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Investors snub Kenyan e-health start-ups

By Frankline Sunday | Published Mon, October 30th 2017 at 12:33, Updated October 31st 2017 at 12:07 GMT +3
About 73 per cent of the e-health ventures polled were found to be mobile-based. [Courtesy]

In summary

  • New report shows local startups lag behind their peers in other countries in the region in attracting financing
  • Out of the 32 e-health firms across East Africa, 15 are from Kenya

Kenyan startups specialising in e-health are struggling to attract financing despite significant investment in the sector in other countries in the region.

According to a new report by Disrupt Africa, 115 e-health startups currently operate in 20 countries across Africa, with Nigeria, South Africa, and Kenya standing out as early hotspots for e-health entrepreneurs.

The report examines data on e-health startups across 20 countries in Africa gathered between January 2015 and September 2017.

Across the continent, there has been an acceleration in startup launching, with substantial communities of e-health innovators emerging in Uganda, Ghana, Egypt, and Senegal.

“The number of startups launching annually continent-wide has risen over the past three years and investors are also beginning to pay more attention - the number of startups raising funding to grow their businesses is increasing each year,” says the report.

To date, Africa’s e-health startups combined have raised investment in excess of $19 million (Sh1.9 billion).

However, Kenyan startups trailed continent leaders in the share of investment financing.

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Failed to take off

Out of the 32 startups across East Africa, 15 are from Kenya. Of these, four Kenyan startups raised a total of $379,600 (Sh38 million) - less than two per cent of the total share of investment in the sector on the continent.

Totohealth, one of Kenya’s leading e-health startups, has won several awards for its mobile-based solution for maternal health and raised more than Sh6 million in funding, expanding into Tanzania in the past two years.

However, the same cannot be said of other local startups. Drugs.co.ke, a website launched to enable consumers to purchase medicine online, failed to take off after it ran into regulatory headwinds. “The need and opportunity for the continent’s innovative entrepreneurs to make a real impact in delivering quality health care to all has never been greater,” said Gabriella Mulligan, co-founder of Disrupt Africa.

Contrary to Africa’s global reputation as a ‘mobile-first’ continent, the majority of e-health startups tracked in the report do not use mobile phones to reach their customers.

About 44 per cent of the e-health ventures polled were found to be mobile-based, with the proportion varying slightly according to region and sub-category of the sector.

“Maternal health and emergency response are examples of areas where mobile is predominant,” explained Ms Mulligan. “The mobile/non-mobile divide is less a conscious decision on the part of founders to not use mobile but more a reflection of the fact that innovation is not limited to consumer-facing mobile apps, but spans the full health sector.”

Kenya displayed mobile-first tendencies, with 73 per cent of the country’s e-health startups using mobile as a delivery channel. The same applied to Uganda, where 64 per cent of startups reported using mobile.

“Areas such as maternal health and emergency response - which are directly helping individual consumers - are more likely to leverage mobile,” said Mulligan. “On the other hand, more startups are increasingly looking at helping hospitals improve their internal systems, an area that doesn’t need to rely on mobile.” Like in most sub-Saharan Africa, Kenya’s public healthcare system is struggling to bring services to international standards.

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