Why we invested into an African pharma-tech startup
Hustle Fund gets about 1,000 applications for funding every month. Of those, we invest into about 7. So, how do we decide which companies to back and which to pass on?
Our evaluation process looks at 5 elements of a startup:
In the past, I've shared real-life examples of how we used this 5-pillar analysis to invest in Daily Blends, The Cru, and Growrk. Today I wanna share an example of a time we invested in a company in a geography that is outside of our traditional investment focus. This is the story of Famasi (like "pharmacy"), a Nigerian-based company.
Would you have made a different decision? Hit reply and tell me why.
What is Famasi?
Famasi is a platform that helps existing pharmacies maintain and grow their businesses more efficiently to create a better pharmacy experience for consumers . On the customer side: Famasi helps users buy medication, manage prescriptions, automate refills, get meds delivered, and schedule virtual consultations.
On the pharmacy side: Famasi helps pharmacies manage their inventory, acts as a point-of-sale service, and delivers medications to patients.
Famasi is based in and does business in Nigeria, Africa.
Regardless of where you are in the world, healthcare is a heavily regulated industry. Entrepreneurs need to know how the system works, and how to operate within it, in order to create real change.
Famasi's founder Adeola Ayoola understands this better than most.
Adeola has over 7 years of experience working in the pharmaceutical world: in retail, hospitals, wholesale, and in distribution. Through her work with a hospital providing medication to people living with HIV/AIDS, she saw first-hand how difficult it was for patients to get prescription refills in a timely manner.
She’s also worked with about 15 pharmacies and worked at a pharma supply chain company that raised over $89m in venture capital... so she deeply understands the challenges pharmacies face when it comes to growing their pharmacies.
Adeola also has prior experience as a founder. Famasi is the fourth company she's built, so she is realistic about customer acquisition, onboarding new clients, and competing with existing services.
That's why she's not aiming to replace pharmacies altogether. Rather, she sees technology as a way to improve the existing system. More on this in the "solution" section.
Through her experience working in the pharmaceutical industry, Adeola saw problems for both consumers and pharmacies.
Consumers with recurring prescriptions often have trouble getting their refills in a timely manner. This is a huge problem for people with chronic illness and their caregivers.
Patients of all kinds struggled with long lines at pharmacies, or delays in getting their prescriptions filled. If the pharmacy is unable to fill their prescription, the patient might either stop taking the medication altogether, leading to worsening symptoms, or find an alternative medication (which is often too expensive and sometimes ineffective).
Meanwhile, pharmacies had no dedicated and efficient inventory management system to help them determine which medications they needed to have on hand.
So pharmacies were often unprepared for their customers' orders, didn’t stock up on necessary medications, and left revenue opportunities on the table.
Since Adeola had a deep understanding of how Nigeria's health care system works, she knew that she needed a solution that would fit within the existing ecosystem. She didn't want to burn the existing system to the ground. She just wanted to improve the existing infrastructure using software and an API.
Her long-term goal was to build an end-to-end solution that simplified the chaos: where users could do everything from buy medications to get them delivered. She also wanted this solution to help pharmacies manage their inventory, simplify logistics, and create better transparency into their customers' needs.
Her solution was quite simple: consumers could order their medication (with a valid prescription) through the Famasi app. They would see availability and price, and even pay for the meds through the app. Pharmacies could set up delivery through Famasi. And patients could automate their refills.
We liked this market for a few reasons.
On the pharmacy side: Aside from the existing outdated, inefficient solutions for pharmacies, there was no other solution for pharmacies to track inventory or make deliveries. And while healthcare is heavily regulated, the solution Adeola was building wouldn't require jumping through a bunch of compliance loops.
At the early stage, her product was essentially Square for pharmacies – not something the government would have major concerns about.
On the consumer side: Almost everyone needs to get medication at some point. And they need those medications quickly. So we saw this as a big problem with a large customer base.
I've said it before and I'll say it again: Hustle fund is a pre-seed / seed-stage fund. We often invest in startups with little (or no) revenue, basically no customers, and often a preliminary version of their product.
That said, we do want to see that the founder is thinking strategically about customer acquisition, and that they're doing something to get early customers.
Our team liked Adeola's customer acquisition strategy. Rather than going from pharmacy to pharmacy individually, she partnered with HMOs. Each HMO gave her access to 100+ pharmacies.
When we invested, Adeola had 229 pharmacies through her HMO partnerships. She opted to onboard them slowly, which meant revenue wasn't high when we invested. But we could see a clear path to customer acquisition.
Where they're at now
As of August 2023, Famasi has built an inventory management software with 5 financial service providers, onboarded 279 pharmacies (3,500 in the pipeline with plans to 1,000 by EOY), contributing 10% - 30% of their revenue growth. They've also built APIs to streamline their pharmacy partnership group and deliver medications.
Famasi is expanding services to Rwanda, with plans to launch in 4 additional countries in the next 4 years.
What would you do?
Knowing what you know now about Famasi, would you invest?