The start of a new year often brings with it many predictions for how things will go in tech. Reading many of these encouraged me to consider what 2017 will bring for startups in Nigerian health tech.
2017 is undoubtedly set to be a tough year. What with Nigeria experiencing a recession and a foreign exchange crisis. Inflation is approaching 20% while GDP growth continues to be negative. A so called ‘stagflation’, that is notoriously difficult to eradicate.
How will this affect startups? Disposable income will be slashed and the much vaunted emerging middle class will be decimated. This will create quite a tough business environment as the main target of not a few Nigerian health tech startups is the middle class.
Despite the economic woes, people will still need healthcare as a necessity. The way the system is structured in Nigeria means this will mostly be done out of pocket. Nigerians will need to find the money somehow. Health insurance, the more affordable way to fund care is virtually non existent. Recently Pres. Buhari indicated that 90% of Nigerians lack health insurance. The NHIS, the body that administers health insurance, has refused to provide official numbers.. This is despite disbursing over 351 billion to HMO’s over the last 11 years. NHIS doesn’t seem to be ready yet so out of pocket payments will continue to rule the roost.
On a related side note, startups attempting to solve health payments and insurance will be a welcome development. The system is broken, we need it fixed. This startup made an attempt in the past but hit a brick wall. Hopefully, the next attempt is more successful.
Challenges breed opportunity
It is clear that 2017 will be challenging. Contracting incomes available for out of pocket health payments will create many nightmares. People may have to choose between meals or paying for health care. Many will thus seek the cheapest forms of care they can access. This may be to the detriment of quality or even avoidance altogether. Hence getting users for health tech products will prove difficult. Running operations for startups will be challenging.
Every challenge, however presents an opportunity. Especially true for startups who are savvy and smart. To take advantage, founders will need to create lean operations, funded or not. This is as even well funded startups in other sectors have begun to fold up. Being lean will keep startups alive longer to figure out where the real pain points are. A task that is made easier by the willingness of people to only pay for painkillers and not vitamins in a recession. The key will be to stay alive. Keep the burn rate low and seek alternative sources of income as it will take a while for products to take off. If investment is offered, ensure the investor is on board for the long term. Opportunities exist but they won’t be a piece of cake.
Routes to success
A laser like focus on building the right product and adopting a strategy to collect revenue from users will be needed for success. To achieve these you must always be cognizant of the following:
- People don’t like paying for health services, let alone health tech products. Your service has to be affordable and of great quality to pry the Naira from peoples cash strapped pockets.
- While you must necessarily start small and focused, your product must ultimately be able to reach and be needed by (or affect the health of) millions of Nigerians for it to be profitable.
- When you achieve the above two, a cheap and scalable product, you will have to figure out how to distribute it efficiently and cheaply. (No this will not be done online).
- Life-saving products are relatively easy to make a case for. Make your solution parlay into an acute life-saving situation where possible.
In all this, the biggest obstacle will always be non-consumption. You will need to know how to convert non-consumers into loyal customers. The startups that are able to incorporate these themes into their product and business models will be the most likely to succeed.
Who to watch
2017 will undoubtedly see the end of many health tech startups. There will be new ones to take their place who will also likely fail. An Accenture reportsuggests 50% of digital health startups fail within 2 years in the U.S. In my opinion, the failure rate in Nigeria will approach 90%. As a yardstick for the health of the Nigerian health tech market, I suggest 3 startups to watch this year:
Kangpe — Made waves in 2016. Won multiple pitch events, including Seedstars Lagos. According to some accounts, they’re making a good bit of revenue. They allow people use their service for as low as ₦200. Affordable.
Safermom — Won multiple awards over the years, including internet.org’s challenge in 2016. Have a good a runway as any health tech startup. It will be interesting to see what they do with it. They have the potential to reachmillions.
Lifebank — In the words of Mark Zuckerberg, ‘This is a thing that needs to exist’. They’ve great PR that’s provided multiple media mentions. They were recently featured in a newsweek article. They’re solving a real life-savingproblem that people are already suffering from and paying heavily for.
These 3 startups are included in my previous post on 20 startups in Nigerian digital health. Go check them out and the other 17.
I would like to add one more startup that seems promising in the way it distributes its product but I don’t seem to be aware of any. I’m always looking to connect with health tech companies in Nigeria. So please reach out and tell us at Digital Health Nigeria how you’re killing it.
We ‘ve set up a whatsapp group for digital health entrepreneurs. Contact us on twitter or facebook to join and network with other founders and enthusiasts. Collaboration is a sure way to weather the storm that 2017 will be.
A few disclaimers:
The opinions expressed above are mine and mine alone.
I don’t pretend to know all the health tech startups in Nigeria or the inner workings of the ones I’m aware of.
The suggestion of startups to watch is naturally skewed towards startups with some PR. While the correlation between PR and ultimate success isn’t linear, it’s nonetheless a good feature to have. The relatively greater public awareness these startups have will provide some indication on the health of the market for health tech.