In 2022, Ugandan startups raised $70 million according to Africa: The Big Deal data. One of the standout deals that year was raised by Rocket Health, a telemedicine startup that secured $5 million for its Series A funding round to accelerate its expansion across East Africa. This funding round was led by Creadev who were joined by existing investors LoftyInc Capital Management and Grenfell Holdings.
The round was greeted with optimism in the Ugandan startup ecosystem, partly because the entire Rocket Health founding team are Ugandans. And internally, it was the culmination of almost a decade of building and a six months sprint, where the CEO and Co-founder, Davis Musinguzi, had paused his day-to-day running of the startup to concentrate on getting the funding over the line. But Davis’ story is much bigger than just the $5M raise, it goes way back.
Davis attended the elite St.Mary’s College Kisubi (SMACK) for his O’Level before swapping it for another traditional school Kings’ College Budo for his A-Level. “Attending these schools was a very transformative experience for me”, Davis tells me. “You get to associate with different people from diverse backgrounds. The experience was not just about academics, but also making friends and learning various values and principles.” Davis, having pursued sciences at Budo, decided to pursue medicine at Makerere University graduating in 2011. By the time he was done with Medical school, he was already itching to disrupt the medical field.
“By the time I was getting done, I was focused on how someone would make a difference in the healthcare system. I was very fortunate to work at UNICEF, which was trying to integrate digital technologies into the public healthcare system in collaboration with the Ministry of Health, and with that experience, I got to tour and see much of the country’s healthcare infrastructure, systems and staffing. It helped me to understand the bottlenecks and opportunities of infusing technology into the public healthcare system.”
This experience helped Davis to consolidate some ideas. Also, the rise of mobile phones made them an obvious gateway due to their impact on other fields like financial services and e-commerce. To put his ideas into action, he turned to familiar faces. “We sifted through a bunch of ideas and decided to start a call centre with some friends that I had met in high school and medical school. I trusted that they had the smarts and the grind to build this with me.”
Davis and his colleagues were just winging it. At that time, there were no viable examples of startups that had done something similar in telemedicine in Africa. The only examples they could find were in the advanced markets, which have different dynamics. So they focused on doing their own research. They put together their savings and got started with an MVP. “We set up a few workstations and equipped them. We wanted to figure out if people would use remote teleconsulting as a means of accessing timely healthcare, and if we could solve their issues over the phone or at least, direct them to the right level of care.”
Davis and his cofounders started this as a free service. They wanted to understand who would call, how many times they would call, when and what they were going to call about. “We started with medical doctors because our early research had told us that they were the most trusted medical cadres. Within the first six months, about 7,000 people were using the service for all kinds of medical issues.”
With customer validation intact, the next step was figuring out a way to make money. “We just went by the name The Medical Concierge Group and for about the first five years (2013-2018), we were making money from contracts we secured with development agencies that wanted to use telemedicine to reach vulnerable populations or people in distant areas where medical services were scarce. We used to help these agencies to achieve their goals across different programs like HIV/Aids or maternal health. The other early adopters were also medical research institutions that wanted to embed telemedicine in their patient follow-up and data collection in their clinical research studies.”
Over time, Davis and co realized that they had to figure out more commercial B2C sources of revenue in order to attract venture capital funding. This is when their data came in handy. “We monitored how many people needed pharmacy prescriptions or lab testing that we were referring to third parties with whom we didn’t have a commercial relationship. We realized that the demand was high. People liked the teleconsulting services, so we went out and looked for resources that would enable us to build these units that would be commercially valuable. We managed to raise an angel round to set up a pharmacy and a lab which was the spring to the startup that we know today. We rebranded to Rocket Health in 2019”.
Apart from just teleconsulting, Rocket Health offers more. When a patient talks to a doctor, the doctor can dispatch someone to their location to pick up their lab samples, run the test and email the results. The doctor is also able to call the patient and explain the results, and if one needs a prescription, these medicines can be ordered and delivered from Rocket Health’s pharmacy to the patient’s location. If a patient needs to be seen in person, they can visit the physical Rocket Health Clinic.
Pivoting to this model put Rocket Health in a convenient position when Covid-19 and the subsequent lockdowns hit in March 2020. “We were very well equipped in terms of model and infrastructure to serve customers during those difficult times with customers preferring to be served at home. As a result, we grew exponentially, and eventually, that brought another demand for capital. We had a massive demand for inventory, staff and logistics.” Davis hit the road.
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Raising $5 million Series A.
To get the funding over the line, Davis took a break from the day-to-day running of Rocket Health, and for six months concentrated on raising capital. In his journey of raising, he learnt a few tricks. “When we started out, we weren’t really building a startup. Starting a startup that you want to be VC backed, a founder should make sure they identify a problem to solve, and this problem should be faced by millions of people. And also, the solution has to be scalable. Figuring this out before you look for funding is important because not every business fits the bill of a VC-backable business.”
For Rocket Health, Davis and team moved their model from simply serving development agencies and research institutions on a contract basis, to building a product for which consumers were directly going to pay. Then they had to make sure they structured their startup properly by doing things like doing financial audits, proper HR and documentation, filing for tax returns and properly structuring their legalities. They then zeroed down on 100 VCs that they felt were a fit for their startup and started approaching them.
From the long prospective list of investors, they sent a lot of emails and calls, and in some cases, visited the investors personally. With time, they trimmed down the list to the investors that had shown strong interest. With these investors, they entered into negotiations over intricacies like valuations, got a term sheet and the legal documents were signed and then the money is wired to the bank account. They announced this funding round in March 2022.
“Ultimately, raising funding comes down to a founder’s pitching skills and how good their business is. It is also important to raise funding on the back of traction, rather than just a need for cash. Your need for cash has to be driven by demand that has become overwhelming, and now you need resources to capture that demand.”
Rocket Health is currently a true giant of the Ugandan startup ecosystem, and in Africa, one of the biggest telemedicine startups on the continent. They have a patient database of about 150,000 patients and an average patient uses the platform 2-3 times. “But if we are including the number of people that we have served even through the contracts with development agencies, then that number swells to up to millions of interactions.”
Having been a startup founder for a decade, Davis looks back. “Companies are built by people, and having quality people is very important. A founder should also learn how startups work because it will guide most of the decisions that they make. But it is really difficult to build a startup. There will be no work and life balance for a long time, but hopefully, you can compensate with success. And in case you don’t, you can make it up with the lessons, skills and the network that you build along the way.”
Davis hopes to grow Rocket Health to serve the whole of Africa because the telemedicine challenges are continental. “If you know Rocket Health for its services in one country, you should be able to count on it to do the same in another country.” At a personal level, Davis hopes to also give back to the ecosystem long-term. “I would like to see myself as an advisor and an investor in founders walking this same journey because startups are going to create wealth and employment.”
This article is published in partnership with Orion. Orion is a transformative community propelling Ugandan trailblazers onto the global stage.