Pitching Investors in Global Health: Funding lessons from social entrepreneurs
Over the past decade, business models serving base of the pyramid (BoP) customers have attracted increased attention. At the same time, major development agencies and foundations have identified the public health segments of the Millennium Development Goals as priorities and have expanded programs to support and encourage innovation in health care for low- and middle-income communities around the world.
For social entrepreneurs working in global health, this is both good and bad news. Good, because there is more support to start enterprises and test their models on the ground. And bad, because once those entrepreneurs graduate from early-stage grants, navigating the terrain to secure capital to help scale their impact is both increasingly competitive and unclear. Several major programs, such as the Grand Challenges in Global Health programs run by USAID, the Gates Foundation and the Canadian government, top out at grants of $3 million. As these ventures look to raise larger amounts of capital and, in many cases, to pursue models other than grant funding, it is a challenge to navigate and adapt to the needs and interests of different types of investors.
We at the Social Entrepreneurship Accelerator at Duke (SEAD) have been studying this journey. A new accelerator working with global health social entrepreneurs, SEAD is a partnership between the Center for the Advancement of Social Entrepreneurship (CASE), a leading social entrepreneurship center at Duke’s Fuqua School of Business, and the International Partnership on Innovative Healthcare Delivery (IPIHD), an affiliate of Duke Medicine birthed by McKinsey & Company and the World Economic Forum to help global health innovators and major health providers work together to scale solutions. Together with our partners at USAID and other members of their Higher Education Solutions Network, we at SEAD have been studying the patterns of the marketplace to discern rules of the road.
We recently released a new white paper on these lessons. The paper, “Fundraising for Global Health Social Enterprises: Lessons from the Field,” focuses on funding lessons from the global health social entrepreneurs who are part of our accelerator. They are based across the globe in Asia, Africa and Latin America, working to scale their impact through ventures that include providing last mile delivery, operating hospitals and clinics, selling micro-insurance, and using technology to combat counterfeit drugs.
Some of the key lessons include:
• Pursue the right kind of capital. Just because you want to have private sector capital does not mean it is appropriate for your venture. Many ventures spend too much time chasing debt or equity funding before they’ve done the hard work of pressure-testing their business model, understanding their unit costs as they scale, and building a compelling case for either recurring cash flows or a successful exit scenario.
• Impact investment is not about cash, but a long-term partnership. Our innovators emphasized the importance of understanding the motivations of interested investors and working to sort investors by their financial and strategic motivations. Many investors in global health in BoP markets are still new to this kind of investing. Having identified an investor that is aligned with your geographic and impact area is just the first step; the real work involves getting to understand what they know, how they think and what they will offer as an engaged partner over the term of the relationship to support both your business needs and your impact goals.
• Target your presentation to what investors need. One of our innovators started out with a pitch focused on: 1) what we do, 2) why it’s great, and 3) why you should care. He ended up revising his pitch to focus on questions more important to impact investors: 1) how big the market is, 2) what we are doing differently, and 3) how our company will be sustainable or make money. His company ended up raising over $10 million for the expansion of their low-cost health care clinic network in India.
The initial transition from grant funding to more and different funding is a challenging one. But global health social entrepreneurs can learn a lot from the lessons of their peers about how to effectively navigate the path.
This article was originally published on the Huffington Post Blog.
Cathy Clark has been an active pioneer, educator and consultant for 25 years in the fields of impact investing and for-profit and nonprofit social entrepreneurship. Lila Cruikshank has a background in business and global health and currently works as a consultant with Global Impact Advisors.