Notes from the Field, Part 3: The Money Chase
Editor’s note: Al Hammond, entrepreneur in residence at Ashoka, writes a series of reports documenting his experiences and the learning involved in started a “base of the pyramid” (BoP) healthcare venture to serve developing countries. This is his third report in the “Notes From the Field” series. You can read the first two here and here.
When BOP entrepreneurs share war stories, they are inevitably about raising money. And I’m often asked, how do you do it? So here in brief are my experiences in raising money for our rural healthcare venture, which now has 3 operating E Health Points in rural Punjab, India.
I have written previously about some of the elements we are incorporating into the healthpoint model —call center and telemedical approaches that provide access to doctors where there are none, while also deskilling care delivery and radically lower-cost diagnostics, part of an ongoing revolution in point-of-use diagnostics. And in the current issue of Innovations, I and other colleagues have an article about a third key component, low-cost water treatment, based around a detailed case study of the Naandi Foundation’s community-scale safe drinking water business, whose marketing and community engagement strategy served as a template for both our water and our healthcare efforts.
For fund-raising, my timing couldn’t have been worse. I started making calls in January, right in the middle of the worst financial crisis in 70 years. I thought I had a compelling story about a model that could potentially transform both rural healthcare and the safe drinking water problem. I was lucky enough to have a partner in shaping the model who became my lead investor: Todd Park, co-founder of athenahealth, perhaps the leading US ehealth company, and an advisor to Ashoka on healthcare-and since August, Chief Technology Officer for Health and Human Services in the Obama Administration. Todd opened his rolodex and played a major role in rounding up an initial set of commitments, before he had to put all that behind him upon joining the government.
But then things got harder, as the crisis settled in. I talked to everyone I could think of or could get introduced to. My partner and I revised and re-revised our presentation. I sought advice from anyone I could reach. I cultivated a set of intermediaries, who could open their networks to me. In the end, I met and had serious discussions with over 100 potential investors –individuals, funds, international organizations, foundations-in the US, India, and (by phone and in person) in several other countries, and peripheral conversations with many more. So one answer to how is, don’t give up, and source your capital globally.
I eventually raised a seed round that closed at the end of August –not as large as I had hoped, but still perhaps remarkable given the circumstances and enough to get the company started and pilot units up and operating. Indeed, because some of the investors were willing to let me take their money and start spending it before it was all formally closed, we actually began operations on the ground in India at the end of June, shortening our time to market. (Caution: a “rolling close”, as this is called, can be very risky-don’t try it without expert advice.)
But the secret of this success was only partly persistence. A larger reason was Ashoka, who has been, in effect, a cofounder of the venture-providing me a platform to work from, lots of advice, and deep relationships that led to funder introductions and immediate credibility. From Ashoka’s point of view, launching a transformative healthcare venture was simply my day job as a social entrepreneur –it’s what they hired me to do. As it turned out, every one of my initial seed investors either has a deep tie to Ashoka or came in through someone who does. And like a founder, Ashoka will have an equity stake in the venture.
To me, it’s a powerful demonstration of the value of a hybrid model in which Ashoka helped develop the ecosystem that could nurture and support the venture, and its worldwide network of Fellows (many of them working in health) will also provide incredible market intelligence to guide how and where we scale. In my next post, I’ll explain why the hybrid approach and the venture’s partnership with the Naandi Foundation in India also enabled us to get up and operating in 3 months-an incredibly short time-and some of the adventures and misadventures that ensued.