Health Tech Entrepreneurs Must Be Patient — Autopsy of a failed Nigerian health tech Startup
First published on July 13 2017 on the Digital Health Nigeria website.
Editor’s note — This is an interview with a founder of a now-failed health tech startup meditell, funded by a Lagos-based incubator and was active between 2014 and 2015. He gives plenty of insights and lessons to learn that is required reading for every health tech entrepreneur. It’s by far the best interview in our series so far. Some identifying details have been deliberately obscured. It was transcribed from a recording and edited to provide clarity
Introduction — I’m one of the three founders of Meditell and oversaw business development and strategy.
Have you always wanted to be an entrepreneur? No, I didn’t always want to be an entrepreneur. What interest me about entrepreneurship is scaling and building organizations. Me being able to build something from scratch and scale it. I don’t have one of those stories where I sold shirts when I was small, and then I grew up. I started learning about business when I was 18 or 19, and then I studied, learned in intricate details about how to start and build a business.
What was the story behind the starting of Meditell? So, I met my co-founder in NYSC camp, and he had developed a drug reminder system that worked via SMS. It was supposed to help patients who had chronic illnesses to remember to take their drugs. One of the problems with chronic illnesses is that a lot of the people do not feel the strain of the illness and so the urge or motivation to take drugs is usually very low. That is why they constantly forget to take their medication. The solution was a seamless drug reminder system that came from the hospital’s end. So, by the time you are to take your drugs the hospital sets the drug reminder via SMS and calls. The text message appears on your phone, tells you what medication to take and what quantity. Also, 3mins later, a voice reminder will be prompted via a call to your phone and tells you that an SMS has been sent to your phone in case you missed it. We wanted to sell these to hospitals.
What problems did you face? We got into the sector in Lagos, and we were selling our services. Then we found out that most people in the private hospitals, a big bulk of the private hospitals were signed under the HMOs. A lot of the doctors said that they couldn’t charge their patients because the HMOs were the one’s who handled their bills. The hospitals we met said oh it sounds nice, but we can’t sell the service because 70% of our patients are under the HMOs, they (the HMOs) are very stingy and won’t want it. That was the problem. The HMOs have a fixed price list of every hospital service. So, for a hospital to now say, oh there is this service, and I want to charge it, it is going to cause a lot of the problem. HMOs and hospitals are not friends, each of them is just trying to get the better of the other. So, there is a lot of animosities there, and that means that there is no friendly conversation where the hospital would say they want to propose this solution to the HMOs. The directive must come from the HMO before there is acceptance, so that’s why we decided to go to the HMOs.
We went round to meet several HMOs to sell our services to get it used by the hospitals. One said oh well this is interesting we like it. But is it possible for us to share information, while this service is in the hospital? Is it possible for us to get more information about the patients? Instead of them buying the product they told us that they struggled with the paper process of their claim management. What happens is that for regular claims such as malaria or something simple, the HMOs gives an amount of money to hospitals per month for patients. Once the hospitals have to admit the patients or do something past the simple ailments, they have to record it and send it back to the HMOs to get reimbursed. This process was handled through PayPal and still is till date. Because of this, there is a long form that the hospital has to complete with the information of every single ailment, patients’ information, details of drug administered and all their prices which are sent to the HMO. The HMO reviews this and vets every single item to confirm that it is the agreed-upon price that was charged to the patient. This was all done by hand. What the man at the HMO was looking for was a solution that would ease that process. Basically, in 2017 you shouldn’t be manually reviewing claim records, but that was what was happening. I mean it seemed like common sense. What we didn’t discover is that they had previously tried to deploy an American solution to handle this. But the solution failed because of problems like poor UX; bad internet was a struggle.
We tried to propose a claims management system to ease the process so that the hospitals themselves don’t have to go and find the individual process of each item. The whole process was supposed to be more automated and simpler, and that is what we were trying to go for. We proposed this to a few HMOs, and they said this is good, and I like it, but we need a standard. I can’t go and ask my hospitals to use this, and then somebody else then asked them to go and use this software. Also, they have these very big problems that exist in the industry with poor technology penetration, and then they were all so pessimistic about it. They all said your solution sounds interesting but will it work? Will it fly? And then most people don’t want to take the risk instead they always want someone to do it first. They keep asking you which HMO have you done this with. And we are like somebody has to agree first. Everybody keeps saying yeah, we like it but we need someone to take the risk first.
There was a lot of scepticism on “why you” and “won’t it stress the hospitals?” considering the huge disconnect between hospitals and HMOs. They are constantly at loggerheads, and so they don’t want to worsen an already strained relationship with a new system. We discovered that the bigger problem wasn’t the core complaints we wanted to solve with our software. Our software wasn’t robust. There was this huge gap, e.g., most of the hospitals who need these things don’t even have computers, the internet, a lot of unwillingness from HMOs to help solve the problem and even till now. And we are in Nigeria where funding is very tight. So, those were the problems. It is not an insurmountable problem, but it is a problem that needs patience and money. And before you know it young men who came into the industry for a drug reminder system seeing all these problems is daunting. So slowly they dropped out of the race. A lot of people in the space right now just work on the peripheries in the sense that they have some people building technology for the internal operations of the HMOs and that is also very important and necessary. We met with an HMO employee that said: “we want one software that does everything including all our internal HMO processes and our claims par. Internal HMO solutions are more important now because we don’t have that”. It is a very big problem according to him.
Did you guys try tweaking your business model-
We met with a few pharmaceuticals, but the business model didn’t fly. I think it didn’t fly because we were distributing through SMS. SMS is the easiest way to distribute because you just give a phone number and them you distribute. In fact, we have been to the pilot in one pharmacy, the people who have chronic illness typically need a lot of reminders, and then that adds to their medical bills and then you just you know those things. The pharmacist did not want to take responsibility because of the added cost. The pharmaceutical business is very low margin, so it didn’t seem like a wise thing for them to do. Now by the time you make it just an app, then it increases the complexity of how the services are served. The UX becomes bad if I had to download an app before I use your service you automatically get fewer users than if I just have to submit my phone number. So, those were the problems that existed in that space. In fact, we even met a company to strike a deal about how to combine the drug reminder system with chronic illness drugs, but then we now discovered that it wasn’t in the margins. Because the people who sell these drugs in Nigerians were mostly traders, they are not proper pharmaceutical companies. Traders are mostly just interested in the money.
The biggest problem was that HMOs were not ready for a solution like that. The problem wasn’t our business model but with the market. The market wasn’t ready and is still not ready for the drug reminder system. The business model makes sense for the HMOs to keep their costs low but the industry has an enormous technological gap that this service is just not right at this point. So, what we wanted to do is to fix the technological gap there first. There is no pre-existing cloud system that anybody is using, no one software that these 10 or 50 hospitals are using and is connected to the HMOs. If that existed already, all we would have needed to do was to go and meet them and say hey we have this solution lets plug into what you are doing and we share a commission. The HMO person would have spoken to our service and say we could have plugged in all this. Ours is a value-added service, but the value-added service can’t fly. It is like trying to sell Facebook when there is not the internet, or you are trying to sell Snapchat, and there are no smartphones yet. Those things won’t fly as such. That was the major problem. There is not enough technology, and internet-enabled laptops, desktops, internet-savvy health workers for this thing to work that way yet.
What were the lessons learned? It is almost impossible to know what is happening in the health sector without being there or inside. There are two kinds of people, people who don’t know what is going on, and they go inside to see what is happening. And some people are inside and are so demoralized that they believe that nothing can be done. So, the people who are in the health sector right now, i.e., individuals who work in HMOs they know all the problems, but they don’t have an entrepreneurial enough mind for them to say this is the problem and we can easily solve this. On the other hand, people on the outside don’t know what is happening. They think about the health sector very simplistically as just the hospital and patients. No, it is not just that, we have the hospitals, HMO, patients and many other players. The relationship between all them is very complex, tenuous and annoying. Though I must say that when a particular new HMO came into the sector, they came with a banking background, they came in with technology and use of service is easier and assured for the customers and because of that, they could win a lot of clients.
A lot of the MDs of HMOs don’t have this technology background; they came from the MDs since 1995, 1997. In fact, our product was going to fly with one HMO until they changed their MD. We had put in a lot into what we built because they kept on changing and adding things to make the system robust for them and so we learned a lot as to what needed to be in such a system. When their MD left, I kept calling them, and they were saying that the new HMO was poaching their customers. They had to put more focus on sales to figure out why their business was being stolen. They didn’t seem to understand that it was because the new HMO had better technology. And so they were able to sell better plans to companies. The HMO couldn’t learn from their mistake or see that the new entrant was winning because they had better technology. It is just their background, very old fashioned background. The people who are in those companies do not understand technology; they are in old men in their 60s or 70s. All they know is the HMO business; they don’t understand how technology can help improve it better.
A technological investment needs to be made into these hospitals that grow slowly. You first make that work then every other thing becomes easier. By the time you deploy your services, you have to give numbers to show that your service works at ease. These things are not always simple and so needs patience. There are times things might not work; technology might not scale, the internet not working, you know all those problems that exist in a startup, and all those things need to be handled patiently. Now I know what is in the sector, it is left for other people to find out. The other thing we could have done was to be persistent. If the team had stayed together, we could have achieved a lot more. We broke out because of lack of patience, as entrepreneurs they wanted to make money but it was not looking like it would come out fast, so people drop out. So, patience is very important and funding. If you are patient, you can build stuff no matter the delay. The entrepreneurs must be patient.
What could you have done differently? To be honest, there is no much that we could have done differently. We did a lot; we tried pharmacies, HMOs, we even got in contact with other health tech companies. The only other thing we could have done was to create an app, but that wouldn’t have worked because getting customers to download your app to use it would have been a challenge. The customer base wouldn’t have been large. We couldn’t have gone small scale because that wouldn’t have made sense for us to run a business on a small scale. We would have needed a lot more funding, but we couldn’t have known what the sector would have looked like. It would have been better to find the HMO who has seen the problem, understands it, motivated and wants to solve the problem. This is very important. You should find the motivated HMO. We had that in one HMO but the MD left.
Do you plan to work on it and relaunch again? No. We have all gone our separate ways.
What is your advice to young entrepreneurs going into the industry? Any entrepreneur who is going into health tech has to understand the ecosystem and know what is happening before venturing into it. It helps if they understand how the sector runs and why every other thing is not the way they should be. The reason why we know so much is that we became friends with people who deployed old solutions. They’ve tried to make the health sector work but failed and can relate what happened, why it failed and what mistakes to avoid. They should do a lot of discovering before they even start doing anything or working. So, they first do all their research, probably involve someone who has been in the sector. They need to do a lot of interviews with hospitals, HMOs, pharmacies, a lot of talking with people in the industry including the stakeholders, research. It is very important. Then they shouldn’t think that a small amount of money will solve the problem, it probably won’t so they shouldn’t be so optimistic. I can’t tell them not to start the business but if they can convince someone to put in a higher sum of the money than the average Nigeria seed fund. That would be good. Also, it helps to have a great team. Finding a great team is good but am not sure what the science of finding a great team is. It helps for the team to know what they want to do with their lives. This is very important. Your co-founders should be people that will stick with you all through and be people who are very versatile. This is because there will come times when the funding will be short and you guys don’t want to close, so people who can earn money doing other things will help. Nobody should just expect that it will be magic and they will blow. It won’t be as fast as you think. You need to build slowly and be more patient and not expect things to move that quickly. One needs to be patient and bold at the same time. The solutions required are not that big but are basic. You learn a lot as you go along.
What can you say about the health tech ecosystem in Nigeria? Is Nigeria ready? Yes, Nigeria is ready, but it needs money and understanding. The health sector is smaller and more complex than the average Nigerian tech business. The health sector is far more conservative and close-ended. If you bring somebody who doesn’t get it, who is a new entrepreneur and goes into it with his money he might just waste the money, to be honest. You have to do a lot of surveys to find out what is possible and then prepare yourself for the battle that is the Nigerian healthcare sector. The sector is ripe for change. There are so many expensive inefficiencies that shouldn’t exist. We will save money if they make things easier for themselves, but the stakeholders are not interested. We just need one motivated party; one HMO and things will grow slowly. It needs to grow slowly; it is just a deliberate effort that is needed.
Has the whole experience been worthwhile? It was a very interesting and great learning experience. Yes, it was worthwhile. Because I haven’t lost out. I have learned much, and it wasn’t a waste of time and money. The learning experience from Meditell are not “oh you could have done this better”; they are just that this is a very tough sector, and this sector needs patience and more money than you would optimistically expect. If you are optimistic, you shouldn’t be that optimistic about it. It kind of speaks about the inherent difficulties when you consider why banks have so much technology put in and why the hospitals have so little technology put in. Those are the kind of things you need to consider. Is it that everybody is stupid to see the opportunities or is the opportunity just so hard that people are not willing to put in the effort? The answer is the latter. It is not that people are stupid if it was easier people would have done it and that is just the truth. But it is not easy, so nobody does it, or nobody succeeds at it or puts in a negligible effort that it doesn’t matter. It is important that they know the problems that are out there.
