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How Lifestores Is Using Their $3M Raise to Upgrade Drug Procurement in West Africa · StartUp Health NOW Podcast

• 0:00
  Starting your own pharmacies picking locations is incredibly tough.
• 0:04
  Then we had our checklist that we re-vetted, re-vetted with industry experts we-- Brian and I both have MBAs from fancy schools, you know, and I, I can guarantee you this process humbled us.
• 0:18
  [upbeat music] Welcome back to Startup Health Now, the podcast where we celebrate the entrepreneurs and innovators who are transforming health. I'm your host, Logan Plaster.
• 0:29
  My guest this week is Andrew Garza, co-founder of Life Stores Health Care. I first met Andrew and his co-founder, Brian Mesue, a few years back when they were launching their business in Lagos, Nigeria.
• 0:40
  At the time, their focus was on creating a chain of tech-enabled pharmacies, and by doing so, the idea was to create an accessible avenue for primary care in one of the fastest-growing cities in the world.
• 0:51
  Fast-forward a few years, and they've done a couple key things which we'll cover in our interview.
• 0:56
  They've layered on top of the pharmacy business a platform for drug procurement and logistics, and they've raised a three million dollar pre-series A, which will allow them to expand in exciting ways.
• 1:07
  We'll get into all that in our conversation, plus hear a bit about Andrew's journey from the East Coast of the US to the West Coast of Africa. Stick around. Andrew Garza, co-founder of Life Stores Health Care.
• 1:21
  Thanks for joining me for the show. Thanks for having me, Logan.
• 1:25
  So we're gonna get into exactly what you're building with Life Stores, uh, but I wanna get a little bit of a backstory from you because you're building Life Stores in Lagos, Nigeria, but, uh, I understand you're not from there originally.
• 1:37
  So where, where are you from? So I'm, I'm, I'm from a small town in New Jersey called Smart-Sparta, New Jersey.
• 1:44
  Um, I developed an interest in high school and college in international development, so worked on projects in Latin America, um, Eastern Europe, Central Asia, and, uh, eventually ended up starting a social enterprise in Ghana, West Africa, an educational social enterprise.
• 2:03
  Um, then at a certain point, wanted to, uh, really wanted to try and ha-continue having a big impact, um, but had the recognition that, that moving through the private sector might be a faster path there.
• 2:19
  So got my MBA, um, came back to the continent, was a consultant for a couple of years in South Africa and Nigeria, and then over time ended up starting Life Stores Health Care in Nigeria.
• 2:30
  Was there anything specific about, about Africa, about working in West Africa that, that, that drew you in? Yeah. There, there were a couple of things.
• 2:38
  I mean, I think, um, from starting the, uh, the educational venture in, in Ghana, I, I really developed an affinity for, for the culture out there, um, in, uh, from the, the needs standpoint as well.
• 2:53
  You know, saw that there was, um, certainly a, a need for higher quality education, um, that the government provided certain fragments of the education, but there were lo... It, it was patchy.
• 3:05
  There, there was a lot of need for improvement. Um, and interestingly, when my, my focus eventually shifted from education to healthcare, um, partly due to, uh, a personal event.
• 3:17
  I, I don't know if I've ever mentioned, but I'm, I'm, I have type one diabetes, um, and that, that's been a, a really interesting kind of journey for me, learning how to manage that and, uh, kind of developed empathy for other people with different types of chronic conditions and other ailments that they're trying to come to, to grips with.
• 3:37
  So, um, that kind of shifted me towards healthcare, and I, I kind of on the Nigerian side, saw that at that point that we were looking to start Life Stores Health Care, um, Nigeria happened to be the country with the highest concentration of extreme poverty per capita, you know, so re-real need.
• 3:57
  And, um, we saw that average lifespans were around fifty-five years old, um, which are the, the fourth lowest in the world.
• 4:04
  Um, so, you know, don't wanna paint a dire picture or kind of misrepresent 'cause there, there are amazing aspects of Nigeria and I, I, I happen to love it, but there are some challenges as well from the patient standpoint, um, and that's part of what, what drew me in.
• 4:22
  You said, you said we a few times there. Tell me about the team that had to come together before Life Stores Health Care could be a reality. So I ended up starting Life Stores with a couple of people.
• 4:34
  Um, my, my co-founders are Brian Mesue and Pharmacist Ken Ahotu, um, who are both Nigerian, um, and, uh, Pharmacist Ahotu is actually Brian's uncle. Um, but, uh, they, they really come from a healthcare family.
• 4:51
  Brian's dad is a neurosurgeon. His mom's a nurse, brother's a doctor, so has kind of that healthcare family.
• 4:58
  Um, and he spent a couple of years in, in business school studying how this concept from Clay Christensen of disruptive innovation could apply to healthcare in emerging markets.
• 5:10
  Um, he also worked at Bain for a couple of years. So through our friends at Bain, um, we came together after I had already left.
• 5:19
  And it just absolute, you know, one of these amazing kind of coincidences in the universe that two Bain guys, both interested in Nigeria, both with a pretty similar vision of using technology to disrupt the pharmacy space and the broader healthcare space.
• 5:37
  So it, uh, it clicked pretty quickly, and, uh, we decided to start something together. And, and when was that? How many years ago? This was back in twenty sixteen. Twenty sixteen. Okay. Take us back there.
• 5:48
  I know the company has evolved and you went through COVID. You've- Sure... raised funds. But take us back to that first year. I understand that you, you bootstrapped the business at first.
• 5:58
  What was it like, um, you know, coming into Lagos? I understand you purchased a pharmacy. Just kinda take a-- take me through those first steps of starting up Life Stores.Absolutely.
• 6:10
  I mean, I, I think we, we started with a similar big picture to where we are now, um, which is that health in, in this healthcare system, on the one hand, you see a patient who faces a number of challenges.
• 6:25
  On the other hand, you have a very fragmented space, both on the supply chain side and then on the, on the retail kind of healthcare provider side.
• 6:34
  And by very fragmented in this case I mean that, uh, if you look at on the pharmacy retail side, the two biggest players combined have about two percent market share by, by footprint, um, compared to about forty-ish percent in the US, um, and in many other markets.
• 6:52
  Um, same thing on the supply chain side, incredibly fragmented. What that means is that you don't have any player who can kind of come in and standardize the level of care.
• 7:04
  Um, so that led us to a point where we wanted to use technology at this point focused on the healthcare provision side to try and do basically a buy and build play in the pharmacy space where we would start some pharmacies from scratch.
• 7:20
  We would also acquire pharmacies, um, from owners willing to sell, um, and that fit with our criteria and basically try and create a tech-enabled Walgreens for, for Africa.
• 7:33
  Um, so, so that initially was the approach that we were taking, um, and we, we ran with that from about twenty seventeen to twenty twenty. Um, at a certain point we realized...
• 7:44
  And, and we, we bought and built up to six, um, now five after having shut down one.
• 7:50
  Um, I think the, the realization that clicked in at a certain point is it wasn't going as quickly as we wanted to have the impact that we were really aiming for. Mm.
• 7:59
  Um, and there are a few reasons that could be a whole conversation of its own. Um, but part of what we saw through that journey as well is there were all kinds of issues on the back end that we faced as a business.
• 8:14
  Um, probably our number one pain point, um, apart, our commercial pain point apart from revenue generation was on the back end with procurement.
• 8:23
  Um, so we would have our team members, our pharmacists spending something like thirty, forty percent of their time on procurement, going to this long tail of suppliers, getting all kinds of different medications, very tough to predict when they're gonna be in stock, when they're out of stock, in an environment where twenty to forty percent of the medications are fake, um, and the stats there are not that reliable, but we know a lot are fake.
• 8:51
  Um, so based on that insight, what we decided to do is test out this idea of building a marketplace, which is a fancy term in this case for a group purchasing program where you're aggregating the procurement needs of hundreds of different hospitals and pharmacies, um, and using that as the basis to go negotiate with suppliers for the very lowest price possible, um, with technology playing the role of kind of the front end or the shingle where people can come place their orders in a very easy-to-use way, easy search functionality, all that.
• 9:27
  Um, a-and then we also built the back end so our supply chain team could use that, fulfill.
• 9:33
  Um, over time, we've also layered on embedded finance features where we can use all the data from these transactions to really intelligently target credit to the healthcare providers that can absorb it so that they can serve their patients even better.
• 9:49
  Um, and we've also built in-house an ERP system, um, that's designed specifically for the needs of pharmacies and, uh, hospital dispensaries in emerging markets.
• 10:00
  So offline capabilities, notifications of short-dated products, some quite niche things for, for pharmacies, um, that we give for free to the pharmacies that are using the marketplace.
• 10:11
  So that's kind of what we've built today, and I think the broader vision is basically being the digital best friend, um, to pharmacies and hospitals on the continent, um, and eventually using this platform to serve patients directly.
• 10:29
  Just to go back a second, that's fascinating. You said that you could do a whole show on the challenges that got in the way of scaling as quickly as you wanted.
• 10:36
  Because a lot of our listeners are, uh, startups that wanna scale, can you name one of those for us? Yeah, sure. I mean, i-i-in this case with, with the pharmacy chain, there, there were two big ones.
• 10:50
  [laughs] So, uh, wi-with starting your own pharmacies, picking, um, picking locations is incredibly tough. Mm. And we had our checklist that we re-vetted, re-vetted with industry experts.
• 11:05
  We, Brian and I both have MBAs from fancy schools, you know, and I, I can guarantee you this process humbled us, [laughs] uh, like locating them.
• 11:15
  And then the other one is when we were making acquisitions, we, we found that there's not a very active market for buying and selling small businesses in Nigeria, and that meant kind of expectations around valuation for selling small businesses was not quite aligned with the market, what the market would buy it for.
• 11:35
  Um, so it was, it was kind of tough. And those, those were the main reasons why. Okay. So now we're moving w- the business has evolved.
• 11:43
  Have you maintained the pharmacies, or is this a full transition and upgrade to the new platform? So i-i-in many ways, I... So I would characterize it as a full transition.
• 11:53
  You know, the, the business is, has very much moved in that direction of B2B with its heart being the marketplace, um, but looking at all kinds of other offerings.
• 12:04
  However, we still maintain, um, the five pharmacies that we ownAs almost an, an R&D sandbox. Yeah.
• 12:12
  So for the, ah, the ERP, for example, we're-- we've tested them first in our pharmacies before rolling them out, making sure that they're actually having that value add that we theoretically think they should before kind of unleashing it to the world.
• 12:28
  Yeah. You know, it's interesting you say that.
• 12:30
  I-- it, it could be that this evolution that you're having your roots in the pharmacy is gonna be your secret sauce in the future, that you have this great footprint on the ground.
• 12:40
  You know, I, I, I think it very well could be, and, and we, we do think about it as kind of a secret weapon, um, because there are all kinds of things that one might assume, um, about pharmacies and hospitals, their purchasing behavior, preferences, that in many cases are not true.
• 12:59
  Um, and if-- just to give one example, um, one might assume that in such a co-- in such a, a constrained, budget-constrained environment, um, that price would be the number one factor, um, for pharmacies and hospitals choosing what medicines to buy.
• 13:20
  Um, it turns out that this is not true. Um, the, the number one factor, um, is actually the, the breadth of products that you're able to supply. So how big is your formulary list?
• 13:33
  And of that theoretical formulary list, how much can you actually supply? And once you get into it, the, the, the reason is actually logical.
• 13:43
  It's 'cause b-because of these budgetary constraints of the patient, it means that the average pharmacy hospital can't hire that many healthcare providers.
• 13:52
  So each of their time is very scarce and must be used in the best possible way, um, which is serving patients, not necessarily procurement.
• 14:01
  So we can save them time on procurement by offering that one-stop shop experience. Um, but we only know that because we run the pharmacies.
• 14:10
  Um, and then, uh, yeah, a number of examples as well with kind of designing functions for the ERP or marketplace. I think we have an edge on some of the other players just in terms of knowing what to build first. Yeah.
• 14:23
  And yet, if you had come into the market to build the platform first, you might not have thought to go through all that hard work of actually creating pharmacy locations. So that's really i-interesting.
• 14:34
  So part of the reason why we h-wanted to have this conversation is because you recently had awesome news about a pre-Series A fundraise. I think it was three million. Is that right? That's right. That's exactly right.
• 14:45
  So in October last year, we, we announced our pre-Series A, um, co-led by, um, CFAO, which is the largest, uh, medication importer in Africa, um, which had recently started a corporate venture capital arm called Health fifty-four.
• 15:03
  Um, so we were the first investment of Health fifty-four. Um, the round was also co-led by Aruwa, um, with participation from some of our existing investors like LionBear. Um, and that really excited by the round.
• 15:19
  I think it, one, it, it from the most obvious standpoint, it gives us the resources needed to grow, um, from a geographic standpoint within Nigeria, keep developing the product, um, expanding the leadership team a bit.
• 15:33
  So we're really excited about all that.
• 15:36
  Um, but beyond that, um, we've, we've always tended to think about fundraising, and we've had the good fortune to be able to do this, to think about it in terms of getting partners, recruiting partners, just like with StartUp Health, and, and you guys have added amazing value to us.
• 15:52
  Um, but, uh, yeah, with, with, uh, Health fifty-four, I think what we've seen so far is they have an operating entity on the ground in Nigeria, as they do in many other countries in Africa, and we've been working really closely hand in hand, both kind of on the supply side and on the sales side to look at, okay, what medications are we buying?
• 16:14
  Let's call it the nitty-gritty of what medications are we buying, pricing, credit terms, et cetera, what customers to target, but some quite exciting, innovative stuff as well, um, including some innovations on the supply chain side, like getting special kind of exclusive supplier promos that we can then offer to our customers, um, exploring business model, uh, um, kind of innovations like consignment model, where we can hold medications on consignment till we sell them.
• 16:47
  Um, so, so we're experimenting with a range of offerings that we think ultimately, um, will point in the direction of, of pharmacies and hospitals getting much better service for, for a critical area. Very interesting.
• 17:02
  You know, educate us for a minute about the, the logistics, hospital logistics, pharmacy logistics in the, uh, Nigerian context.
• 17:11
  We've got folks who will be listening to this who might work in a similar vein in the US or in the UK. Uh, who are you competing with for developing this kind of platform? Well, th-thanks for asking.
• 17:24
  I mean, I, I think it's, uh... W-w-well, there, there, there's a couple aspects that, that, uh, maybe I'd highlight.
• 17:32
  I mean, I think in, in the primary care market in Nigeria, one of the first things to highlight is that for the average patient, they get their care from pharmacies as opposed to clinics or hospitals, um, unless kind of they're really on the lower income side, in which case they might get their care from a government clinic.
• 17:51
  So, so the, the mix of care between hospitals and pharmacies is a little bit different, with pharmacies often kind of the first point of call.
• 18:00
  Um, there's also kind of a large informal sector as there is in kind of in many other industries in Nigeria, where you have a hundred fifty to two hundred thousandChemists or what are called PPMVs in, in the Nigerian context, um, which are e-effectively unlicensed pharmacies that are only allowed to sell over-the-counter goods.
• 18:23
  So it's, it's a much different healthcare provider landscape, and then when you go back a level to the supply chain side of it, um, you have this incredibly, um, fragmented mix of-- that con-consists of a few large importers.
• 18:41
  Well, first I'd say kind of seventy percent imported medications, thirty percent locally produced.
• 18:48
  Of those imported medications, it's really this long tail of suppliers, some legal, some illegal, that kind of bring stuff in in a, a shady way through the ports, um, in an illicit way.
• 19:01
  Um, so there's-- It's a whole patchwork. About ninety percent of the market would, uh, on the supply chain side would be traditional.
• 19:11
  Um, about ten percent is composed of these modern kind of other players in our space, digital distribution.
• 19:20
  Um, there have been, um, just under ten kind of big players, kind of VC-backed in Nigeria over the past five years in our space, and we're excited to see kind of a thousand flowers blooming, um, lots of innovation, which I think over time is gonna serve healthcare providers well.
• 19:40
  Um, and I think one of the, the really interesting things that we are starting to see and are gonna see much more of over the next couple of years is we're moving from what we think of as almost a phase one for this space to a phase two, where we're gonna see kind of more and more advanced technology coming to bear on some of these procurement and other challenges we're addressing for healthcare providers.
• 20:06
  We think we're also gonna start to see more holistic solutions, where it's not necessarily kind of procurement here, EMR here, financing here, clinical here, but rather a lot of these solutions coming together in one place, and we're trying to play a role in kind of helping with that kind of consolidation or holistic solution, um, movement.
• 20:30
  Um, and then I think financing is gonna p-play more and more of a role, and I think we see this in the U.S., we see this in other countries, um, that healthcare supply chain is an incredible vehicle to offer embedded financing, 'cause you already have all the, the data that you'd need to make kind of great financing decisions, so you can use that to do that.
• 20:54
  Um, so, so this is a little bit of what we're seeing. Very nice.
• 20:58
  If you could go back to twenty seventeen and mentor yourself at the beginning of this journey, what are a couple pieces of advice you, you might, you might give? Huh. Um, well, I, I mean, I think may- a, a couple things.
• 21:15
  One, each time we have hired kind of a new level of senior person to help us,
• 21:24
  I, I have been kind of scared out of my mind of, like, kind of running out of money or moving in that direction, but it has often worked out really well, you know?
• 21:34
  And we've only done it when we felt the pitch, so we've never hired in kind of a, you know, let the money fly type way. But, but that's been one lesson.
• 21:43
  Like, you, you really do need to bring the right people on, and as soon as you can afford, you should try and do that. Um- And they help you, they help you level up. They help you level up, exactly.
• 21:52
  You know, there's very much a kind of chi-chicken and the egg dynamic, where you can get to that next level faster, as you say, with the right person. Um- Any tr- any tricks you've learned about hiring that, that person?
• 22:05
  Yeah. I, I-- definitely. Definitely. Um, and, you know, i-if you invite me back, this could be a whole podcast of its own.
• 22:12
  But a, a, a couple quick ones I would say is kind of, one, that combination of some level of corporate experience but some startup as well.
• 22:21
  The person really needs to be able to roll up the sleeves and get stuff done in addition to, you know, producing slides or plans or what have you.
• 22:29
  Um, then I think the other one is perhaps, um, that they need to be really smart.
• 22:35
  Um, and I-- in some ways that seems like an obvious one, but, um, in cases where we have gone in that direction, we've been really happy, um, when you pair that, you know, high degree of intelligence with, you know, being really hardworking, um, sharing our values.
• 22:51
  Um, and then I think lastly, just kind of that fit for, for mission and values, since in the end, in the early stages, someone else is gonna be able to pay more for that incredible person.
• 23:04
  Um, but if you can find people where this is the journey that they wanna be going on anyway and you're just the platform to enable that, you know, I, I think all of you can have a great time, you can wake up every day working on a mission you wanna work on, and then, of course, the monetary bit works out for everybody over time as well.
• 23:24
  Got it. Okay. La-last question for you. What are you most excited about for the coming year?
• 23:30
  I think what, what I'm most excited about is to take kind of this offering that we have, which has already been getting a lot of traction, kind of twenty percent growth these last three months, and looking to continue these next couple months, so a lot of traction, just trying to keep scaling this up, um, so that we can talk to more and more kind of pharmacists and doctor clients who tell us, "Wow, you know, we're saving a lot more time.
• 24:00
  You know, we're bringing the time spent on procurement from forty percent closer to twenty percent, freeing up a lot more time to see patients.
• 24:08
  You know, you're helping us cut costs by ten to twenty percent, so we can use that money on other things and, you know, make this business more financially sustainable in a tough time."
• 24:19
  So I'm, I'm, I'm just excited to keep, um, increasing that impact. That's awesome.
• 24:23
  Andrew, it has been really exciting to watch your, your journey from the, near the beginning when you joined StartUp Health and see the evolution of the product and how your origins really feed into what you're doing now and make it into this, um, this sort of super-powered thing, so, uh, and I love that you were able to, uh, to end that rai- fund that raise this last fall and take it to the next level.
• 24:49
  So, uh, thanks for taking the time with me today, Andrew. Thanks so much, Logan. Gra-grateful for StartUp Health's support from the beginning and, and your, uh, your advice all along the way. All right.
• 25:00
  Keep up the great work, and we'll check back in soon. All right. Thanks, Logan. Take care. [upbeat music] Thanks for listening to StartUp Health NOW. We'll be back again with another episode next week.
• 25:14
  [upbeat music]