At the start of the year, the conversation about African startups centred on a funding decline. Various reports showed that startup funding dropped by 39-65% compared to the previous year. But everyone seems to agree that investors have toned down on hype and focused on efficiency. And in this period, health tech has pulled a relatively silent but solid year.
In a Medium article published in December, Dr Ola Brown, founder of HealthCap Africa, said: “We will also see that during downtimes, healthcare brings stability to investment portfolios because healthcare is both defensive, inflation resistant and counter-cyclical. Furthermore, the ageing population, technological advances, and the global reach of diseases are driving factors for healthcare investments.” After seeing the scorecards for tech funding, it seems that investors went in this direction.
According to a report by Salient Advisory, a pan-African health-tech consulting firm, health-tech funding dropped by only 2% in 2023. “The online sentiment is that there is a very positive outlook,” Yomi Kazeem, Engagement Manager at Salient Advisory, told Ventures Africa. “It’s hard to put [African health tech] on a growth curve because these are still early days. But what we’re seeing is an emerging crop of high-potential companies led by strong, exciting founders and management teams looking to solve real problems faced by Africans every day.”
Access to healthcare is one of Africa’s most pressing challenges today. Nigeria, for instance, has only 17 healthcare facilities per 100,000 people. Many of these health facilities are not hospitals but clinics and health centres. It’s the same case in many parts of Sub-Saharan Africa. In Ghana, only a reported 48% of the population can reach a tertiary health care facility within a recommended travel time of 30 minutes. And only a handful of these people can afford quality services. Healthcare work is also becoming less attractive to young Africans because of low wages. A UN article from 2017 found that, on average, surgeons in New Jersey earn $216,000 annually, while their counterparts in Zambia make $24,000, and those in Kenya make $6,000.
Health tech is the most feasible way to improve access to healthcare without waiting for governments. And investors want to be a part of it, whether for profit or social good. “Investors are seeing that there’s a lot of potential in the space,” Kazeem explained. “They have also realised that a lot of the promising companies in this space have validated their business models over the years.”
Funding was largely driven by a handful of companies which raised significant amounts of Series B funding. Investors’ biggest bets were on online pharmacy solutions, which scooped 38% of all funding in 2023. Five startups (Helium Health, Kasha, MYDAWA, Yodawy, and Remedial Health) captured 59% of all funding. “If you’re looking to be predictive, do we see this trend happening again this year? The answer is yes. But that would require us to see more companies accessing growth-stage capital.”
In 2021, we wrote about how Africa was due for a health-tech boom (specifically, telemedicine). By 2023, health tech had taken off beyond our expectations. General awareness about the sector’s potential has reached new heights, and with it, funding.
However, there’s still a wide gap to fill. Supply for health-tech funding is not nearly as much as the demand. It’s also arguable that health tech funding is less susceptible to a sharp decline because it didn’t have a high volume in the first place. “When you’re working from a low base, a sharper decline is less likely to happen,” Kazeem admitted.
Yet, healthcare seems to be one of those sectors with the most room for disruption. For instance, women-led startups championed the sector’s growth last year. They raised $52 million in funding, 31% of the total investments. In 2022, they accounted for only 1.4%. No other sector has closed its gender financing gap this well. “Long-term, the ideal is to see a lot more spread in terms of investment, going from just 4-5 companies to more,” Kazeem said. “But if only a handful of women-led companies continue to raise higher than $10-20 million year after year, it would still be inspiring.”
Victor Asemota, a renowned veteran in African tech, also predicted in a tweet that healthcare would be the next ‘fintech’. But before then, health tech has a few challenges that are not within the reach of innovators. According to Kazeem, “The pace of innovation in health tech is beginning to outpace regulation. As of today, there is no regulation guiding online pharmacies in Africa.”
