Health Tech Companies Use Foreign Capital To Overcome Local Lending Obstacles

As local sources of investment for healthcare entrepreneurs are limited, they are turning to foreign markets for capital.

HealthCap Africa, a venture capital business specializing in healthtech and fintech, has successfully raised about $100 million more to further expand its portfolio throughout Africa.

The company is avoiding harsh lending conditions in Nigeria and most of Africa by presenting workable and feasible solutions to international lenders who are willing to grant enabling terms.

Its primary function is to provide funding for technology-enabled healthcare solutions, including telemedicine, diagnostics, clinical trials, research, retail pharmacy, biotechnology, medication manufacture, and imaging.

With a portfolio of eleven healthcare and five fintech businesses valued at a combined $750 million, it has drawn investment from roughly 110 investors.

Several of them, including LifeBank, Healthtracka, Infiuss Health, Reel Fruit, and Emergency Response Africa, are run by female entrepreneurs in the health sector.

For example, Melissa Bime, the founder of Infiuss Health, began bringing patients in the US and Europe together with researchers, pharmaceutical companies, and life science businesses in 2017 for clinical research and trials.

Her business seeks to increase the proportion of Africans included in international clinical trials and research investigations.

HealthCap recognized the potential in the vital service that Infiuss was doing and provided it with support that many companies find difficult to obtain because of the strict requirements associated with obtaining loans in their area.

In an effort to slow down the rate of increase in inflation, the Central Bank of Nigeria has hiked interest rates sharply this year. In March, the benchmark rate was raised by a total of 600 basis points to a record 24.75 percent, which hindered lending to businesses.

Ola Brown, the founder of HealthCap, founded the venture financing company earlier in 2017 as a result of this concern.

She looked into alternate forms of funding and created a welcoming ecosystem specifically designed to meet the needs of African startups and entrepreneurs.

Brown stated, “I encountered formidable obstacles in accessing funding despite achieving significant success, including multi-million dollar revenues, a robust client base comprising prominent global corporations, and a proven track record of delivering services across 30 African countries.”

“My bank required a substantial “cash collateral” equivalent to 200 percent of the loan amount, which led me to question the viability of growth for companies on the continent under such stringent lending terms.”

All things considered, African healthtech entrepreneurs are succeeding in luring outside funding. In 2023, they raised $167 million, which was a significant amount even if it was a two percent decrease from the year before, according to a Salient Advisory report from 2024 on funding activities.

The healthcare industry witnessed a 17 percent growth in investments, outpacing the 39 percent funding loss in the overall African tech environment.

With 38 percent of all money going to online pharmacy solutions in 2023—largely due to Series B rounds to Kasha, Mydawa, and Yodawy—investors were placing their biggest bets in this area.

Fifty-nine percent of the funding went to five startups: Helium Health, one of HealthCap’s portfolios; Kasha; MYDAWA; Yodawy; and Remedial Health.

According to the research, financing is still mostly concentrated in Egypt, Kenya, and Nigeria, with notable annual fluctuations in Egypt (+137%) and Ghana (-99%).

Ninety-one percent of funding in 2023 came from equity investments, with $4.8 million spread over 27 pre-seed agreements. Furthermore, 23 projects received $32 million in seed funding, and seven deals received $99 million in series A or higher funding.

Less than 10% of the funds invested came from grants, and there was only one debt-based investment that was documented.

Funding for women-led companies increased by more than 2,000 percent in 2023, from $2 million in 2022 to $52 million.

Chefaa, Maisha Meds, Dawi Clinics, and Kasha were the driving forces behind these deals.

The largest investment ever made in a woman-led African healthtech startup was Kasha’s $21 million Series B fundraising.

Speaking at a workshop on investment in Africa, Amaan Khalfan, director of Amseena Consulting and former CEO of Goodlife Pharmacy, stated that the fundraising momentum demonstrates the existence of capable management teams capable of advancing investments.

Komal Patil: