Saving the lives of the rich and the urban poor through cross-subsidisation
Could you introduce yourself and tell us a bit about LifeBank’s business model?
My Name is Temie Giwa-Tubosun. I am the founder and CEO of LifeBank. While many elements of our business model have stayed constant, we had to get the pricing right. The pricing in the beginning was way too low and we knew that was not sustainable. So, we used customer profiles to develop different types of customer segmentation—the premium services and then the no frills services. This allowed us to start charging the right amount.
How is LifeBank funded today and how has this evolved from when your organization was first founded?
LifeBank is primarily funded by venture capital and its own revenue. Our primary goal this year is to break even so that our revenue can finance our operations and then we can only raise financing for growth.
Increasingly, we are looking into grant funding from Development Finance Institutions (DFIs) because we can build a really small business on the 30% of Nigerians who have the capacity to afford our services, and we think that that is not the right way to build an inclusive business. To build an inclusive business, you need to serve both the premium customers and those at the bottom of the pyramid and to do that, you need to figure out a payment mechanism for those with absolutely no income.
What advise do you have for businesses that are trying to figure out what kind of finance would be right for them, whether that's grant finance or venture capital?
I think it's important to be creative. For me, I am pre-disposed to actually running your business with your own revenue. At the very least, the core of your business. That is the best way, first, to guarantee that you are delivering value to your customers. Second, to make sure that you are sustainable, which is important. We are talking about the Sustainable Development Goals.
Even though you have a public sector/NGO background yourself, you never applied for donor money with LifeBank. Why?
I wanted to build a lean and capital-efficient business and prove that our model works without donor money. For longevity, sustainability, and clear value, you want to make sure that you have built a business that can stand on its own.
And then what you can do is use grants or donor money to expand, to serve a different population, like a bottom of the pyramid population, and to take risks—like a new business model or innovation— with the businesses. Donor money can be useful for research and innovation. In the beginning, I didn't want donor money, but now we're getting to the stage where it would be quite useful for the next level of our growth.
Finance possibilities for the customer are very important. Can you tell us a little bit more about that and how you managed to find the right price?
I think we managed to find the right price because we were flexible, and we listen to our customers. That was key, key, key. In the beginning, we made assumptions without listening to our customers, without talking to them. These were wrong. So, we recreated that process. We went to talk to our customers, to figure out their biggest pain points. Hospitals that are serving the bottom of the pyramid in urban areas, they had different requirements than premium hospitals. Rural hospitals will have different requirements and different pain points, too.
I am a big believer in sliding scales and no frills for this part of the population and then premium services so that the premium customers can subsidise the non-premium customers. I am a big believer in the very rich helping to subsidise the very poor. It's the same sort of idea that powers universal health financing and a single payer system. I have a background in health economics, so I really love that idea, and I knew I had to build it into our pricing model.
What skills are necessary for entrepreneurs and for founders to successfully raise venture capital and other routes to obtain capital?
The biggest skill is storytelling. Investors want to be inspired. Of course, you need to be really good at defending your financial model. You need to be thorough in terms of your pricing model and your cashflow model. But the first requirement is to tell a compelling story about how your business is going to change the world and how investors can tap into that story. That's really the key.
Having differential pricing and using one segment to cross-subsidise the other sounds like you are facing two masters, one that is the cash cow and the other that is your mission segment. How do you wrestle with those two competing goals emotionally, mentally, and business-management-wise?
I started LifeBank because I wanted to rescue people. In my vision, I didn’t have an upper-class woman in my head. For me, working with the bottom of the pyramid is why I got into this work.
There was a mismatch between the daily job that we did and our mission. I had to think about sales tactics and all of these things that you don't necessarily think about when you are mission-driven. Not only am I mission-driven, but we were hiring for the mission, too. Then, there would be moments where you hire someone because they want to change the world and their daily job is trying to convince premium customers to use our services.
We adopted an “Objectives and Key Results” model that really helped us because our objectives and key results included our overarching mission and tied our daily work to our bigger vision.
And by going through that process, we realised we have to make money before we can save the world. Before we can focus solely on our mission, we need to pay our bills, right? That's the way I have been able to make sense of it in my head and then also communicate it to my teammates who were feeling a little bit of a disconnect between our mission and the actual daily job that they did. And I think that's been helpful.
But is it painful? Focusing on the rich to pay for the poor, starting with the rich and saying tomorrow-
We serve the poor right now. We have built a platform where we are doing the exact same thing for two different populations. The rich are getting blood and oxygen that is a little bit more expensive and comes with premium services, so that it can pay for the blood for the poor.
We have saved about 4,000 lives. Now, of those 4,000 lives, it's probably about 1,000 rich and 3,000 poor.
So, you're not waiting to serve your mission, you're already doing it. You need one rich customer to serve three poor customers. The Robinhood model of pricing.
We deliver more services to the rich, like additional security and quality assurance. So, there is a justification for charging a little bit more.
Externally, people look at our business and think that there is a contradiction because when some people think about inclusive business and sustainable development goals, they think rural. We have lost out on at least four grants—big grants—because we were told, "You're only serving the rich. What about the rural areas?"
And I have to make a case that there are tons and tons of people who live in urban areas and are poor and need to be served. I think it is absolutely essential that the world pays attention to the plight of the urban poor.
What would be your message to the development community or for the people who are giving out these donor grants?
First, profit is not a bad word. Profit is good. When you have a mission-driven business that is profitable, that's a good thing.
Second, there are lots of poor people living in cities. And apparently about 60% of the world's population live in cities right now and in the next 10 to 20 years about 70% of people will live in urban areas. That's significant and a lot of them will be working poor.
Third, businesses that are profitable and that are serving the bottom of the pyramid should consistently think about how to design a model where you're serving three masters. The rich, the urban poor, and the rural poor. A mix of cross-subsidisation and grant financing can allow you to do that.
Thank you, Temie!