Changing the investment landscape for AT [Part of our new blog series: AT, Entrepreneurship & Finance - with GDI Hub's Assistive Tech Impact Fund]
The assistive technology sector is one that hasn’t historically received much attention or investment from angel investors, venture capitalists or impact investors. However, for any sector and support ecosystem to really grow, investment capital from these modes of funding is needed. To try to understand why investment has been low, we interviewed investment professionals who work across Africa and share their perceptions of the assistive technology sector. In this blog, we share our findings and share how we as the AT community can work together to begin attracting more funding to the sector.
When we interviewed investors, they seemed to be split between two camps; either they knew nothing about assistive technology or knew a small amount. For total newcomers, they had only recently heard of the term ‘assistive technology’:
“I didn’t even know about the term ‘assistive technology’. I found out about it through the Assistive Technology Impact Fund”
A lack of AT knowledge
Interestingly, in most investors minds, AT such as hearing aids, wheelchairs or eyeglasses were thought of as a type of healthtech. This can be somewhat of a problem, because, for some investors, healthtech is seen as too heavily regulated, slow-moving and difficult, and therefore may pass on AT opportunities that could be a good fit. The other consequence of not knowing about AT is that their lack of knowledge would put most investors off investing in AT companies. It is not surprising that investors are unwilling to fund companies in a sector they know nothing about as it introduces risks that are hard to mitigate. However, when investors are made aware of AT, they now see it everywhere and are starting to realise the opportunity.
One of the big difficulties with making investor audiences understand the AT sector is that it is hard to keep descriptions of AT simple. This matters because some AT entrepreneurs have found that the moment investors start to see AT as complex, they get put off the opportunity, tending towards simpler sectors. Therefore it’s important for AT entrepreneurs and other stakeholders in the sector to realise the importance of communicating our sector as simply and clearly as possible to newcomers, and using gradual disclosure of complexity as people become more and more familiar with the opportunity.
Investing in AT products
For investors who already know something about assistive technology, they see it as an immature sector, which isn’t an unfair assessment. Some have done small pieces of consulting in the sector, and have come across the occasional company in their investment pipeline. But many have been put off investing due to the high perceived costs of assistive technology and a mismatch with customers in LMICs ability to pay:
“I’m sure you’ve come across the smart cane, or all-terrain wheelchairs and that sort of thing. I think we just haven’t found companies that are innovating for this space and whose innovations speak to the customer’s ability to pay”
Some investors also only see opportunity in ‘common’ disabilities such as vision, hearing and mobility impairments, and associate these with ageing. Therefore some AT entrepreneurs may find that when trying to raise funding from investors with a focus on scale, the relationship between ageing, impairments and disabilities can be useful to tap into mass-market appeal.
Whether they were new to AT or were familiar with the term, investors shared a common sentiment that they would treat an investment into an AT company the same way they would any other goods or service. This truth is important for AT entrepreneurs because it means that the standard ‘fundraising’ playbook that entrepreneurs use in LMICs applies. It does also mean that investors need to be able to see evidence of returns (both social impact and financial returns). Herein lies one of the largest barriers to investment. Investors are not yet able to find convincing and robust data that shows them the market size and opportunity for AT in LMICs. Without ‘AT hero companies’ that show that AT companies can successfully scale AT sales, the lack of high-quality, easy to access market sizing data will remain a blocker to AT company investments, limiting ecosystem growth.
Once the data barrier is overcome, investors will follow the same process they do when investing in new sectors. One investor shared with us that this typically involves plenty of independent research, including verifying market size data and trends, talking to sector experts for additional perspectives, and fellow investors to find out the challenges in the sector. Investors also almost always have an advisory board, that will be engaged when making investments in new sectors.
As a stakeholder in the AT community, you can help change the investment landscape. To do this, we need to get better at raising awareness of AT and disability innovation outside of our existing networks and learn how to gradually inform people about the sector without being too technical. We shouldn’t avoid the complexity of assistive technology and social enterprise models, but if we do not learn how to make the sector easy to understand to newcomers, we unintentionally exclude people that can accelerate the progress of AT companies.
As part of informing others about the sector, we also need to openly share the challenges in AT entrepreneurship, but more importantly, share how they can be overcome. Investors also need to be able to access high-quality and specific market sizing data, that covers specific countries and types of disabilities to demonstrate the scale of the sector, whilst also supporting investor due diligence. Finally, ‘AT hero companies’ that are runaway successes should be a point of pride for the whole sector, and promoted widely to prove that entrepreneurial success in AT is possible. Ultimately, all of these actions will help to attract investment to the sector. With enough capital, we’ll kick start a positive feedback loop that creates strong companies getting AT to the people that need it most, wherever they are in the world.