Welcome to Sati - Sourcing Africa to Invest

👋🏾 Marge and Ona here…

We’re both Ugandan 🇺🇬

And through our work at Benue Capital, we’re on a mission to support Uganda’s tech ecosystem and invest in extraordinary founders across Sub-Saharan Africa.

We write Sati to uncover Africa’s history of tech and private investment to understand the present and predict the future.

Join us; let’s see where this ride takes us 🚌

This is Part 2 of 3 in our series on FemTech in Africa.

If this is your first time with us and you want to get caught up, check out Part 1 here.

If you want to skip the details and instead jump right in, at a high level, we explored:

• Section 1: Why women are pivotal to improving Africa’s economy

• Section 2: Four health-related challenges African women face that hamper their ability to contribute to economic development

Our analysis helped us understand the demographics, structural drivers, and key markets where African women face the most health-related challenges.

Today, in Part 2, we will look at solutions focused on improving quality and access to women’s health.

With data from Briter Bridges and Africa: The Big Deal, we will share:

• Section 3: Characteristics of venture backable solutions and where nontech solutions can thrive

• Section 4: An overview of the FemTech landscape and whitespace for founders to build

Before we dive in, let's define the Silicon Valley model for ‘venture backable’:

VCs often take one of two approaches to portfolio construction:

• Concentrated: Typically specialists with deep industry expertise that make larger bets in fewer companies

• Diversified: Usually generalists that make smaller bets in several companies

The overarching goal for both types of investors is to find companies that can deliver outsized returns, ideally 50-100x.

Why?

Because most companies fail.

Therefore, some companies within a portfolio must win BIG to cover the losses from those that fail, better known as the power law.

Hence why investors search for unicorns, companies that have the potential to be valued at $1bn+.

Now that we understand the traditional Silicon Valley model, let’s examine Africa’s FemTech landscape and consider where venture-scale returns might lie.

Section 3: Characteristics of venture backable solutions and where non-tech solutions can thrive

What we uncover in this section is that not all problems must be solved with technology or venture financing.

We will approach breaking this down by looking at the major challenges (verticals) that we discussed in Part 1:

1. Menstrual Health

2. Adolescent Pregnancy, Sexually Transmitted Infections, and Cervical Cancer

3. Maternal Health

The deteriorated economic output of African women starts with inadequate Menstrual Health Management, alternatively termed period poverty.

We discussed the socio-economic factors that contribute to period poverty in Part 1.

Getting a woman out of period poverty can change the trajectory of her life.

However, our deep dive into the feminine hygiene market in Africa reveals that a standalone venture-backed FemTech solution in this industry can only work if:

1. You unlock offline distribution

2. You participate in the manufacturing of the product / prioritize local manufacturing

Let’s unpack why:

In 2023, Africa made up 8% of the global menstrual hygiene market.

11 markets accounted for 80% of total share, with the Big 4 contributing 54%.

The remaining 7 markets have at least $100m in sales.

Roughly 99% of menstrual hygiene sales in Africa occur offline, emphasizing the current lack of an online retail market. This purchasing behavior is not expected to change in the near future.

Lastly, it is important to note that most brands sold are international.

Now that we understand the size of Africa’s menstrual hygiene market, how customers purchase, and the key players involved…

Let’s determine what would need to be true for a menstrual hygiene company to attract traditional venture financing:

Scenario 1: A business-to-consumer (B2C) e-commerce platform ( ❌ not venture-scale)

A B2C e-commerce platform dedicated solely to menstrual hygiene products isn’t a viable venture-scale solution because 99% of consumers purchase products offline.

Scenario 2: A business-to-business (B2B) e-commerce platform in Nigeria, the largest market, with $1.1bn in revenue (⚠️ potentially venture-scale)

Let’s walk through why.

Consider a hypothetical company called Everess.

Similar to most B2B e-commerce platforms, Everess generates revenue through transaction fees. Based on what we’ve observed with other platforms, let’s assume their take rate is 5%.

Recent developments

Last month, Everess secured a contract with industry leader Edgewell Personal Care to sell 5% of their product on Everess’ platform.

This strategic partnership positions the startup for growth, with anticipated revenue projections as follows:

• Nigeria’s menstrual hygiene market: $1.1bn

• Edgewell’s market share (89%): $979m

• Edgewell sales going through the Everess’ platform (1%): ~$9.79m (GMV)

• At a 5% take rate, this equates to ~$490k in Annual Recurring Revenue (ARR)

Valuation

To determine Everess’ valuation, we will use a 10x revenue multiple. With $490k in revenue, Everess’ initial valuation is $4.9m.

Assuming investors are interested in a 50x return, Everess’ goal is to achieve ~$25m in revenue or a ~$250m valuation.

Note that the company’s maximum revenue potential in Nigeria is:

• Total market size: $1.1bn

• 5% take rate: $55m ARR

Thus, to realize a 50x return, an investor must enter this deal before the company exceeds an $11m valuation.

But the final entry point is an unlikely outcome

To 50x and generate $55m in revenue in Nigeria, all brands would have to sell their products through the Everess’ platform, which isn’t probable.

Therefore, to derisk and maximize revenue potential, Everess should consider expanding its product and service offerings beyond menstrual health.

And based on our research, most FemTech companies that have a menstrual hygiene component do just that:

If Everess wanted to only service the menstrual health vertical and expand revenue potential, they could draw inspiration from a nontech solution, AFRIpads, that:

1. Has unlocked offline distribution, and

2. Manufactures its own pads

AFRIpads is a local manufacturer and global supplier of reusable, washable sanitary pads.

When the company launched in 2008, its target consumers were schoolgirls who were often absent from school during their periods, which led to high dropout rates.

To solve this problem, the team could have sold sanitary pads (similar to the model discussed above), but they recognized that this would generate low margins and they’d struggle to reach their core market - people living in rural areas.

Therefore, instead, AFRIpad’s targeted NGOs and corporates that would be incentivized to distribute their products and services, which are:

1. Product: Reusable, cost-effective menstrual kits that offer complete protection for 12 months.

2. Education: Menstrual Health and Hygiene education and capacity-building services for NGO staff, teachers, and community health workers.

3. Evidence: A data collection toolkit for its partners through a mobile app that can be used to complete surveys offline in the field.

Over the years, AFRIpads has accumulated over 200 partners worldwide and serves over 5 million women and girls in 40 countries.

In Part 1, we pointed out that African women have the highest rates of adolescent pregnancy, sexually transmitted infections (STIs), and cervical cancer in the world.

These stats are impacted by women’s access to:

1. Contraception

2. Gyn and Pelvic Testing

3. Oncology Services

For each of the above, we will dig into whether venture-scale returns are feasible for FemTech companies.

Contraceptive use directly affects birth and STI rates. African women have the lowest usage of contraception globally, leading to higher rates of pregnancy and STIs.

While most African women have knowledge of at least one contraceptive method, we find that in some markets, demand is unmet due to inadequate supply or availability.

It’s also important to consider that, even when contraception is available, uptake is often low for cultural reasons. In many African cultures, there’s great value on a woman’s ability to have children, with a stigma placed on women who can’t.

Therefore, under pressure to bear children, some women avoid contraception to secure their position in society.

Despite the accessibility and cultural barriers to contraception use, there has been an uptick in utilization over the last 15 years.

According to the Family Planning 2020 report, contraceptive use among African women increased by ~65% from 2012 to 2020, driven by expanded supply chains to clinics and community centers, which also broadened access to a variety of contraceptive methods.

What does this mean for FemTech?

All the FemTech startups we observed sell male condoms and/or emergency contraceptives online, the only contraceptive methods that can be sold over the counter.

Therefore, we’ve focused our market analysis on these two methods.

Male condoms

According to a report by the Global HIV Prevention Coalition, the average annual condom need for men aged 15-64 is 26 per person.

However, in African countries, this need is less than half met, with men using only about 10 condoms per year.

As per the UN, Africa’s male population in this age group is 424 million. Therefore, the expected annual usage at full need would be approximately ~11 billion condoms. Current usage is around ~4.2 billion. The average price of a condom is $0.03 per unit, meaning the market is between $126m and $330m.

Now that we understand the size of the market…

Let’s determine what would need to be true for a company selling condoms to attract traditional venture financing:

A B2B e-commerce platform selling condoms across Africa ( ❌ not venture-scale)

If all men’s needs were met and they were using 26 condoms per year, a B2B e-commerce company serving the entire African market would be valued at $165m.

• Total Market Size: $330m

• Take Rate (5%): $16.5m

• Valuation (10x): $165m

While venture scale returns could be achieved if an investor came into the deal early enough, it’s unlikely that all brands would partner with this company to sell condoms across the entire continent.

To solidify the case against building a product just for male condoms, we found that many countries provide condoms for free through the public sector, which is often heavily dependent on donor support. For example, in 2014 donors provided $60m in condoms in Africa.

Moreover, a large majority of condoms are socially marketed for subsidized pricing, leaving a small percentage commercially sold.

Emergency Contraceptives ( ❌ not venture-scale)

Emergency contraceptive (EC) pills are a method used to avoid pregnancy after unprotected sex. In Sub-Saharan Africa, usage is low at less than 10% of all available methods. This would imply that the market size for ECs is at most $10m.

Contraception apps ( ❌ not venture-scale)

Besides selling contraceptives, we explored the market size for platforms that also provide services.

According to Statista, a contraception and fertility app provides users with guidelines on self-care, family planning, and birth control topics, raises their awareness, and offers monitoring functions.

Revenue displayed refers to revenues generated from paid apps offering premium options and from in-app purchases. Revenues from app downloads and advertising are not included.

Based on these figures, the market size for contraception and fertility apps is small, too small to achieve venture-scale returns.

Summary

Achieving venture-scale returns for a standalone over-the-counter B2B contraceptive e-comm platform or a contraception application is difficult.

Maximizing revenues requires diversification and we see FemTech companies with a contraceptive component do just that:

Ultimately, this work is better suited for nontech and government-focused initiatives.

Gyn and pelvic testing keeps one informed of their sexual health status.

African women have some of the highest rates of testing in the world.

Assuming these figures, the market for STI testing, specifically for women, is ~$1bn.

But this would vary based on:

• Frequency of testing

• Price per test depending on what’s being tested

• Access to free testing

Now that we understand the size of the market…

Let’s determine what would need to be true for a company providing gyn and pelvic testing to attract traditional venture financing:

A platform providing medical testing services across Africa ( ⚠️ potentially venture-scale) :

It's reasonable to assume that a platform developing a testing solution for women's health could also serve men and potentially expand beyond STI testing, thus increasing the market size.

Additionally, as we've observed above — they can diversify, and most do:

In Part 1, we focused on cervical cancer but neglected to discuss all cancers African women face.

In 2022, ~700,000 African women were newly diagnosed with cancer, and ~420,000, including new and existing cases, died that year.

Northern and Southern Africa have the highest incidence rates, likely due to the availability of early detection and cancer screening.

However, East, West, and Central Africa saw the highest proportion of deaths relative to new cancer cases, potentially resulting from under-diagnosis and limited access to early-stage treatment.

Additional factors include poor awareness, low disposable income or savings, and lack of health insurance coverage.

What does this mean for FemTech?

The cost of treatment in hospitals varies significantly, ranging from ~$45 to $75,000 for most women, depending on cancer type and stage.

If all 700,000 women were treated, this could represent a $52bn market—the largest single market identified in our research and one that could yield  ✅ venture-scale returns.

Including males, cancer incidences in 2022 were 1.2 million. Assuming similar costs of treatment in hospitals, the market would reach $90bn.

Moreover, it’s suggested that new cases will increase by 70% by 2030 due to population growth and aging.

However, actual revenues from treatment in Africa were $5.7bn in 2023, indicating a large whitespace opportunity to increase access and for founders to build.

To truly unlock access in this sector founders should develop modern technologies focused on:

• Prevention through early detection

• Real-time data collection, processing, and storage

• Networks that enable fast and accurate data analysis for appropriate diagnosis and treatment

While some FemTech companies have built solutions tailored to the above, most produce clinical diagnostics tools (hardware), provide patient support, or sell oncology drugs (e-comm).

The point is, there’s opportunity here, and we’d love to see more founders take this space on to save more lives.

~37 million women gave birth in Sub-Saharan Africa in 2020. ~200,000 of these women died, which accounted for ~70% of global maternal deaths.

To prevent maternal death, it’s recommended that women attend 4 prenatal visits, deliver in facilities with adequate supplies, and have at least 1 postnatal visit.

Let’s uncover if venture-scale returns are feasible for FemTech companies building in this segment.

Prenatal Care

The average price for 4 prenatal visits ranges between $40 - $80.

If all women attended these visits, total revenues would be $1.5bn to $3bn.

However, only 54% follow this guidance, reducing total potential revenues to between $800m and $1.6bn.

Delivery Fees

The average price to deliver a baby in a health facility is ~$1,000.

If all women delivered in a facility, total revenues would be $37bn.

However, only 66% do so, reducing total potential revenues to $25bn.

Postnatal Care

The average price for a postnatal visit ranges between $10 - $20.

If all women attended 1 visit, total revenues would be $370m to $740m.

However, only 42% do, reducing total potential revenues to between $155m to $311m.

Given these figures, the market for maternal health is ~$41bn, large enough to achieve ✅ venture-scale returns.

This sector has the largest concentration of FemTech founders.

We hope this section provides a strong foundation for your research and guides you in developing solutions that fit the traditional Silicon Valley VC model.

If your venture doesn't align with this, consider alternative funding sources like loans, revenue-based financing, grants, crowdfunding, etc.

Section 4: An Overview of FemTech in Africa

Often, we hear people say that FemTech is a huge opportunity, and they’re right.

Above we dissected the market sizes for:

1. Menstrual Health: $4bn

2. Contraception:

   1. Condoms - $330m

   2. Emergency Contraception - $10m

3. Gyn and pelvic testing:

   1. Women - $1bn

   2. Including men - even larger

4. Oncology (high side):

   1. Women - $52bn

   2. Including men - $90bn

5. Maternal Health: $41bn

A founder building a FemTech company that covers all sectors would potentially be playing in a $136bn market. This excludes the market for fertility.

We touched on where FemTech founders are active and highlighted oncology as a whitespace. More gaps exist in:

Taking it a step further, we looked at geography and where there’s a need to build.

We noticed that many founders build across verticals.

The most diversified companies have received the most financing:

• Kasha

• Susu

Or they’re not only serving a female population:

• Healthracka

Another noteworthy point is that FemTech is gaining more traction.

In closing, this piece is intended to help you think critically about how you can exploit this opportunity.

The next time we meet, we’ll introduce you to Shamim Nabuuma Kaliisa, the founder of CHIL Femtech Center. Although not tracked in Briter Bridges or Africa: The Big Deal, her company is the perfect example of one that’s unlocked immense value in this sector, starting with oncology.

Finally, we’d like to give a special shoutout to David Saunders, Mariam Adebola, and the team at Briter Bridges for providing us access to their data.

That’s all we have for you this week!

Thanks so much for making it to the end!

If there’s anything else you’d like us to explore, send us a note. We’d love to hear from you! You can find us on:

• Twitter: Marge, Ona

• LinkedIn: Marge, Ona

• Email (Reply to this email)

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