March 18, 2016

Understanding the Fundraising Landscape in Latin America

In mid-March, Innovations in Healthcare – with sponsorship from the Pfizer Foundation and in partnership with New Ventures – coordinated a fundraising workshop and networking reception in Mexico City.

The workshop included our network innovators based in Latin America, and featured presentations, expert panels, and rich discussion among innovators about funding sources, successes, and challenges for social entrepreneurs working in the healthcare space.

Our innovators were joined by key investors and funders for the reception that followed, during which each innovator had the opportunity to give a brief pitch, and our team shared trends that emerged during our research for our recent working paper on the healthcare innovation landscape in Latin America and the Caribbean.

Below are a few key themes that emerged from the presentations and discussions.

Impact investing is a relatively new space in Latin America, and there are currently limited funds focusing on healthcare. Of the approximately 30 funds in Mexico looking at investing in healthcare with an impact perspective, none are exclusively focused on health. Entrepreneurs report difficulty in finding investors with the right type and size of capital, while investors struggle to find investable health deals. For example, on the whole, healthcare delivery investments with an impact focus can be less lucrative and more capital intensive than investments in other sectors – an investor may expect a 3-5x return on a healthcare delivery impact investment over the course of 7-10 years, whereas an investment in a grocery delivery service could yield a 20x return in even less time.

Healthcare investors looking to place capital in Latin America must understand the health sector locally and the important role of the government. Compared to other regions in which we’ve seen innovation clusters, the government is an incredibly important healthcare player in Mexico and other Latin American countries. Working with the government can help innovators in terms of both patient sourcing and financing. Given this, entrepreneurs and funders should understand the advantages and disadvantages of government contracts as it relates to growth, and look for investment opportunities with partners who have shared philosophies on working with the public sector.

To scale proven healthcare delivery models in Latin America, more entrepreneur- friendly impact investment capital is needed. At an early stage, entrepreneurs are often interested in capital that allows them to maintain ownership and favorable valuations. This often means an interest in grant funding or access to mezzanine debt, but few investors are currently offering this option. Impact debt that is available tends to come with high interest rates. And on the grants side, there is limited grant funding available from Mexican or local country foundations. More recently, this region has seen economic volatility leading to more difficult times for foreign impact investors placing capital in this region.

Operating a business and seeking funding are both full-time jobs. To successfully scale a business, entrepreneurs must frequently balance fundraising and running their business operationally – both very different skill sets and both critically important to success. To succeed in this, entrepreneurs must build strategic plans, a strong team of employees, and a willingness to delegate.

Despite these challenges, presenters, panelists, and innovators also had stories of success and advice about opportunities to share. Key advice included that entrepreneurs should look to fundraise when they don’t need the funds, because processes vary between funders and the timelines for receiving funds can be long. Also, as entrepreneurs and funders consider potential matches, a challenging but critical task for both parties is to find a partner that aligns well.

Our team was busy during our trip to Mexico City – in addition to these fundraising events, we hosted a dinner for our network innovators attending these events and had a site visit with one of our veteran innovators based in Mexico City, salaUno.

You can meet our network innovators and learn more about our work in Latin America at our upcoming Annual Forum, this April 4th and 5th in Washington, D.C. For more information about this invitation-only event, contact Jenny Cook at jennifer.cook@duke.edu