Salient Advisory’s recent report, reveals that a mere 2% of funding supports female founders. Women-led ventures heavily rely on grants and debt due to this financing gap, often leading them to be perceived as social enterprises, consequently impacting healthcare innovations.
In Africa, a male-dominated healthcare supply chain and 8% of women-founded companies affect reproductive health and overall well-being. South Africa dominates health tech, yet just 12% of companies are solely women-founded. South Africa and Nigeria stand out with 76% of such companies on the continent.
Juddy Gitahi, Senior Consultant at Salient, to discusses the importance of targeted grant programs such as the i3 initiative spearheaded by Salient Advisory to bridge the funding gap, build inclusive ecosystems and foster an environment where women founders can thrive and contribute significantly to the industry’s growth
1- Can you elaborate on the key findings of Salient Advisory’s latest Market Intelligence report regarding the funding distribution between male and female founders in the healthcare supply chain innovations ecosystem across Africa?
There is unequal funding distribution between men and women founders in the African healthcare supply chains. Out of the $2.6 billion in all-time funding that supply chain innovators have raised, women have raised only 2% of this amount. Additionally, disaggregating the $2.6billion by the type of funding (equity, debt, or grant) shows that women appear to be more reliant on grant and debt funding than men are, suggesting that equity funding, which is historically dominated by men, is not as accessible for women founders.
There are varied reasons for this continued gender financing gap, and we engaged deeper with the women founders, speaking with them about their experience working in supply chain ecosystems.
Women founders reiterated that their access to funding is uneven because there is a fundamental inequality in the access to funding by women. Compounding the access problem, even though women raise less money, they also spend much more time working to raise those funds. If you look at the time value of money, and the depreciation they experience, it’s a lot.
2-South Africa and Nigeria are identified as the main hubs for women-founded health tech companies in Africa. What factors might contribute to the concentration of women entrepreneurs in these particular countries?
76% of women-founded companies are headquartered in Nigeria and South Africa alone, and this may be due to factors such as a conducive start-up environment for nascent companies, high population density which results in an increased number of potential users, and high disposable income. While the above factors might contribute to the concentration of women entrepreneurs in these two countries, it is also important to note that Nigeria and South Africa had the highest number of innovators reported in our research, accounting for 39% of the 348 innovators.
3- The i3 initiative by Salient Advisory is mentioned as a potential solution to bridge the funding gap and build inclusive ecosystems for women founders. Could you provide more details about how this initiative works and its goals in fostering a supportive environment for women in the industry?
The investing in innovation program (i3) is funded by the Bill & Melinda Gates Foundation with 4 additional sponsors: MSD, AmerisourceBergen, Chemonics, and Microsoft. The program supports health tech startups innovating in the sector of supply chains in Africa. The program was launched in 2022, and it centers around 3 key pillars: access to markets (connecting startups with key clients), provision of risk-tolerant funding ($50,000 per company in grant), and investment readiness support (tailored and delivered by leading accelerators on the continent such as Co-creation Hub, Villgro Africa, Impact Lab, and Startupbootcamp Afritech.
For the first pillar, each year, the i3 program holds an Access to Markets event, during which key stakeholders are invited to engage with startups selected in the program and hold partnership discussions. This creates a platform to identify synergy areas and work towards key strategic partnerships. During the 2022 event in Lagos, startups had over 200 partnership discussions with key stakeholders at the event. The first year of the i3 program just wrapped up and 31 different health tech startups got grants. The program is now rolling into the second year, where another 30 companies across Africa will also get selected.
The i3 program has fostered a supportive environment for women in the health tech industry by addressing women’s unequal access to funding. In the first I3 cohort, 48% of the companies selected were women founded. The same intentional thinking is in place for the second year of the program.
4-Due to the lack of equity financing, how do women-led businesses in the healthcare supply chain innovations ecosystem tend to be perceived, and what does this lead to in terms of their funding sources?
While men innovators have raised $2.2 billion in equity, women innovators have only raised $23 million in equity, highlighting the unequal access to equity that women face. Since equity investment signifies a company’s commercial viability and investor confidence, a lack of equity financing may result in women-led businesses being perceived as not viable. This higher perception of risk associated with investing in women founders deters women founders from accessing larger ticket sizes during funding rounds, a fact that prevents them from being bolder in their asks while fundraising. Ultimately, funding disparities inhibit women founders’ chances of success.
Reversing this will require stakeholders to be intentional about limiting or eliminating gender bias, such as by designing funding mechanisms that prioritize women entrepreneurs, creating exclusive funding programs for women founders, and increasing the number of women on funding-related decision-making committees.
5-The report mentions that a significant portion of the featured companies operate exclusively within one country. How might cross-border collaboration and expansion impact the healthcare supply chain innovations across Africa, and what challenges might arise in achieving this?
Cross-border collaboration and expansion will result in increased scale and impact of healthcare supply chain innovations across Africa, and possibly increased partnerships with governments. Since local health supply chains are often fragmented, overburdened, and susceptible to the influx of fake or substandard products, cross-border collaboration and expansion will help governments leverage innovators’ solutions to solve healthcare challenges, ultimately helping consumers access affordable, and quality health products. The expansion will also help innovators access markets and build traction.
The challenges that restrict cross-border collaboration and expansion include uncertain regulatory environments since stringent environmental and business regulations can inhibit expansion to new countries and markets. Multi-country operations are also limited by the nascency of the ecosystem since 74% of the innovators are in the nascent and early stages. These nascent companies’ smaller number of consumers, limited traction, less geographical operations, and little amount of funding raised means that they are not yet positioned to scale into multiple countries.