Social Venture Capital for Health.. Two Years On (Mar 2009-Mar 2011)

17Mar11

It is with tremendous excitement that I write this post – almost two years to do the day that I started the BioBuzz blog – based on a integrated theme of innovation, finance and health – I am both amazed and excited about what has happened since March 2009 (and what’s going to happen in the next 5-10 years).

Two years ago, I returned to graduate school to complete a Master’s in Bioscience Enterprise. The highlight of the course was an Cambridge-MIT exchange with my classmates, and we attended a study-tour of companies in Boston, MA – one of the global hubs of healthcare innovation.  We met Dr. Bill Rodriguez giving us a talk on his HIV-diagnostic company DaktariDx. Daktari Dx is a diagnostics company with a first product of a CD4 cell counting diagnostic machine to help with HIV/AIDS diagnoses and treatment.

In one hour, Bill’s story of Daktari’s development transformed my entire thinking behind healthcare commercialization business models.  25 classmates and I inspired by Bill’s talk,  argued, discussed and debated different ways that healthcare technology companies can raise product development financing when their target markets are in low-income countries. Heck, it’s difficult enough to find risk capital to finance biotech/pharma enterprises in rich, developed countries, what happens when market “pull” demand is diminished by poverty? Our discussions overflowed into the rest of our study-tour, and became the initiative to start this blog to keep the conversation going, and subsequently… a few months later, my into my decision to pursue a PhD in this exact topic: Financing Global Health.

MARCH 2009:

Our first gut instinct was to say who best in the field today can think about Social Venture Capital targeted at improving health at the Bottom of the Pyramid (primarily low and middle-income countries) – Gates Foundation seemed the obvious pioneer-to-be in March 2009. And our arguments for it were detailed in my Gates Ventures(?) post.

Followed by a preliminary survey of the field and other active players in social venture capital in It’s About Precedence (including Aga Khan, the Brainstorm Prize/Legatum and Google Ventures – announced March 31, 2009, very timely)

Over the Easter-term break of my MPhil course, I went home and shared my thoughts with an outstanding group of young professionals in Vancouver on this matter of who finances the healthcare product development gap? at a great Whiteboard Party

As fate would have it, my flight back to graduate school in Cambridge was scheduled to depart from Seattle instead of Vancouver and I thought it would be the best opportunity I would have to ask the Gates Foundation directly  the questions that had been discussed. And so with the kind help of Dr. Tachi Yamada, I was able to Continue the Conversation at the Gates Foundation offices over a lunchtime meeting with Dan Kress and Erik Iverson. It was emphasized that the Bill & Melinda Gates Foundation was primarily a grants-giving organization and participated in very few other “push financing” program-related investment (PRI) methods. I nodded and tried to understand why Gates Foundation did not jump at the thought of leading social venture capital for health – I read all their suggested readings and ever since have kept a special interest in this area, and the conversation has really progressed… fast forward –>

MARCH 2011:

March 8 - “Gates Foundation Makes First Equity Investment in a Biotech Startup” screamed the headlines and statement from official press release – and I jumped up with huge grin! It has happened!! a $10M USD equity investment into Liquidia Technologies, a biotech based in North Carolina specializing in platform technology to engineer particle-based vaccines.  (And truth be told, yes I did a happy-dance). It may only be one-company today, this month, or this year – but it is proof that the minds of funders are changing and giving hope to all health entrepreneurs out there (both developed and developing-country based)  that if the science and technology is good enough, there are new sources of risk capital coming to bridge the “valley of death”.

Interestingly, as I read more, I realized that the first equity investment by the Gates Foundation occurred the month prior – Feb 14th - “Gates Foundation Makes $2 Million Program-Related Investment in Inigral” – to build an educational social media platform to keep kids in school in their USA Schools program division.

The times are changing… and social investment capital are starting to catalyze the huge potential in private market partners to do good and to do more.

The Gates Foundation investment this month is a definite signpost in the sand – something for all social foundations and developmental aid organizations to consider. Perhaps social venture capital’s time has arrived (for health)… Let me also highlight some of the developments that happened between March 2009-March 2011 (each worth recognizing in our inter-connected ecosystem):

June 4, 2009: International Finance Corporation (IFC), Africa Development Bank, Gates Foundation, German DEG create a new private equity fund investing in Africa’s health sector.  It is part of IFC’s Health in Africa effort intending to mobilize up to $1 billion USD in investment and advisory services over 5 years. The fund is managed by emerging markets private equity firm Aureos Capital. The Health Fund’s launch was also in the same year as IFC launching its asset management division (May 2009) to allow private third party capital (including mighty sovereign funds and pension funds) to co-invest in IFC transactions. “It is a new avenue to connet investment capital with developing country opportunities, to provie better jobs and livelihoods, along with good returns” said World Bank President Robert Zoellick.

December 23, 2009: World Health Organization issues Public Health, Innovation and Intellectual Property Report of the Expert Working Group on Research and Development Financing (executive summary version). The report from the expert working group included recommendations for both health financing options and mechanisms for disbursement and coordination. The WHO as per their Global Strategy and Plan of Action are continuing actively continuing efforts in this space.

March 7, 2010: Alex Friedman, out-going CFO of Bill and Melinda Gates Foundation writes an OpEd in the Financial Times detailing how banks and other players in the private capital markets can help the world’s poor.

October 8, 2010: President Obama and Secretary Clinton called on US Agency for International Development (USAID) to increase investments and engage in game-changing innovations and established Development Innovation Ventures. DIV will invest resources in promising high-risk, high-return projects, but are often difficult to undertake using traditional Agency structures (ie. grant-giving body).  It is led by Chief Innovation Officer Maura O’Neill and Michael Kremer, the Harvard Professor who authored “Strong Medicine” and I admire as a proponent of the Advanced Market Commitments (AMCs) for health.

December 13, 2010: Dutch Ministry of Economic Affairs, Agriculture and Innovation and Dutch Ministry of Foreign Affairs/Development Cooperation launches PSI: Private Sector Investment Programme to support innovative investment projects in emerging markets. The fund seeks to support investment partnerships implemented by Dutch (or foreign) company with a local company.

January 6, 2011: The UK Department for International Development (DFID) announces New DFID Private Sector Department to engage with with private enterprise to improve the prosperity and well-being of poor people.  Including healthcare firms!

February 23, 2011: UN Foundation unveils Pledge Guarantee for Health (PGH) as an innovative financing mechanism to speed and streamline foreign assistance and make global health supplies more affordable for recipient countries.

That is all that I have for now… watch this space for more updates and twitter: @juliafanli



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