DUE DILIGENCE - GRANT This accomplishes University Impact’s charitable purposes due to its ability to crowd-fund healthcare and provided essential services in developing .

Watsi Recommendation : Provide a $100k grant so can provide 125-250 surgeries through their matching campaign.

Company Information Legal Name Watsi, Inc. Incorporation Date 2011 Corporate Address , CA, USA Nature of Business Healthcare, Fintech Website https://watsi.org/

Social Problem: Individuals in developing countries cannot afford essential surgeries.

UN SDG: # 3.8: Achieve … access to quality essential health- care services and … to safe, … affordable essential Business overview medicines… 5 Billion people worldwide do not have access to safe surgical services, Theory of Change: By providing capital to fund essential costing over $85 billion globally.1 Further, access is worst in low-income surgeries, Watsi can improve the quality of life for the very poor. and lower-middle-income countries, where nine of ten people cannot Intervention: Watsi obtains capital through and access basic surgical care. 1 Not only do surgeries benefit individual health, partners with hospitals and clinics who pay for essential surgeries. they allow the patient to contribute economically to their family and society. Studies estimate that for every $1 invested in strengthening local Outputs: surgical systems, $10 is created in increased productivity and improved Patients helped 20,241 2 Donations raised $12.6 M health.

Potential Outcomes (Not measured by Watsi): Watsi, founded in 2011, is a crowd-funding platform that allows donors Additional income earned post-surgery (not measured) to fund “high-impact, low-cost” surgeries for patients who cannot afford Generated $ for economic productivity $120.6 M the procedures. To date, Watsi has raised $12.6 million dollars, enabling

Financial Overview care for 20,000+ patients in 25 countries. It currently operates in 8 2019 Revenue USD 2.7 M countries (Ethiopia, , , , Haiti, , Myanmar, 2019 Operating Expenses USD 3.8 M and ) to maintain a balance between geographic diversity and 2019 Net Income (with donations) (USD 1.1 M)

2019 Avg. Monthly Crowdfunding USD 115 k high-quality care. Avg Cost of Surgery USD $600 • 49% of surgeries are performed in the Southeast Asia region, Overhead expenses/Total Expenses 17% • 46% in the region,

Company Management • 4% in Latin America (see Appendix for a breakdown of Mackinnon Engen (American) Executive Director procedures by region). Keenyn McFarlane (American) CFO

Watsi operates on a model in which 100% of crowdfunded donations are used to fund medical care. Operational and overhead costs are supported by charitable foundations, unrestricted gifts from independent donors, corporate donation matches, and optional “tips” added by donors through the online platform.

Watsi verifies health and financial need for 100% of patients. In keeping with high-impact, low-cost models, surgeries costGrant $600 onRecommendation average. In some rare cases, when surgery costs exceed $1,500 (primarily cardiac surgery in the SE Asia and Latin America Figure regions),1: Watsi Care other Model organizations will supplement Watsi's support. In Haiti, for example, Watsi’s contribution funds patient preparation and travel to another , where the cost of surgery is often covered by another charitable institution. Figure 1, below, illustrates how the Watsi model works.

1 The Lancet Commission on Global Surgery. 2A Cross-Sectional Survey of Essential Surgical Capacity in Somalia

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DUE DILIGENCE – Watsi

Transaction overview We recommend that UI grant $100k to allow Watsi to increase momentum and achieve sustained growth by 1) expanding the capacity of its East African operations and 2) contributing to expanding the donor base. East Africa has the lowest cost per surgery of any of the regions which Watsi supports and the most demonstrated surgical need (see Impact Overview, Page 5). These funds will be used to leverage a match campaign on Watsi’s platform to incentivize additional patient support and donor growth. UI will provide a 1:1 match up to $80k USD for every dollar Watsi fundraises through crowdfunding. The total matched amount will help $80,000 Watsi expand capacity in East Africa by: • Financing the treatment of more patients • Investing more in surgical training programs to expand the abilities of the medical staff to treat patients more efficiently or quickly Finance other costs Watsi needs to scale programs. It will support: • Medical partner oversight and due diligence $20,000 • Software and product engineering (to set up the match campaign and data analytics programs) • Marketing and promotion of the match • Reporting on use and impact of funds

Rationale to Give Key Opportunities - Watsi has a strong triple-line impact: 1) aiding the patients who need the surgery, 2) patients’ families who may rely on the income of the patient, and 3) the hospitals which need the financial stability to provide quality healthcare. - While Watsi is reliant on donations, the team is good at fundraising and 40% of donors commit to monthly recurring donations. The donor base is stable and passionate, with donations only slowing down about 2% during the COVID crisis compared to normal times.

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DUE DILIGENCE – Watsi

- Watsi’s business model of tracking individual beneficiaries and having low overhead costs makes it a good candidate for growth within the donor market. - Watsi has a strong institutional donor base that would provide opportunities for UI to form beneficial external partnerships and connections. Major Risks and Mitigating Factors

Risk Relevance Explanation Mitigating Factor In 2018 and 2019, Watsi began In early 2020, Watsi developing Meso, an insurance discontinued its work on Meso product that consumed much of and shifted its focus back to Watsi’s time and resources. treatment activities. However, Consequently, this distracted them Watsi may take several years Watsi may not fundraise as High from fundraising efforts and to bring the number of effectively as pre-2018. reduced their fundraising surgical procedures momentum. performed back up to pre- 2018 levels. They have plans to regain momentum through UI’s donation. Watsi has expanded to several Watsi has expanded to have different countries rather than diversity of beneficiaries so focusing on certain geographies that donors will find more and fulfilling existing demand in patients they value or align Lack of a focused one or two regions. This may lead with. They hope that Medium geographical approach to a decreased overall impact on expanding in several different the population of patients in an countries rather than focusing area and not bring the desired on one geography will financial stability to any one area. increase revenue.

Missing impact targets because of Health and economic variability in the costs of surgery. productivity are driven by While $30,000 dollars may lead to monetary contributions, not an impact on 120 patients if their number of beneficiaries. Variability of Surgery Costs Low surgeries are cheap (cataracts surgeries at $250), it may only impact 20 if the surgeries are more expensive (cardiac surgeries at $1500).

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DUE DILIGENCE – Watsi

Financial Overview Watsi’s biggest constraint to delivering maximum impact is that they are not able to give each of their current partners enough funding to fulfill demand; Watsi has an excess of patients to help in the areas it has currently reached, but not enough capital to do so. From several studies and surveys of the places in which Watsi funds surgeries, Watsi has found that every care center is constantly turning away patients due to lack of funding and could treat more patients if they had more donations. UI’s money would be catalytic in helping Watsi expand to treating more patients, and patients in more surgical areas by working with new medical partners.

Watsi is reliant on donations sourced through crowdfunding, institutional philanthropy, and other grants but consistently brings in this revenue month-over-month, showing that Watsi fundraises effectively on the program it focuses, and is not at risk of losing impact.

Each month, Watsi receives about $115K in crowdfunded donations. Of this amount, about 40% ($45k) is recurring monthly, coming from approximately 1,500 donors who are auto- Revenue and Expense subscribed to monthly gifts. The donor base is also stable and Distribution passionate, with donations only slowing down about 2% during the Revenue COVID crisis compared to normal times. Crowdfunding 30% Institutions/Grants 50%-60% To the right is a distribution of Watsi’s 2018 revenue and expense Other 10%-20% categories. All revenue from crowdfunding (30%) except for Expenses optional “tips” is earmarked specifically for medical treatment, but Treatments 83% other revenue can be used for any purpose; most expenses cover Management/Admin 11% treatments and medical programs, with very little overhead. Watsi Fundraising/Mktg. 6% has $2.1 M cash on hand, with $500-$600K being earmarked specifically for medical treatment. Funding for surgeries far exceed the earmark with about 83% of a year’s expenses being directly applied to medical treatment of those in need of surgery.

Based on previous experience, Watsi anticipates a 5x leverage ratio for cost of obtaining donations in 2020. Watsi expects to bring in $1M in crowdfunding donations this year with marketing/fundraising spend of $200K. While the cost of marketing and fundraising compared to overall revenue is only 6%, the cost of crowdfunding is approximately 20%. Crowdfunding is less efficient for Watsi than institutional grants, but an important source of revenue nonetheless.

2016 2017 2018 2019 2020Q1 In 2018 and 2019, Watsi funded fewer surgeries Revenue $3.5 M $3.2 M $5.8 M $2.7 M $449 K than in previous years because of a failed pivot to a Expenses $4.0 M $5.7 M $3.7 M $3.8 M $603 K software product called Meso. Meso streamlined Patients insurance and government-based payments in East Funded 4,224 4,580 2,832 1,826 383 African countries. They hoped this would help the program to be self-sustainable but proved unfruitful. In 2020, Watsi spun Meso off into an independent open-source platform and has now put 100% of its focus on crowdfunding. Impact Overview: Problem and Delivery Enabling access to surgery in lower and middle-income countries is a necessary and cost-effective solution towards improving healthcare and overall economic productivity.

● The annual need for surgeries around the exceeds $85 billion.1

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DUE DILIGENCE – Watsi

● 5 billion people worldwide do not have access to safe, affordable surgical and anesthesia care when needed.1 ● Access is worst in low-income and lower-middle-income countries, where nine of ten people cannot access basic surgical care.”1 Watsi has found that funding surgeries is a highly cost-effective intervention because of the two-fold impact on patient lives and the added economic productivity of making larger investments in healthcare.1 Watsi asserts that a hydrocephalus surgery, in which a shunt is placed in a child’s skull to relieve pressure due to buildup of fluid on the brain, is as valuable to a child, by the additional years of quality life provided (QALY), as the TB vaccination which has saved 43 million lives since 2000 (WHO). Financially supporting surgeries is also an effective way of bolstering the economy. It is estimated that for every $1 invested in strengthening local surgical systems, $10 is created in increased productivity and improved health.2

Research has also shown that failure to meet the existing surgical burden of disease could:

● Rollback development gains in middle-income countries ● Reduce annual GDP growth by approximately 2% ● Cost developing nations up to $12.3 trillion of GDP, collectively, by 2030.1

In the past 8 years, Watsi has had strong outputs, and powerful outcomes on patients and their families. Watsi has raised $12 M for over 20,000 patients in 25 countries. Watsi currently does work in 8 geographies. According to Watsi, working in several areas rather than honing in on a single location creates diversity in the beneficiary base and increases donor engagement, as it gives donors the opportunity to contribute to patients with whom they feel an emotional connection. Watsi’s goal for the number of procedures performed in 2020 is 2,000. All Watsi surgeries are vetted and approved; If a surgery is approved, the patient will receive the surgery whether the profile on the page fills donations or not.

While Watsi does not currently have programs in place to measure outcomes, executive director Mackinnon Engen has made impact measurement a priority for 2020 and following years. Watsi plans to distribute surveys to patients at follow-up checkups with questions about individual income pre- and post-surgery as well as secondary effects such as child enrollment in school. Surveys will also be distributed to partner hospitals.

Increasing spending on elective surgery procedures strengthens individual hospitals and overall health infrastructure in Lower-Middle Income Countries (LMICs). Watsi funds “elective surgeries”, which are procedures that are scheduled instead of on an emergency basis but have a significant impact on a patient’s health and quality of life. These are often the greatest drivers of a hospital's income, representing 48% of hospital revenue on average. Making elective surgeries accessible provides a significant source of revenue to the medical partners, which can now continue providing high-value care, make the quality of healthcare in an area better, and better train medical staff. This financial outcome is also not tracked, but can be extrapolated through secondary research, shown below.

The table below shows the benefits a clinic gains if they invest net profits from elective surgeries into lifesaving care packages (malaria medication, breastfeeding, etc.) to children under 5. The model assumes that: • It costs $4.10 to provide one such care package; one care package translates to $38 per Disability-Adjusted Life Year (DALY) averted • An elective procedure has a base contribution margin of 15%, which increases slightly with economies of scale

1 The Lancet Commission on Global Surgery 2 A Cross-Sectional Survey of Essential Surgical Capacity in Somalia

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DUE DILIGENCE – Watsi

Total Revenue Hospital Net Profit Additional Children Child DALYs Averted Procedures Funded ($600/Procedure) (Rev-Costs) Treated with Profits ($38/DALY) 1 $600 $90 22 2 5 $3,000 $473 115 12 10 $6,000 $966 236 25 15 $9,000 $1,466 358 39 20 $12,000 $1,971 481 52 25 $15,000 $2,480 605 65

Market Overview: Capturing the Donor Market Watsi’s business model of tracking the outputs of each dollar spent directly to the beneficiaries and low overhead costs makes it a good candidate for growth within the donor market. Trends in the donor market have shown that those organizations which track their donations to specific beneficiaries and utilize technology within their donor platforms tend to outperform those which do not. Watsi keeps a transparent list of the individual medical partners that receive donations down to the dollar amount and identifies the individual patients who are the beneficiaries of a donor's money. Every patient profile has a transparent break-down of the allocation of funds for treatment (see Appendix 2 for an example of a patient profile), and the transparency allows for strength as a player in the donor market. Additionally, Watsi is appealing to young donors, who constitute one of the largest donor demographics. Watsi scores a 9.27 out of 10 Net Promoter Score (NPS). In the monthly recurring donor categories, Watsi scores even higher--at a 9.54. Companies with an NPS between 9 and 10 have high retention rates, meaning donors are likely to come back many times, and have customers who are willing to promote the company through referrals and loyalty programs. Watsi plans to expand its loyalty and match programs to capture even more of this attractive donor market. Management Overview: Qualifications and Execution (Partners and Main Team)

Based on interactions with Mackinnon Engen, executive director, the UI team believes that Watsi’s management team is experienced and capable of accomplishing its established goals. The team is intentionally small to be agile and keep operational costs low. Watsi has been highly responsive, helpful, and honest during the UI due diligence process. The Executive Director has deep experience in the global health and humanitarian space, and the CFO is also well-connected in the nonprofit sector. The co-founder of Kiva is an advisor for Watsi. Watsi has three paid employees: its Executive Director, CFO, and a part-time software engineer. They are considering hiring a marketing director to spearhead the marketing and fundraising growth plan and outside consultants to perform an economic impact analysis. Qualifications of the management team and board are found in Appendix 1. Conclusion

We recommend that UI grant $100,000 in addressing demand at Watsi’s existing medical partners in East Africa. We anticipate that investing in this project will impact around 125 patients and generate $1,000,000 for health and economic productivity in East Africa. The UI due diligence team believes that Watsi is a good candidate for a UI grant because of its proven track record of effective fundraising, plans for tracking impact to patients and their families, and impressive management team.

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DUE DILIGENCE - GRANT This accomplishes University Impact’s charitable purposes due to its ability to crowd-fund healthcare and provided essential services in developing countries. Appendix

Annual Unmet Need (# Need met by Watsi Region Surgical Cases) (2019) Caribbean 131,050 62 Central Asia 910,432 - Central Europe 678,358 - Central Sub-Saharan Africa 4,192,980 - East Asia 27,956,507 - Eastern Sub-Saharan Africa 17,555,748 773 North Africa and Middle East 2,115,011 - Oceania 55,196 - South Asia 57,791,550 - Southeast Asia 12,480,939 968 Southern Sub-Saharan Africa 291,000 - Western Sub-Saharan Africa 18,909,507 - Dollars Needed/Funded $85,840,966,800 $1,064,640

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