Why We Backed Field Intelligence
2019 was a year to remember, but not because we achieved any particularly heady milestones. No new companies closed, no IPOs. Everything was overvalued and few businesses had a focus on profitability AND scale. It was a year of doing the work, supporting portfolio companies, evaluating follow on rounds. We restructured debt, wound a business down and had a partial exit. We fretted about retrenchments and pivots and changes in structure. We watched teams grow into a new hard phase of entrepreneurship. But that didn’t mean we stopped looking for the next big thing. I think we found it.
This week, we led an investment in Field Intelligence, a company that works on last-mile distribution and financing for pharmacies. The pharmacy business in Africa is wildly fragmented — there are more than 18,000 drug distribution outlets and pharmacies in Kenya[1] and more than 80,000 in Nigeria.[2] Large chains are rare, with the largest players operating 100 outlets or less. This fragmentation directly impacts customers. The lack of collective purchasing power results in higher retail drug prices for the average consumer. Small outlets lack forecasting capabilities, and stockouts of the most high-demand medicines are frequent. In moments of scarcity, these fragmented supply chains create opportunity for counterfeit products to proliferate, even at the most well-intentioned outlets.
Enter Field’s Shelf Life, a software platform that uses sales and purchasing data to help pharmacists buy and finance more than 23,000 subscriptions at nearly 300 pharmacies in Kenya and Nigeria. Shelf Life offers high-velocity pharmaceuticals on a pay-as-you-sell basis. The subscription model moves the planning and forecasting process to Shelf Life’s data driven system, eliminating the need for ordering while unlocking recurring revenue while reducing the working capital burden on small business pharmacies. Data gathered over time helps sellers avoid the risk of stockouts and product expiration. On average, pharmacies who subscribe to Shelf Life are able to grow their revenues by 40% in the first year of integration and experience a product stock out only 4% of the time, compared to an average stockout rate of up to 40% in Nigeria. The market is huge, and the product is best in class.
This investment marks a number of key learnings for BHI. First, data-driven businesses tend to manage cash more effectively. The Field team is one of the most data-driven sets of decision makers we’ve worked with. Because Shelf Life delivers value by using sophisticated data analysis, the team is not surprisingly obsessed with making sure the information it collects is accurate. It also means at the corporate level, the team has built systems that similarly track and manage activities that drive growth and profitability. Both the customer level insights and corporate level management systems help drive a fanatical approach to managing cash. This round marks the first outside investment capital taken in by the Company, having bootstrapped its initial product since 2015.
Field is also the first company in Blue Haven’s portfolio with a global tech team. We have always focused heavily on in-country talent that understands the problem being solved, however, with nine investments across the continent, we’ve seen every single one struggle to find enough technical team members that won’t break the bank, particularly when it comes to software developers. While Field still maintains in-country product teams, they have made the decision to augment with talent from the more mature tech scene in Berlin, while focusing on close collaboration and onsite work to localize the team as much as possible. In order to leverage the wellspring of technical talent and energy on the continent, Field also runs a three-month development program to find junior developers and support staff, training them on the professional skills required to be effective on software engineering teams, and work on large projects. At the end, Field makes offers to about half of the associates and the rest use the experience to get more senior roles at other startups. Those that stay are part of a team which balances local perspectives, fresh talent, and software engineering experience.
A third lesson incorporated into this investment is to find companies that don’t need to blaze a totally new path to exit. Exits on the continent remain few and far between, but healthcare distribution and logistics is an area that has liquidity events and even some comparable transaction data. The fragmentation of pharmaceutical supply chains across the African continent is a huge opportunity for multinational distributors and pharma companies globally and, several technology and brick and mortar distribution businesses have been acquired by large strategic players based in Africa and elsewhere. Given the growth in healthcare spend on the continent, insights into how, what and where Africans are making purchasing decisions is extremely valuable.
We would be remiss in not thanking Prosper Africa, which provided advisory support to Field via CrossBoundary. Though Field is our first investment with a healthcare bent, we’re happy to continue building our expertise in logistics and financial services. There remains a huge opportunity to finance and optimize many different supply chains in Africa, similar to the work done by Twiga Foods in agriculture. We will continue to hold out for this combination of market opportunity that marries tech and human touch. Blue Haven still believes there is huge opportunity on the continent and we’re happy we waited to find it. Congrats to Field and the entire team!
[1] “Filling health and wellness needs in Kenya.” IFC. https://www.ifc.org/wps/wcm/connect/news_ext_content/ifc_external_corporate_site/news+and+events/news/impact-stories/filling-health-and-wellness-needs-in-kenya
[2] “Winning in Nigeria Pharma’s next frontier.” McKinsey & Company. https://www.mckinsey.com/industries/pharmaceuticals-and-medical-products/our-insights/winning-in-nigeria-pharmas-next-frontier
