The investment approach of Health 4 Development is unique and is reflective of the goal of achieving Graduation.
What is Graduation?
A secure, successful and sustainable business which is profitable, delivers returns on invested capital and is able to secure investment (debt or equity) on commercial terms in the open market. For Health 4 Development, an investment achieving this state is termed Graduating.
Economies of scale in emerging markets are often only realised through a broad-visioned and market aware approach to growth.
And in businesses which are post-start-up, but not yet delivering sustainable returns, the most significant impact on their success is to drive growth – targeting all of the 4 C’s: Capacity, Catalogue, Channels and Countries.
4 C’s of driving growth
Investment in people, production, systems, marketing and management.
Adding profitable lines that augment range or leverage channel opportunities and addressing sub-economic “tails” in production or supply.
Introducing new key accounts, major chains, state tenders, including the means to finance the specific sales and working capital costs of these channels.
Entering additional markets with unmet demand but understood, manageable risk and viable supply chain / route to market and cash management systems.
The Path To Success – Achieving Graduation
Investments are graded in 4 groups and a growth plan evolves as appropriate:
Established business with core team and proven market uptake and route to market capacity, but sitting “on the red-line” of, at, or, close to break-even. Providing guidance, confidence and investment growth in the 4 C’s to expand revenue and release margin
Beginning to deliver real profitability with capacity to self-fund ongoing investment and service debt. Needs support in areas such as establishing controls, management systems and human capacity development
Approaching graduation and so needing guidance and support in balance sheet management, ongoing strategy on market development and investment focus, risk management and business resilience
A Stack starts as risk-heavy for the investors and cost-light for the business.
As the business evolution progresses, so the risk migrates to the business and the costs increase to eventually reach commercial terms – Graduation!
Building and Graduating a Blended Finance Stack via
4 Categories of investment instruments
This risk-sharing instrument will be our first use, targeting capital preservation or capital plus a very small annual return on investment.
When the business is seen as able to provide a yield or to service debt costs, debt will be used to “graduate” equity out of the stack. Debt will initially be introduced as interest-free, graduating to low yield bonds and low interest terms as the business develops.
Philanthropic contributions or even some impact investor funds will primarily be used as performance incentives but may also be used as business accelerants for slow-to-perform investments.
The major risks of first loss and forex shift exert a disproportionate impact on the risk-rating and therefor the costs of investments. Philanthropic capital will be used by Health 4 Development to provide risk pool funding across the portfolio.
Our Solution-Driven Strategy
Delivering on Value