Novastar Ventures Africa Fund III: $147m For Climate, Impact Startups

By Johnson Emmanuel

Novastar Ventures closed a $147 million third fund, Africa People and Planet Fund III, below its $200 million target, to invest in startups across Africa. Andrew Carruthers, Co-founder and Managing Partner, and Brian Odhiambo, Partner, confirmed the fund will deploy capital from pre-Series A to Series B stages.

DECISION HIGHLIGHT

• $147 million fund size, 40 percent increase from prior fund
• Shift from regional to continent-wide investment mandate
• Entry focus on early growth-stage companies
• Strong participation from development finance institutions and Japanese investors

DECISION MEMO
The fund signals a measured expansion of venture capital ambition within Africa’s startup ecosystem, balancing growth with capital constraints. While the increase from $108 million to $147 million indicates investor confidence, the shortfall from the $200 million target reflects persistent caution among global allocators toward African risk exposure.

Carruthers’ emphasis on “transformative businesses” aligns with a dual-return thesis, financial and impact-driven. However, this broad mandate dilutes sectoral concentration, potentially complicating portfolio optimisation and expertise depth. The decision to invest across sectors, anchored by climate and social outcomes, reflects a thematic rather than industry-specific strategy.

Odhiambo’s articulation of a “Japan-Africa bridge” introduces a structural innovation in capital sourcing. Japanese institutional participation marks a diversification away from traditional Western development finance dominance. Yet, this also introduces expectations of commercial returns alongside developmental outcomes, increasing pressure on portfolio performance.

The stage focus, pre-Series A to Series B, positions the fund within a high-risk, high-growth segment where capital gaps remain acute. Initial cheque sizes of $1 million to $8 million indicate flexibility, but also expose the fund to execution risk in markets where exit pathways remain underdeveloped.

The early deployment into six companies suggests pipeline readiness, but also raises questions about deployment pacing relative to fund size. Rapid capital allocation, without corresponding ecosystem maturity, may constrain follow-on financing and exit opportunities.

Overall, the fund reflects a strategic recalibration, broader geographic scope, diversified capital base, and impact orientation, but remains constrained by structural market limitations in Africa’s venture ecosystem.

DATA BOX

• Fund size: $147 million
• Initial target: $200 million
• Previous fund (Africa Fund II): $108 million
• Growth: 40 percent increase
• Investment stage: pre-Series A to Series B
• Cheque size: $1 million to $8 million
• Portfolio companies (initial): 6

WHO WINS / WHO LOSES
Wins:

• Early-stage African startups with growth potential
• Development finance institutions seeking impact-aligned returns
• Japanese investors expanding into African venture markets

Loses:

• Later-stage companies requiring larger capital pools
• Funds with narrow geographic or sector focus
• Startups outside climate or impact-oriented themes

POLICY SIGNALS

• Rising alignment between venture capital and climate transition priorities
• Increased internationalisation of Africa’s startup financing ecosystem
• Continued reliance on blended finance structures

INVESTOR SIGNAL

• Sustained interest in African venture opportunities despite capital constraints
• Preference for impact-linked investments with scalable business models
• Continued funding gaps at later growth stages

RISK RADAR

• Fundraising shortfall relative to initial target
• Limited exit opportunities across African markets
• Currency and macroeconomic volatility affecting returns
• Execution risk in early-stage investments
• Potential misalignment between impact objectives and commercial performance