Health Start-ups: to finance or not to finance?
The difficulty of finding ready-made projects and businesses to finance in the African Healthcare scene is proving more and more of a distant reality. Most big private equity and financing firms aim to steer well clear of greenfield opportunities due to the perception of the high risk involved.
This may explain why there are so few healthcare deals done in the continent ( a noteworthy exception is the recent equity stake taken by Abraaj in Vine Pharmaceuticals in Uganda).
This may call for a different model of stress tests to be used in financing healthcare projects.
Other factors, such as the strength of management, the sub-sector, the business plan, and plans for scalability should be given more weight.
Also, private equity firms should consider hiving off a small department with a small seed capital of say £10 million, which could be used to finance small start ups. As a rule of thumb, 7 out of 10 start ups fail, but the 3 that succeed could potentially make up for the 7 that dont make it.
lets try this and see if it works.