VC-Backed HealthTech in Africa – H1 2021 Market Map

Published 28 June 2021
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According to a report published this March by Quartz Africa, the Africa HealthTech market is booming, thanks to the increased opportunities presented by the Covid-19 pandemic. HealthTech investment reached $106.7 million USD in 2020, across 62 funding rounds, and represented 12% of all disclosed investment rounds.

A report published this week on healthcare supply chains by Salient, a healthcare advisory, noted that while many entrepreneurs in the HealthTech space express a high interest in supporting public health efforts to combat Covid-19, that the necessary commercial partnerships between industry players such as distributors, pharmaceutical manufacturers and technology companies remain limited.

Over the last 12 months, the number of HealthTech deals has reached just over $77 million USD over 56 funding rounds. With much of this attributed to a single raise closed by LifeQ a South Africa founded biometrics company now based in United States of America.

Over a year has passed since the start of the Covid-19 pandemic, and many healthcare providers have responded to the outbreak by incorporating new delivery models such as telemedicine and direct-to-consumer (D2C) delivery channels into their service offering. But has this innovation continued, and has this translated into opportunity for African HealthTech entrepreneurs?

A huge opportunity?

Healthcare distribution is big challenge, African e-commerce giants like KongaCopia and Jumia have shown a strategic interest in the healthcare – all of whom now offer over-the-counter healthcare products directly on their e-commerce platforms. In fact, Konga announced this year that it plans to launch a healthcare distribution subsidiary in H2 2021. It aims to provide improved distribution channels from manufacturers to pharmacies, hospitals and health service providers, as well as leveraging their last-mile delivery services direct to consumers.

However, a lack of clear and harmonised regulations is often cited as a barrier to growth, particular for companies with direct-to-consumer distribution or telemedicine offerings. A recent report published in the British Medical Journal highlights the challenge for both innovators and regulators. In Kenya for example the pharmaceutical sector is regulated by the Pharmacy and Poisons act (CAP 244). Despite numerous amendments over the years, there is still no provision provisions which govern e-pharmacy or patient data management.

HealthTech Investment Continues to Grow

Despite this, healthcare investment continues to increase, and in 2021 there has been a total of $61.982 million USD raised by HealthTech companies in H1 2021 across a total of 15 deals. However, compared to the same point last year, when the pandemic was burning at its hottest, the amount of investment has decreased from a high of $91.2 million USD across 42 funding rounds recorded in H1 2020.

Figure 1: Quarterly VC-investment into African HealthTech since 2018

For early stage companies, i.e. those raising pre-seed or seed stage funding rounds totalling $550,000 or less, 2021 has seen a drop-off in the pace of investment in terms of both the total amount of funding and the number of funding rounds. 2020 saw an increase in early-stage investment from 2019, increasing from $2.5 million USD across 18 deals to $2.7 million USD across 24 deals. In H1 2021 there has been a total of $0.51 million USD raised across 3 early-stage funding rounds.

Figure 2: Pre-Seed and Seed stage investment into African HealthTech since 2015

The proportion of early-stage funding in the HealthTech space has favoured companies based in West Africa, in particular Nigeria. In 2019 West African HealthTech secured around 31% of funding, second only to companies based in Southern Africa. However, 2020 saw this increase to 43% in 2020 and 67% in 2021 (year to date).

Figure 3: Proportion of Early-stage VC-Investment into HealthTech start-ups by HQ region

The decrease in the proportion of pre-seed and seed stage funding rounds closed by HealthTech companies in Africa hasn’t necessarily corresponded to an increase in the number of late stage funding rounds. An indication, perhaps, of a nascent space. While there has been a slight increase in the number of Series A+ funding rounds, which increased from 8 to 11 between 2019 and 2020, the most significant increase in funding is seen in the number of non-equity financing and grant funding rounds. In 2019 non-equity financing represented 29% of all funding rounds, this increased to 34% in 2020 and 42% of all funding raised in 2021 (year to date).

Figure 4: VC-investment into HealthTech start-ups in Africa by funding round type since 2015

What next for Africa’s HealthTech start-ups?

Salient reported in their report on healthcare supply chain innovation that more than half (53%) of HealthTech entrepreneurs they interviewed hope to support distribution of Covid-19 vaccines. The challenge of distributing vaccines is huge task, and the extent to which technology companies can be involved very much depends on the governments’ willingness to engage with private sector healthcare technology companies.

However, AstraZeneca partnership with Kenya’s MYDAWA is a great example of how large scale pharmaceutical manufacturers can engage with, and test the effectiveness of supply chains as governments begin to ramp up Covid-19 vaccine distribution. Partnerships such as this could be a win-win scenario for tech entrepreneurs and public health providers; helping to share expertise with early-stage companies whilst stress-testing technologies which could ultimately provide efficiency savings across the value chain.