Memorandum – Watsi Update

TO: University Impact’s Investment Committee FROM: Ritvik Bodducherla DATE: July 9, 2020 The following document is to be used as an appendage to the original memorandum presented Wednesday June 17, 2020 during the investment committee meeting (Review memo here).

EXECUTIVE SUMMARY: UI SHOULD COMMIT A $150K DONATION

While the investment committee initially doubted whether Watsi is the optimal solution to the lack of healthcare access in the developing world, Watsi has shown that it is an effective solution with defined outcomes. Taking into consideration the investment committee suggestions, and after speaking with the new Executive Director, Mackinnon, we recommend the following investment:

- Provide $60,000 to support patient treatment in East Africa through a matching donation program with goals to re-engage lapsed monthly donors, increase monthly donations from current donors, and acquire new monthly donors.

- Provide $90,000 to support innovation and growth of the platform to scale by driving increased donation revenue. Watsi will use funding to hire a Senior Engineer ($45k) and a Marketing Consultant ($45k). The strategy will produce 10% more growth in year 1 ($120k in additional donations) and more afterwards.

Critical concerns and questions posed by the investment committee on June 17th:

1) Details on Watsi’s impact measurement strategies outside of secondary sources and measured outcomes to date. a) Has Watsi measured positive outcomes at the patient-level? Has Watsi measured positive outcomes at the hospital level? b) Does Watsi care about impact measurement and have plans to pursue it?

UI recommends a grant because Watsi has shown that it cares deeply about impact and currently measures outcomes qualitatively. Watsi tracks outcomes at the patient and family level through qualitative surveying. To date, they have surveyed 20,241 patients. Questions include: • Are you still experiencing any of the symptoms you had before? • Do you have any new symptoms? • Are there things you can do now that you could not do before surgery? • How will the treatment you received help you and your family? • How will your life be different after treatment? • What are your plans for the future?

Page 1 of 6 July 2020

These surveys generally show that patients can resume or start income generating activities. After discussion with Mackinnon, Watsi has a four-step plan to make this qualitative result more quantitative. These surveys also provide outcomes at a broader community level. Watsi’s support of care centers improves financial stability and brings greater access to healthcare for the community.

2) Is a matching donation program the best of use of UI funding to create a step- change and scale Watsi’s impact long-term? a) Is a matching grant the best use of UI funding? Would UI money just treat more patients short-term, or is their lasting benefit to the company? b) Is there a better use of UI funding?

Watsi’s carefully crafted growth strategies make our team confident in the organization’s future success. Watsi is working on a study with Duke and the University of Illinois to determine the most effective marketing strategies. Preliminary results show that their matching programs generate the most donations per dollar than other methods. To help Watsi achieve growth and regain momentum, UI should sponsor the matching program and fund the employees – the software engineer and marketing consultant – to bring increased growth and more dollars to people in need of surgeries.

3) What is the addressable market of crowdfunded donations? a) Is there room to grow or is the market saturated? b) What is the acquisition cost of new donors and is there a plan for new donor acquisition?

UI should invest in Watsi’s growth because the addressable market for crowdfunded donations is much larger than the share Watsi currently captures. While GoFundMe raised $650 M across 2017 and 2018 towards healthcare initiatives around the world, Watsi only raised $4 M. The acquisition cost of new donors for Watsi is also low ($50- $100/donor), while donor lifetime value is relatively high ($1,200 per donor).

4) Are donors really driven by diversified geography of impact? How do they know?

UI should invest in Watsi because a diversified geography of impact drives further growth and revenue. As shown through case studies by Kiva, a Skoll Foundation awardee and key advisor to Watsi, diversity in geography of impact is crucial to gaining more donation revenue. Some donate only to certain populations or geographic regions. In addition, Watsi is not planning to spend on much diversification moving forward—they only hope to reach add a refugee population and a site in the Americas to their portfolio.

Page 2 of 6

APPENDIX

After speaking with the executive director and Watsi’s impact team, here are our conclusions and answers to your concerns:

Impact Measurement Because of the qualitative data and anecdotal evidence Watsi has collected to date, it is clear that Watsi cares about ensuring surgeries do contribute to meaningful outcomes in patients’ lives and hospital’s stability. They also have actionable plans to measure impact more quantitatively. The new executive director has lots of experience in the nonprofit space. As a global health and humanitarian professional, her experience has spanned the UN, international and local NGOs, and academic sectors. For nearly ten years prior to joining Watsi, she helped oversee an international program development for a surgical NGO. She understands the importance of tracking outcomes, and the organization is hoping for coaching in designing better impact measurement strategies.

Specific Future Plans to Measure Impact: Action Items

1. Develop and pilot additional patient follow-up reporting and ultimately scale this across all programs Their focus will likely be patient-centered outcome reporting that is captured between 2 weeks and 1 year after the surgery. 2. Carry out periodic impact assessments (focus will likely be a sampling of patients who accessed care between 2-5 years ago). 3. Strengthen annual medical partner surveys to include additional impact-related questions that are tracked on an annual basis. 4. Leverage and learn from experts and studies that are related to the type of global health/surgery programs they are leading.

Current Measured Impact: Patient and Family Impact

Watsi currently tracks surgical outcome data for 100% of Watsi’s patients to ensure that medical partners deliver safe, high-quality surgeries to all patients. Watsi sends a post- operative update on all patients to donors. A lot of the outcomes of the surgery so far have been traced through stories collected on patients which assess why the patient truly needs that surgery and whether surgery ultimately fulfills that need. For example, a woman who could not work on her farm from her injury had to pull her children out of school. She needed surgery to resume her income-generating activities. The follow-up survey showed that surgery helped her return to the farm, generate income, and put her children back in school. Similarly, another 6-year old patient had contracted muscles in his neck due to a birth defect. Surgery has helped him socially, as other students no longer bully him, and will likely lead to increased income and physical capabilities as he grows older. It is difficult for Watsi to pool together anecdotal evidence into a reportable outcome.

Page 3 of 6 July 2020

Watsi is in the process of building out more impact measurement tools and plan to pilot and launch additional measurement processes this year. While the organization is still determining the exact composition and structure of these assessments, Watsi hopes to quantitatively track items like increased income and the benefits driven by additional income. A lot of this push has been led by the new executive director, who has worked with several other NGOs and prioritizes impact measurement.

Current Measured Impact: Hospital and Economic Impact

Watsi has committed to measuring impact on care centers as well by holding monthly meetings with their medical partners to discuss programs, plans, challenges, and results. In their reviews and discussions with each medical partner, they have that reliable support for surgery provides a consistent revenue stream, strengthens the hospitals’ ability to pay staff in a timely manner, enables purchasing of supplies and equipment that lead to higher quality care, and raises the profile of the hospital as a surgical center of excellence, ultimately drawing in more patients from the community in need of care.

Watsi also carries out formal annual surveys which qualitatively assessed increased financial statement and ability of medical partners to treat more patients. Previously, Watsi accepted this qualitative data as meaningful. The executive director understands the importance of seeing numeric data and proving change so that Watsi can revise its theory of change if necessary, so they are adding questions to this year’s annual report that will emphasize tracking their impact through quantitative data.

To ensure local sustainability, Watsi caps their support at no more than 30% of a care center’s operating budget. They encourage their partners to find and maintain other sources of reliable revenue and support them in finding it so that the hospitals have a sustainable financial foundation. If Watsi were to leave, the hospital would have the foundation and skills necessary to fundraise effectively. More importantly, in the communities that Watsi serves, patients often hear of access to care through word of mouth. Watsi’s support to treat patients enables more surgery to take place, and in turn, awareness continues to grow, bringing more patients to the centers. Some of whom will be future Watsi patients, but others will pay for their own care, receive government support, or qualify for other assistance that further strengthens the hospital.

Use of Funds: Helping Watsi Scale $60,000 for a matching donation program: The main point of a match campaign is to leverage more monthly recurring donations. Thus, the impact of UIs donation would not only just double due to the match but create lasting impact through regular monthly donations. The organization wants to recapture monthly donors who have lapsed and attract new monthly donors. $90,000 to hire two personnel that will lead innovation and growth of the platform:

Page 4 of 6

July 2020

To innovate and scale their programs and fundraising, they require both technical software engineering and digital marketing/fundraising expertise. Watsi requests support to fund a portion of the annual salary and benefits for a Senior Engineer ($45,000) and a Marketing Consultant and testing budget ($45,000). This initiative is the main reason why Watsi expects to regain the traction lost from the pivot to Meso and back. With these positions filled, Watsi hopes create 10% growth on the platform ($120,000 in increased donations), and consistent growth in following years.

Meso Insurance Product: Why was it abandoned? Meso is a product designed to help digitize the healthcare systems of governments in Africa and improve the insurance systems in these countries. Watsi was the best place to build Meso, but because of its goal of transforming governments, Watsi did not have the resources or global infrastructure needed to scale Meso. The management team decided that an organization connected to governments more directly was better equipped. The Executive Director cited the UN as a better fit to adopt and implement Meso as a tool across many countries, walking governments through adoption of the product. In summary, the product did not fail, but rather making it an open-source platform for adoption and implementation was a strategic decision.

Size of the Crowdfunding Market Watsi expects to raise approx. $1 M this year from crowdfunding. Prior to the transition to Meso, Watsi was raising approx. $2 M per year in crowdfunding.

As a reflection of growth potential, below is data from a few key crowdfunding platforms: • Kiva: $150,970,150, total contributions (2018-2019, please note this is loan-based rather than charitable contributions) • DonorsChoose: $95,738,387, total contributions to classroom projects (2018- 2019) • GiveDirectly: $27,156,853, total general contributions (2017-2018) • GoFundMe: $650,000,000, total contributions to support healthcare (2017-2018)

The crowdfunded donations market is clearly large, and Watsi only takes up a small sliver of this market. Watsi expects that they will be able to grow.

Acquisition Cost of New Donors Most of Watsi’s new donors are acquired through word of mouth, but this year’s budget allots $60k additional to marketing and fundraising. As of July 2020, they have not spent much of their budget on marketing and fundraising, and still acquire about 100 new donors each month. They hope this spending, along with our donation, will accelerate

Page 5 of 6

July 2020 that growth. Even if the additional spending does not immediately result in more growth the acquisition cost per donor for the rest of the year assuming the $60k budget will be ~$100/donor. The average donor lifetime value is about $1,200.

Diversity in Geography of Impact Watsi’s diversity in their geography of impact primarily arose from guidance from their advisors at Kiva (Premal Shah). Kiva has seen that some donors specifically like to give to certain geographic areas or populations and suggested that Watsi set up similar outlets. However, expansion plans are currently only limited to approximately two new partners (specifically: Regional--Americas and Population--Refugees) and only if Watsi sees a lift in fundraising that will sustain the programs in a meaningful/impactful way and ensures that partnerships with local organizations and hospitals are significant.

Page 6 of 6