Emerging markets, or economies transitioning into developed economies, shoulder a disproportionate share of the global disease burden, but their health systems are often underfunded and overwhelmed. For example, according to the World Health Organization (WHO), African countries, are exposed to 25% of the global disease burden yet receive less than 1% of the global health expenditure.
This presents not only challenges but also substantial opportunities for healthcare entrepreneurs. Private capital, which includes funds from individuals, venture capital firms, private equity, family offices and other non – governmental sources, is crucial for addressing the significant funding gap faced by healthcare businesses, particularly in emerging markets. By bridging these gaps, private capital enables innovative solutions to scale effectively and improve healthcare outcomes. Given there has been a surge in interest from investors – driven by factors such as population growth, urbanization, rising healthcare costs, spread of vector borne diseases, and increased demand for healthcare services – healthcare entrepreneurs face a unique opportunity – if they are prepared to attract and secure the right investment partners.
At the Health Finance Coalition, our extensive interactions with diverse healthcare enterprises combined with our strategic partnerships with various types of investors, have given us deep insights into the investment landscape. While the specifics of what investors seek can vary depending on the stage and size of a business, certain critical evaluation criteria consistently guide investment decisions.
Below are a few tips to set healthcare enterprises up for success to attract the right investors, secure necessary capital, and play a pivotal role in improving healthcare access and quality.
Demonstrate a sustainable and scalable revenue model
Investors prioritize healthcare companies with sustainable and scalable revenue models. Although a robust primary revenue stream is crucial, diversifying into other product lines or markets will mitigate “concentration risks” and enhance investor appeal.
To demonstrate diverse and robust revenue streams, these may include subscription-based, pay-per-user, direct sales, or other models.
Diversification, however, should not only encompass products or services but should extend to targeting different demographic segments or expanding geographically as the company scales.
However, it’s important to strike a balance—being too diverse can lead to a loss of focus and the dilution of resources, ultimately hindering overall effectiveness. Careful strategic planning is essential to ensure that diversification efforts complement the core business and contribute to sustainable growth.
Assess your market size and growth potential
Investors closely examine the potential market size and growth of a company’s offerings, as they weigh whether there is a significant addressable market gap that the company’s services or products can fill. For healthcare enterprises, this means entrepreneurs must also understand their projected market growth and factor in market potential, including demographics and consumer behaviours. These insights position companies to tailor their offerings, capitalize on growth opportunities, and become more attractive to investors.
Create a unique value proposition
To effectively standout from potential competition, healthcare companies must be able to clearly articulate their unique value proposition. A strong UVP is essential as it differentiates a company from its competitors, making it more attractive to investors and customers alike. It defines what sets the company apart and highlights the specific benefits that only it can provide. This differentiation is crucial in a crowded market, where numerous businesses vie for the same target audience.
Demonstrating a unique value proposition may include showcasing superior quality, innovative technology, or an enhanced customer experience. Utilizing business strategy tools, such as Porter’s Five Forces and PESTEL analysis, helps businesses better position themselves and more effectively navigate market dynamics and external influences.
While integrating advanced technologies, such as AI or telemedicine platforms, can significantly enhance operational efficiency and scalability, it is essential to ensure these innovations are purposeful and deliver tangible value to customers. By being proactive and adaptive to industry trends, companies can maintain their competitiveness, ensuring sustainability and success in the evolving healthcare market.
Demonstrate demand and financial growth
For investors, a company’s financial track record is a clear indicator of market validation and operational effectiveness. Investors seek evidence of consistent growth over the years and a demonstration of demand for the company’s offerings. In evaluating financial health, investors also focus on the company’s ability to maintain profitability while managing costs and generating consistent revenue.
A crucial aspect of this evaluation is margin expansion. Demonstrating the ability to increase profit margins over time indicates efficient cost management and the potential for higher profitability as the business scales. Additionally, positive and stable cash flow is essential, as it reflects the company’s capacity to cover its operating expenses and invest in growth opportunities without relying excessively on external funding.
This financial discipline is crucial for assessing whether a business can thrive over the long term, especially in dynamic and competitive markets. Investors are particularly interested in businesses that can not only grow revenues but also improve their operational efficiency, thereby expanding margins, ensuring sustainable cash flow, and maintaining overall financial health.
Showcase an effective team
The strength of a company’s team cannot be overstated. Investors prioritize teams that demonstrate not only technical and operational expertise but also an effective distribution of responsibilities. Strategic delegation not only mitigates risk but ensures investors that the company will remain stable and its operations uninterrupted, even in the absence of key individuals.
Teams that share a deep passion and alignment with the company’s vision, significantly appeal to investors as these businesses are perceived to be more resilient.
Provide an expansion strategy
Showcasing a robust expansion strategy is essential for companies aiming to increase their market presence and meet investor return expectations. Entrepreneurs should demonstrate realistic timelines and resource needs for entering new markets or expanding product lines. Timing is critical: companies must know when to push for expansion and when to consolidate.
Effective expansion plans should include a strategy for market penetration and customer acquisition, as well as be tailored to the unique demands of new markets or sectors.
Craft a Compelling Impact Thesis
A compelling impact pitch is crucial for attracting a wider range of impact-focused investors. By clearly articulating how your products or services address significant health challenges, you can demonstrate both societal benefits and financial viability. This makes your business more appealing to investors who prioritize measurable impact alongside financial returns.
By linking your company’s impact to the Sustainable Development Goals (SDGs) or utilizing frameworks such as the Global Impact Investing Network’s (GIIN) 5 dimensions of impact and IRIS+ tools, you can effectively measure and showcase your impact. This strengthens your pitch and makes it more robust and attractive to impact-focused investors.
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