money_health
Article Featured Founder

How Can Nigerian Health Tech Startups Build Sustainable Businesses?

Between the 30th of June and 2nd of July, medical doctors, software developers, graphic designers, business development guys and many others gathered at the Co-creation Hub in Yaba, Lagos for a hackathon called “Health Meets Tech” which was organized by a partnership of Digital Health Nigeria, EpiAfric and Facebook, and covered by the Nigeria Health Watch. Throughout the 3-day period 5 different teams, each comprising of medical doctors and other healthcare workers, software developers, graphic designers, business people and so on, worked on an idea that would leverage technology to improve an aspect of healthcare in Nigeria. I joined the program on the second and final day during which I went round to interact with each of the teams on what they were building. My interaction focused on the healthcare problem each team was trying to solve; whether this healthcare problem was a recurring pain point for the target market; the willingness of the target market to pay for the solution that was being built to address the healthcare problem; whether the business is for profit or a social enterprise; and the sustainability of the model on which the business will be built.

Nigeria has a population of over 170 million people with almost 80% of this number leaving below poverty line: they have a very low spending power because most are not gainfully employed. This means the majority of the population place utmost priority to their immediate, recurring needs (and different means through which they can be empowered to immediately provide these needs) which are food, clothing and shelter; every other need, including healthcare surprisingly, is only given priority when the line between life and death becomes blurry. Therefore, businesses, especially for profit ones, focusing on problems outside of these 3 immediate and recurring needs will have to be built around a sustainable model in order to survive. It is very exciting to dream up and build a cool idea that leverages technology to solve a particular healthcare problem; but reality dawns when the average Nigerian on the street, who reflects over 70% of the population, is asked to pay for this idea which is now a product or service. If it does not, in any way that is direct and clearly understood, bring food to the table or put money into the pocket, this person on the street will likely expect it to be free, and, to your surprise, give you his or her explanation of why it should be free: “if there is need for you to be given money for the health tech product or service you built, God will provide” (now that was what some Nigerian who wanted use the service of a health tech startup I worked with some time ago told me).

So, the question is how can anyone building a health tech product or service ensure they have a sustainable business model that will keep them in business in years to come in this part of the world where the majority of the population has a low spending power. In other words, how can the health tech product or service, built to start making profit after a certain period, get these people to willingly and regularly pay to use it? What I discuss here are not some golden rules and are not encompassing; they are my opinions as a medical doctor and are based on the little experience I gathered and observational analyses I made while working with a health tech startup over a short period of time and the discussions I had with people like Dr. Ikpeme Neto of Digital Health Nigeria.

For business to customer health tech startups, the terrain is much rougher, especially in this part of the world, when it comes to building anything that will ensure a recurring revenue from end-users. Establishing a recurring revenue model may require:

1. Partnership with Established Physical Health Institutions

While many hospitals  may be slow at adopting innovations in technology into their operations, some may be open to partnerships with startups who are using technology to streamline access to solutions to certain healthcare problems which different segments of their patient base (end-users) find exhausting to access through the normal manual hospital protocols. Hence, it is left for anyone venturing into the health tech space to figure out a defined pattern behind access to solutions for these regular health care problems that constantly bring people to the hospital. The next step is to build the health tech product or service, or fine-tune an existing one, around this defined pattern and show with numbers how it is going to benefit the healthcare institution in terms of operational cost and possibly more clients. This model can also apply to pharmacies, fitness centres, physical rehabilitation centres, medical laboratories and so on, with revenue coming to the health tech startup on a per-end-user basis in form of a commission on what each user pays to the healthcare institution.

2. Working with the Health Insurance Sub-sector

Another way to secure a sustainable revenue model for health tech startups is through building products or services that serve the healthcare needs, especially preventive or non-urgent healthcare, of people with any form of health insurance, be it NHIS, HMO or community-based health insurance, and working with health insurance players to pay a sustainable amount whenever an enrollee makes use of the product or service. This model is likely going to take a long time to achieve in this part of the world hence, it should form one of the cores of the business from the onset. Again, the success of this model will depend on its ability to save the health insurance companies money over a period of time: will it lead to their enrollees adopting a healthy lifestyle which ensures they go to hospitals less frequently? Will it it inculcate into their enrollees a culture of seeking healthcare immediately any health symptoms are noticed for prompt treatment to avoid complications with huge hospital bills?

On the other hand, health tech startups can take the B2B route where they build technology-powered products or services for other businesses in the healthcare industry. However, the work for the health tech startup lies in identifying strategic operational processes in hospitals, pharmacies, fitness centres, medical labs and so on which technology can significantly improve in terms of saving time and money and improving clients’ user experience.

The spending power of the larger segment of Nigeria’s population is tied to their socioeconomic status which, currently and unfortunately, is still at the lower end of the spectrum. Profit-oriented health tech startups should not get lost in the illusion of the awesomeness of their ideas, products or services. While it is good to be excited about that cool mobile health app you are building it is wise to also factor in how you are going to get its target market to pay you, on a sustainable basis, right from the onset if you intend to make a business out of it in the years to come. You should also have a rough idea of how the business will scale both in users, iteration and revenue if you have any plans of raising money from investors within and outside Nigeria.

Like I said earlier these are my opinions and they are not encompassing. We need more discussions on business sustainability of health tech startups in emerging markets like Nigeria from others in the health tech space; there may also be a need to have a meetup where established entrepreneurs can come to share their insights with people building health tech products and services in Nigeria.

Okechukwu Amako is a medical doctor who is passionate about leveraging technology to improve healthcare in Africa. He worked briefly with Kangpe Healthcare Services, a Nigerian health tech startup which was part of the last winter batch of Y Combinator’s business acceleration program in Silicon Valley.

Leave a Reply