Acclaimed entrepreneur on bootstrapping, cash flow and why a good idea isn’t enough
Award-winning entrepreneur Siraaj Adams recently told How we made it in Africa that the most important aspect for business success, before anything else, is clients.
“At the end of the day you can have the most fantastic concept… but if you don’t have someone willing to pay for it, then it is difficult to generate cash flow and to get investment. If you look at most venture capital guys, they will always say: ‘I don’t invest in apps, I invest in the business’. And ultimately a business needs clients,” Adams explains.
He is the co-owner of South Africa-based Iyeza Health. The business was originally founded in 2013 by his partner, Sizwe Nzima, as a bicycle delivery company called Iyeza Express that distributed chronic medication in the partially informal Cape Town township of Khayelitsha from health clinics to patients’ homes. The company has since evolved into a digital health provider with logistics capabilities. It focuses on the provision of HIV self-test kits and chronic medication to patients in low-income areas.
Adams first met Nzima while working at medical scheme administrator Metropolitan Health Group. Through its enterprise development programme, Metropolitan partnered with Iyeza Express to help it formalise the business and scale operations. Adams was one of Nzima’s mentors as part of the programme.
Adams later joined the business to create Iyeza Health, incorporating Express as one of its arms and including digital healthcare software and medical devices to assist people with diagnostic self-testing at home as offerings. Now the company delivers some 3,000 HIV self-test kits a month and medication to over 1,000 people in Khayelitsha through its own fleet of cold-chain-enabled trucks – and bicycles when necessary. It has also started discussions with medical suppliers in neighbouring countries – such as Botswana and Namibia – in a hopes to boost self-test kit deliveries to around 60,000 in 2018.
Commenting on demand for HIV self-test kits, Adams says: “It is a discreet, confidential service. Not everybody feels confident enough to ask a nurse or a pharmacist for an HIV self-test kit. This way the patient is able to receive the kit conveniently delivered to them at work or home. And if they need a confirmation of the results, we actually have a referral map that allows the patient to find the nearest doctor or lab for confirmatory results.”
Adams and Nzima recently won the “emerging entrepreneur” category at the 2017 Entrepreneur of the Year competition, sponsored by Sanlam and Business Partners.
“He has the logistics experience and I have the digital health experience, and we complement each other in terms of being able to create this unique platform that is focused primarily on preventative care and how to reach the vulnerable groups – the low-income areas as well as vulnerable populations like young women,” says Adams about the partnership.
Bootstrapping the company
So far the owners have largely bootstrapped the business, growing organically without external investment or bank loans. One of the reasons for this is because they didn’t want to incur unnecessary debt until they were comfortable that the company’s future cash flow would be able to cover it.
Adams says although investors typically don’t fall over their feet to invest in township businesses, there have been a handful of opportunities to attract funding or grants into the company. But the business never quite fit the required criteria.
“So sometimes we were too small and sometimes we were too big… to hit those kind of grants and funds.”
Although the partners are currently looking for investors to help scale the business, Adams says they first want some large contracts in place to ensure the business achieves a proper valuation.
“We will wait for the opportunity, we will wait for the contract to be signed and then once we have a guarantee, then we use that as a way to justify investment… You only want to take investment once your valuation is worth something.
“You don’t want to go in and say: ‘As a township business we are worth R2m’. You want to wait until your valuation is materially bigger… So if you want investment of R500,000 into a R2m company, you are going to give away 25%. If you are receiving investment of R500,000 into a R50m company then you are only going to be giving away 1%,” Adams remarks.
Bumps in the road
One of the challenges the Iyeza Health owners had to deal with in the early days was managing cash-flow issues. At one stage they had to survive as long as four months without remuneration.
“Waiting for contracts to be signed affects your cash flow. You get a contract, then it must be formalised and signed and then they must pay you. So the approval of the contract could be quick – the finalisation could take months.
“If you don’t have somebody willing to give you money to carry you over, the only way to survive is to keep your expenses very, very low in the beginning. You basically don’t take a salary, you don’t extract any value from the business – until you can. You don’t hire anybody, it is just you and your partner.”
However, the duo managed to pull through, and won’t make the same mistake twice. “Your hardest lesson is the one where when there is no money in the bank. We’ve learnt to manage our cash flow better as a result of that. Mistiming the contract approval to the implementation – that’s definitely been the hardest lesson,” says Adams.
Good ideas alone won’t cut it
Internet and smartphone penetration in Africa is growing rapidly, and with it the number of apps and software solutions aimed to solve the continent’s healthcare challenges. Adams says he has seen many good ideas, but oftentimes these lack a strong business model.
“Yes, the tech is important – but the business model is the most important part,” he notes. “For me it’s really important that people understand the relationship between the technology aspect and the business model. Because without sales or a pipeline, your apps won’t go anywhere.
“Your technology can always become outdated very quickly or improved upon by a competitor, but your business model is what sets you apart,” he adds.