Leeat Gellis – Director of Social Finance, Grand Challenges Canada
The Transform Health Fund aims to bolster healthcare systems across Africa by scaling proven and innovative healthcare models. Recently, AfricInvest and The Health Finance Coalition announced the final close, successfully raising $111 million through a mix of commercial, public, and private donor investments.
In this Q&A, we speak with Leeat Gellis, Director of Social Finance at Grand Challenges Canada, who oversees the organization’s impact investing and blended finance strategy, including GCC’s $5M USD investment in the Transform Health Fund.
What is the Transform Health Fund? Why does it exist?
The Transform Health Fund is an innovative blended finance fund that seeks to scale proven and innovative healthcare companies in Africa that improve access, affordability, resilience and quality of healthcare on the continent. It invests in locally-led companies delivering innovative primary healthcare models, digitally enabled healthcare solutions, and health supply chain transformation.
The fund was established as a joint venture between AfricInvest, an African private equity firm with a 30-year track record, and the Health Finance Coalition, a partnership of organizations focused on achieving universal healthcare coverage in Africa.
AfricInvest and the Health Finance Coalition recently announced the final close of the fund, having raised $111M USD from investors and surpassing their initial $100M USD target. This type of fund is needed because there is still a significant financing gap for social enterprises, particularly for companies in the healthcare space that are trying to reach underserved or unserved communities.
How does the Fund work?
Transform Health Fund is structured with a blended capital stack, which means that it has two layers of investment: a layer for catalytic shareholders who are able and willing to take on more risk and wait longer for returns, and a commercial layer, for investors that require risk-adjusted rates of return.
With funding from Global Affairs Canada, Grand Challenges Canada is uniquely positioned to invest in the catalytic layer given that our investment approach prioritizes health outcomes over financial returns. GCC was one of only five catalytic investors in the first close, making our early investment essential to mobilize private investment dollars.
What are GCC’s goals with this kind of investment?
One of our main goals with this kind of investment is to have a market shaping impact in the global health investment ecosystem. If Transform Health Fund can demonstrate healthy returns for investors and also deliver transformative impact for underserved communities, other fund managers will be inspired to invest in these kinds of companies as well. This potential ripple effect is vital to mobilize more international and domestic capital towards global health innovations and achieve the impact that we are seeking.
We have a precedent for this. Over 12 years ago, GCC invested in the Global Health Investment Fund (GHIF). The returns we’ve seen from this investment have been threefold: GHIF delivered impressive financial returns as well as transformative impact, with its portfolio companies estimated to be reaching over 250M people in low- and middle-income countries. As an example, Eubiologics, is the only global manufacturer of oral cholera vaccine, achieving WHO prequalification and has delivered more than 130M doses of its vaccine in more than 25 low- and middle-income countries. Beyond the financial returns and outsized health impact, GHIF’s performance has also spurred the creation of other similar types of funds in global health, which they estimate at more than $1 billion additional capital raised for global health impact investments. This is the type of ecosystem effects we are really excited about.
Cross Border Impact Ventures, is another great example. Canadian and women-led, it invests in medical technology and digital solutions to improve women’s and children’s health in low- and middle-income countries. GCC anticipates that its success should inspire others to invest in this underfunded space, providing a great mechanism to scale health innovations in the areas that we care about.
Now that the final close has happened, what happens next?
Transform Health Fund has already made three investments and has a strong pipeline of opportunities at various stages of due diligence.
We sit on the Advisory Committee for the fund. We also support the fund through our $500K CAD ecosystem catalyst grant awarded to Health Finance Coalition to develop a deal construction platform. The platform provides tailored support to select organizations as potential pipeline for the Transform Health Fund and other investors. With this grant, we see tremendous opportunity for the deal construction platform to serve a much-needed matchmaking role between social entrepreneurs and impact investors.
How does this fit into your overall investment strategy?
As part of our investment strategy, GCC explicitly prioritizes health impact for underserved communities over financial return. With support from the Government of Canada and other funders, we have been able to complement our investments in social enterprises that are transitioning to scale, with investments in impact venture funds that seek to scale these types of high-impact innovations.
GCC’s USD $5M investment in Transform Health Fund aligns directly with our ethos and strategy. The fund invests in locally-led African innovations and has a rigorous approach to screening, measuring, and reporting on impact. It aims to scale proven, innovative healthcare models with a goal of bolstering local health systems. Its investment process, governance and inclusion of impact incentive bonuses have all been designed thoughtfully to maximize Transform Health Fund’s potential impact.
Lastly, as mentioned earlier, one of GCC’s ultimate motivations is to mobilize other funders. This is true for the Transform Health Fund, and it’s embedded in our policies around matched funding for the Transition to Scale portfolio. By providing catalytic capital (concessionary, risk-tolerant, patient, long term), we work to crowd in other investors that may otherwise not be able to participate and thus broaden the pool of funds supporting impactful global health innovations.
