Hamza Asumah, MD, MBA, MPH
The Donor Trap
With poor funding and a poor state of health systems hindering attainment of sustainable development goals, billions of donor funds are perennially pumped to improve African healthcare delivery and health system performance. That sounds like opportunity. For early-stage healthtech, it often becomes a trap.
Here’s the pattern:
- Year 1: Win $200K grant from Gates Foundation/USAID/Wellcome Trust to pilot your solution
- Year 2: Expand to 3 countries with $500K multi-year grant
- Year 3: Raise $1M from combination of grants and “catalytic capital”
- Year 4: Your largest donor shifts priorities. Funding evaporates. You scramble.
You’ve just spent 4 years building a company optimized for donor deliverables rather than customer value. Many digital health solutions start with grant funding from donors or foundations and are tested as software-as-service products for governments or private providers, but many pilots never move beyond grant cycles due to unclear business models, procurement bottlenecks, or lack of integration with national digital health architectures.
Why Donors Fund (And Why That Creates Dependency)
Donors aren’t investors. Their incentives are different:
- Investors want returns. Donors want impact.
- Investors want scale. Donors want proof of concept.
- Investors want sustainable business models. Donors want priority disease areas covered.
Donor-driven agendas often prioritize vertical disease-specific programmes over holistic health system strengthening, creating siloed interventions that strain local capacities, with conditional aid structures and short-term funding cycles undermining long-term planning.
The dependency trap: You optimize your product for what donors fund (HIV testing, TB screening, maternal health) rather than what customers will pay for. After 2-3 grant cycles, your product is shaped by donor priorities, not market demand.
The Hidden Costs of Grant Funding
1. Deliverables That Don’t Build Business Value
Grants require quarterly reports, impact assessments, and demonstration of “lives touched.” None of this builds revenue, improves unit economics, or creates sustainable go-to-market motion.
One founder’s experience: “We spent 40% of our time writing reports for donors. The reports looked great. Our business model didn’t exist.”
2. Geographic Distortion
CHW programs in Ethiopia and Uganda have scaled significantly with grant and donor financing, but sustaining innovation depends on transitioning from project-based to line-item budget financing.
Donors often fund rural areas or conflict zones where commercial viability is lowest. You build for these markets, then struggle to find paying customers elsewhere.
3. IP and Ownership Constraints
Many grants require open-sourcing code, making results publicly available, or granting donors “field of use” rights. This can limit your ability to build proprietary moats or license technology commercially.
Read your grant agreements carefully. Some donors claim rights to inventions, data, or discoveries made during the grant period.
Structuring Grants to Protect Your Business
Strategy 1: Grants for Non-Core R&D
Use donor funding for pilot studies, clinical validation, and market research—things that de-risk your business but aren’t your core product.
Example: mPharma used grant funding for clinical trial partnerships and health outcomes research, but built their pharmacy network and inventory management business on commercial terms.
Strategy 2: Co-Investment Requirements
The New Compact for health financing reduces funding volatility by ensuring core services are domestically financed while aid expands services at the margin, preventing domestic finance displacement.
Structure grants where donor funds match commercial revenue 1:1 or 2:1. This forces you to maintain commercial discipline.
Strategy 3: Milestone-Based with Off-Ramps
Negotiate grants with clear milestones tied to commercial traction. If you hit revenue targets, grant funding decreases. If you don’t, it continues.
This prevents the perverse incentive where commercial success means losing funding.
Negotiating Deliverables That Don’t Kill Your Business
What donors typically want:
- Pilots in multiple sites (often rural/difficult)
- Extensive M&E and impact reports
- Rapid deployment timelines
- “Free” services to beneficiaries
- Data sharing and public dissemination
What you should push back on:
1. Geographic requirements that ignore commercial logic: If donor insists on rural deployment but your viable market is urban, negotiate a mixed geography or separate funding streams.
2. Free service requirements that prevent revenue learning: Patients paying even $0.50 per transaction tells you more about willingness-to-pay than 10,000 free users. Negotiate cost-sharing pilots.
3. Reporting that duplicates what you already track: Align donor reporting requirements with your internal KPIs. Don’t build parallel M&E systems.
4. Open-source requirements that eliminate IP: If donor wants open-source, negotiate for delayed release (e.g., open source after 2 years) or open-source non-core components while protecting proprietary algorithms.
5. Deliverable timelines that force technical debt: Rushing to meet grant deadlines often means cutting corners on scalable architecture. Build realistic timelines into proposals.
Case Studies: Grant Dependency Done Right (and Wrong)
Done Wrong: The Pilot-to-Nowhere Pattern
A telemedicine startup won grants from three major donors to deploy in refugee camps, rural clinics, and urban slums. Each deployment used different workflows because different donors had different requirements. After 3 years and $2M in grants, they had:
- Three incompatible product versions
- Zero revenue
- Expansion dependent on winning more grants
- No clear path to commercial sustainability
Done Right: Grants as Market Development
Zipline used donor/government partnerships to prove drone delivery economics in Rwanda, then commercialized the model in Ghana and Nigeria. Zipline’s drone delivery service has transformed healthcare in Rwanda, ensuring timely access to essential medicines and vaccines, having delivered over 10 million health products and 15 million vaccine doses.
The grants funded infrastructure and proof-of-concept. The commercial business was always the goal.
Protecting IP While Taking Donor Money
Key negotiation points:
1. Scope IP protection to deliverables: Donor has rights to what you build under the grant. You retain rights to everything else.
2. Background IP vs. Foreground IP: Define “background IP” (what you owned before grant) and “foreground IP” (created during grant). Donors often want field-of-use licenses on foreground IP, which is negotiable.
3. Commercial licensing rights: Even if donors require open-source publication, negotiate commercial licensing rights for enterprise deployments.
4. Data ownership: Be explicit about who owns patient data, research data, and derived insights. Don’t let vague language create future disputes.
Transitioning Away from Grant Dependency
To derive maximum benefits from significant investment in program development and promote long-term program sustainability, detailed understanding of facilitators and barriers of donor-funded projects is important even long after cessation of funding from primary donors.
Phase 1: Separate Grant-Funded and Commercial Operations
Set up different teams, different P&Ls, different roadmaps. The grant team delivers on donor requirements. The commercial team builds sustainable business.
Phase 2: Develop Non-Grant Revenue Streams
Stronger domestic resource mobilization, including tax reform and earmarked health revenues, reduces over-dependence on external aid. In startup terms: Build revenue from government contracts, private payers, or direct customers.
Target: 50% non-grant revenue by year 3.
Phase 3: Sunset Grant Funding
The financing model should prevent domestic finance displacement and improve transition planning by creating natural exit strategies for donors while empowering governments to set their own priorities.
Don’t renew grants if commercial traction is happening. Use grant runoff period to smooth transition.
When to Walk Away from Grant Money
Red flags that grant will damage your business:
- Geographic requirements that prevent ever finding paying customers
- IP provisions that eliminate any proprietary advantage
- Deliverables that force you to build unmarketable features
- Reporting requirements that consume >20% of team time
- Donor priorities that shift dramatically mid-grant period
The gut check: If this grant succeeds perfectly, does it increase or decrease the probability of commercial sustainability?
If decrease, walk away.
Alternative Funding Structures
1. Catalytic first-loss capital: Donor provides “first-loss” guarantee that de-risks commercial lenders. You raise debt against future revenues with donor covering losses if you default.
2. Results-based financing: Donor pays per outcome (vaccinations delivered, patients treated) at rates that approximate commercial sustainability.
3. Social impact bonds: Donors fund upfront, you deliver outcomes, government repays based on results. You’re building a government contracting business, not a grant-dependent one.
4. Prize challenges and milestone awards: Less restrictive than traditional grants, focused on specific technical achievements rather than ongoing operations.
What Success Looks Like
You’ve mastered grant dependency when:
- Grant funding represents <30% of operating budget
- Deliverables align with product roadmap, not the other way around
- You can walk away from grants that don’t support commercial goals
- Commercial customers provide majority of feedback shaping product direction
- Team spends <10% time on donor reporting
The i3 Africa programme has successfully connected African health tech startups with funding and strategic partnerships, providing 60 promising startups with $50K grants each while linking them to numerous local and international customers, catalyzing over 70 partnerships and creating more than 700 jobs.
That’s the model: grants that accelerate commercial traction, not replace it.
The Philosophical Question
Are you building a business or running a donor-funded NGO?
Both are valid. Both create value. But they require different skills, different structures, and different definitions of success.
Making global health partnerships more actionable and respectful is crucial for addressing Africa’s public health challenges, with partnerships that are aligned with African priorities and enable sustainable solutions rather than perpetuating dependency.
The choice is yours. Just make it consciously.
If you’re building a business, treat grants like you treat any other capital: take it when it accelerates commercial goals, with clear terms that protect your ability to build sustainable value.
When grants become the goal instead of the means, you’ve lost the plot.
Dr. Hamza Asumah 
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