepreneurial development bank FMO, Sweden’s Swedfund International and France’s Proparco.
Vladimir Dugin, a partner in E3 Capital, told Impact Investor he expected further investment in the fund to be come mainly from DFIs, but that it would also seek additions from investors in the company’s previous fund, as well as funds of funds and family offices.
“I think the fund will land somewhere between $75m and $100m. The fundraising environment is not that easy, but we believe that a lot of investors are now focused on climate, and that’s something that we are bringing to the table,” he said.
Investment pipeline
In terms of potential investments, Dugin says the fund has a “strong pipeline” and will look at a variety of companies making contributions to carbon emissions reductions, including potential investees in the electric mobility sector, energy efficiency, digital inclusion and digital infrastructure.
Work on the previous fund had added to the E3 team’s valuable insights into the African market, according to Dugin. “We already have expertise from the ground. We’ve seen what’s working and what’s not working,” he said.
Linde Lassche, investment officer at FMO said E3 Capital’s role had been “instrumental” for innovation in the energy sector in Africa, having been a pioneering investor in PAYGO and commercial solar, and being prepared to invest in fragile states such as Mali, Burkina Faso and Chad. “The E3 team has a knowledge team on the ground with great networks across Africa,” she said.
Besides raising capital from DFIs for its funds, E3 Capital has also co-invested with some of its partners, including three co-investments with FMO to further the DFI’s direct venture capital strategy.
