When the government of Ghana, in 2019, signed on Zipline, the San Francisco-based drone delivery startup to fly over its airspace delivering medicine, blood samples and other healthcare services, government critics called it the hoax of the century. In other words, how could the government waste a whopping $12.5 million signing on some insignificant little flying machines instead of attending to the real issues plaguing the country’s healthcare system, like the critical shortage of hospital beds, gloves, among others? But it was only a matter of a few countries before the darkness of the coronavirus shawled the Earth and chased the whole world indoors. As at the time of writing this (Sunday, May 24, 2020; 10:41 PM, WAT), more than 340,000 people have died, close to 5.4 million people infected. And for the first time in a very long time, the world is never in a hurry to return to business as usual. Nevertheless, while the world patiently hopes for the better, the whole pandemic has revealed the near shambolic state of the global healthcare system. And to imagine that Zipline, one of the fancy improvements in healthcare service delivery, would assist Ghana fast enough in deciding whether to lift the lockdown of its major cities (ahead of the continent’s giants such as Nigeria and South Africa) because the country has conducted more tests per million and has secured insights on the pattern of spread of the virus is the first hint that more investment in the African healthcare startup space will assist African countries to build stronger healthcare systems. But are healthcare systems all over Africa not that too complex for healthcare startups on the continent to play a significant part in? 

First, We Consider How Well Funded African Healthcare Startups Were Prior To The Coronavirus Pandemic.

Perhaps until now, much of the investment on the African startup space has gone more to other sectors than healthcare. In 2019 alone, out of a total of 250 deals amounting to a record-breaking $2.02 billion reported by data firm Partech, financial technology companies (fintechs), at 41%, received the lion share of the whole investment sum. The set of data below further paints this picture better. It is rather saddening, from the data, that healthcare startups in Africa have managed to secure only about 4% of the total funding raised by African startups in the past four years, compared to the increasing interests shown by investors in other sectors, such as fintech (which, at 28% has netted the highest percentage of funding coming to African startups) or enterprise and ecommerce( 27% of the total funding accruing to African startups). 

How Best Could The Low Investments In African Healthcare Startups Be Explained?

Explaining why investment doesn’t always pour into healthcare startups that often, Justin Barad, co-founder and CEO of Osso VR, a clinically validated and award-winning surgical training platform, notes critically that traditional healthcare was not designed, in the first place, to understand startups.

“When it comes to early-stage technology companies, their challenges and early development are drastically different,’’ Justin writes on TechCrunch, an online technology and innovation magazine. ‘‘The two critical resources an early-stage company has are cash and time. The goal is to unlock additional capital with product-market fit, and these companies need maximum flexibility to be able to move quickly to find it. Unfortunately, investors see the healthcare space as complex and high risk, which is true. So these startups face fundraising challenges for the space they are in, as well as unnecessary additional hurdles from the home institutions, increasing the likelihood of scaring away already skittish investors.’’

Read also:Ghana ’s Government Grants $10m Tax Waiver To Health Startup Zipline

Another factor that causes low investment to the African healthcare startup sector is the lack of coherent institutional policies and transparency in healthcare systems which scare off potential investors. According to Dimeji Kofowora, co-founder at Helium Health, a Nigerian health startup disrupting the way medical records are kept in most hospitals across Africa, there’s actually an incentive to do nothing in most healthcare enterprises across Africa. 

“One difficulty we have faced,’’ he said, about building his startup, “is convincing hospitals that have previously used an electronic medical records platform and have been frustrated to the point where they returned to paper-based records that their experience with Helium Health will be different.”

On institutional policies, Barad also notes that “in today’s world of software, patents are somewhat less valuable and relevant than they once were. If any IP is filed, the institution will claim ownership and will consider licensing it to the inventor for a royalty agreement. Sometimes, if the institution does not believe in the ability of the inventor to carry the IP forward to commercialization, they will even cut them out entirely from the agreement.”

Barad’s assertion, although more particularly likely to be prominent in the United States is true for all countries. By the terms of Article 5(2) of the Paris Convention for the Protection of Industrial Property, each country signatory to the convention has the right to “grant compulsory licenses to prevent abuses which might result from the exercise of exclusive rights conferred by the patent…” This is further consolidated by Article 31 of the TRIPS Agreement which authorizes all member states to the agreement to use compulsory licenses without the authorization of the right holder in appropriate circumstances. 

This fact substantially validates the reason why seemingly successful healthtech startups are having proportionately more recurring investors than new ones. Investors in the sector, especially after the Theranos debacle, are now more inclined to fund “tried and tested” issues — except there is a promise by the startup to outperform standard industry practices at least ten times, Barad added.

Perhaps the strongest point that drives home the reason for low investment in the African healthcare startup scene is the very nature of the industry itself. Generally, the healthcare industry is built on evidence, testing and validation. These processes normally take longer time for impatient investors who usually want instant returns on investments (ROI).

“Just last year we launched and we raised 4.5 million dollars in seed funding. Now why were we able to do this?” asked Abasi Ene-Obong co-founder at 54gene, a biotech startup based in Nigeria. “I think it was because investors who came into my company understood the potential for good. Now one of the things I’d like to say is (that) impact investing is not the same thing as charity. This is very important because I once thought impact investing is something that is often talked about but people don’t really understand what it is. People confuse it with Corporate Social Responsibility (CSR); they confuse it with NGOs and things of that sort. So, it’s a very important distinction to make. In fact, if you want to bring in charity money as an investment to my company I will probably say no, because that means it’s a misalignment in our values as a company. As a founder and CEO, I want to do well; I want to make money right. I want to make the enterprise to be profitable, but at the same time I want to do good.”

Abasi’s statement not only captures the values of his company, but the objectives of most venture capital firms, angel investors or even private equity investors looking for profitability in startups when they invest, even if it means quickly accelerating them against their natural growth patterns. Almost always, evidence-based medicine, medical technologies, drugs, or healthcare solutions require energy, and even years to develop, sparing no time for investors, who because of the speed of the technology market, gravitate towards solutions that require the least amount of time to go to market.

Finally, healthcare startups in Africa themselves don’t look like they are ready yet. According to the most recent report from GSMA, an association of mobile network operators worldwide, there are 747 million SIM connections in sub-Saharan Africa, representing 75% of the population. Of this number only a third, 250 million have smartphones. Of this number further, 85.44% are Android users, 13.19% are IOS users while a meagre 0.17% are Windows users. In other words, about 98.63% of all internet experiences in Africa happen on mobile smartphones. These figures are relevant because, according High Tech Health: Exploring the African E-health Startup Ecosystem Report 2017, released by Disrupt Africa, only 44 per cent of the e-health ventures in Africa counted are mobile-based.

“The majority of East African e-health startups use mobile, for example 64% of Kenyan startups use mobile. However this is in contrast to South Africa where the number is 38% and Nigeria with only 25% of e-startups using mobile. Maternal health and emergency response are the two most mobile-based sub-categories of e-health,” Gabriella Mulligan co-founder of Disrupt Africa said. 

This scenario probably explains the reason why smaller number of healthcare startups in Africa are closing deals, year-on-year. The most important quality of high-growth and innovative startups is the ability to scale faster to larger markets, and that some e-health startups in Africa are not leveraging technology to reach more markets is a great call for reflection. 

How Some African Healthcare Startups, In The Face Of The Coronavirus Pandemic, Are Proving That With More Investments, There Is Hope On The Horizon For Africa’s Healthcare System. 

Indeed, the coronavirus pandemic has opened a new chapter for Africa’s healthcare startups. Investors, in their reactionary and opportunistic tendencies are turning more of their attention to healthcare startups now. 

“What we are passionate about now is health technology. It will be for the next five years, what fintech has been for the past five years,” said Noor Sweid, partner of Global Ventures, commenting on the investment made by the firm in Helium Health recently.

But the above statement is one side of the good news. The other side shows the resourcefulness of a majority of healthcare startups in Africa in tackling the challenges of Africa’s healthcare system. 

54gene, the biotech startup based in Nigeria, for instance, has helped to increase the daily testing capacity of Nigeria during the coronavirus pandemic by launching a fund and a mobile testing center at a time when Nigeria was crying it was running out of testing kits. 54gene launched a $500,000 fund to help increase COVID-19 testing capacity in the country by up to 1,000 additional tests a day, by buying testing instruments and the required biosafety materials such as biosafety cabinets and personal protective equipment needed to keep frontline healthcare workers safe. The startup has currently been at the frontline in one of Nigeria’s coronavirus most hit spots.

In Ghana, mPharma a leading health startup and one of the most valuable health startups in Africa, recently donated a $30K molecular works station to Noguchi Memorial Institute for Medical Research, Accra as a part of its COVID-19 rapid response efforts. The equipment is capable of testing samples right on the field.

Nigerian startup MDaas is also assisting health organisations and African governments to run mass testing centres. The mass testing centres include drive-through testing sites and booth testing sites. The “out-of-health facility” locations will help attend to high volume of patients for COVID-19 samples and send to a centralized laboratory for processing.

The Table Below Contains African Healthcare Startups That Have Raised More $1m In Total Funding, (Deals Were Sealed Both Prior To And During The Coronavirus Pandemic) Whether From Private Equity, Venture Capital, Or Other Types of Financing.

The above are not exhaustive of African innovative healthcare startups that are changing the course of the continent’s poor healthcare system. The coronavirus might have succeeded in throwing more light on them now than ever before, but the fact still remains that in one way or the other these startups are contributing through their niche efforts in changing the entire narrative of Africa’s near-death healthcare systems. They most probably need a voice, by way of more funding, to further construct an entirely new paradigm for the continent as a whole.

In effect, the words of Joshua Owusu-Ansah, country lead of Talamus Health Ghana, help to summarize the current turn of events for African healthcare startups, in the face of the coronavirus pandemic:  

“Covid-19 highlights the inefficiencies in the healthcare sector, largely run by the government, and for a long time seen by technology enthusiasts as an unattractive sector to venture into,” he said. “Given the scale of this pandemic — and its direct and indirect impact on the global economy and daily life — I expect it will encourage more to venture into healthtech.”

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer.