Emerging Opportunities in Global Health Impact Investments

15 Oct

By Shaoyu Chang, MD, MPH,  Senior Research Analyst, LSN

Shaoyu 10*10

Earlier this week, one of the largest money managers announced the first US impact-backed mutual fund, reflecting a trend of impact investing in the investment community. Impact investing attempts to address the dual bottom line of financial returns and measurable social and/or environmental impact. It has been gaining traction quickly in recent years, especially among a new generation of socially-conscious investors, with an estimated market of $50 billion.

The global health community is also seeing the rise of impact investment. One reason is the growing awareness of the global disease burden, partially thanks to outspoken philanthropists, foundations, and advocates such as the economist Lawrence Summers. In his recent article, Summers was on a mission to bring preventable maternal, child, and infectious diseases to universally low levels by 2035. He argued that “the necessary investments [in global health] would have benefits that exceeded their costs by a factor of 10.”

Their optimism is well grounded. The convergence of medicine and communication technology has created unprecedented opportunity to tackle age-old diseases worldwide. The better understanding of disease and human biology has led to new diagnostic, treatment, and prevention methods for disease that plagued the world’s poor for centuries. Coupled with the widespread use of mobile phones and the Internet to facilitate patient monitoring and outbreak surveillance, global health agencies are hopeful to completely eradicate several ancient diseases, such as polio, malaria, and filariasis.

Another reason for a growing interest in impact investment is a financial one. According to a 2015 analysis that reviewed data from 1998 to 2010, social impact investment funds performed as well as conventional mainstream funds in terms of financial returns. In Asia, health tech saw the fastest growth in venture funding among all healthcare sectors.

Driven by a growing middle class and a rising healthcare demand, developing economies are seen as a source of future growth, especially by multi-national corporations. Global health serves as an ideal platform for them to build non-competitive collaborations with entrepreneurs, academia, and other corporations.

Based on our interviews with several global health investors, LSN has discovered that these investors are not only interested in startup teams emerging from low-income countries, but also in repurposing or adapting developed world innovations for specific, global health-related applications. Entrepreneurs could receive additional funding if they are flexible and willing to explore their technology’s applications.

While many global health entrepreneurs are passionate about their work, they frequently have a mismatch between their passion and their “investment readiness.” Entrepreneurs urgently need basic education on business strategy and investment landscape to realistically assess their assets and reach out to the right funding sources.

Development of health technology is a long, risky, and capital-intensive process. In global health, a successful project may involve multiple funding sources, including government grants, donations, impact equity, and impact debt. Entrepreneurs should carefully choose “smart money” investors who understand the timeline and provide strategic guidance when necessary. Good financial planning can help entrepreneurs pool capital from different sources to achieve milestones within a reasonable timeframe. The report by the Global Health Investment Landscaping Project provided a few useful case studies.

The increasingly crowded investment landscape poses both opportunities and challenges for entrepreneurs in the healthcare arena. We expect the growth of local innovation and global collaboration will advance healthcare for all.

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