This post is co-authored by Lila Cruikshank.
Over the past decade, business models serving the 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 by 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 just 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.
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.