In March 2022, news spread quickly — TreeENT Health, a Chinese chain medical brand specializing in otolaryngology, completed a Pre-B round of financing worth hundreds of millions of yuan, led by Cenova Capital with follow-up investment from existing shareholder, Eight Roads Capital.

In recent years, the incidence of otolaryngological diseases has been high, and the market demand is strong. The state has also successively introduced policies to support the development of private specialty hospitals, including otolaryngology. For example, the "Guiding Principles for the Planning of Medical Institution Settings (2021-2025)" issued by the National Health Commission in January 2022 clearly stated that social medical practice is encouraged, and there are no planning restrictions on the regional total amount and space for social medical practice; strengthen the standardized management and quality control of social medical practice, and improve the level of homogeneity; explore various forms of collaboration between social medical institutions and public hospitals; the establishment of clinics is not restricted by planning layout, and a filing system is implemented.

However, upon closer inspection, compared with specialized tracks like dentistry and ophthalmology, which have more obvious consumer attributes, otolaryngology has a relatively lower level of enthusiasm in the capital market. The main reasons for this are twofold: First, compared with other departments of the five senses, otolaryngology currently has a relatively low overall degree of marketization; second, otolaryngology has strong medical attributes, and there are certain bottlenecks in business expansion. However, precisely because of this, otolaryngology also possesses characteristics such as enormous market development potential and relatively high track barriers.

VCBeat found that from November 2021 to present,TreeENT Health's latest round of financing is the only funding event that has occurred in the field of specialized ENT medical services. As early as 2019, TreeENT Health gained capital favor — a multi-million-dollar Series A round led by Eight Roads Capital, F-Prime Capital, and China Growth Capital.

Focusing on the niche track of ENT specialized medical services, why has TreeENT Health been favored by the capital market? What are its future plans behind the completed financing? And how does it solve the "standardization" challenge in store expansion? With these questions in mind, VCBeat interviewed Xu Jinghuan, founder of TreeENT Health, Chersy, Executive Director of Eight Roads, and Zhang Min, Managing Director of Cenova Capital, to seek answers.

Starting from the Hangzhou Day Surgery Center, which was established in 2017 at China's first Medical Mall, TreeENT Health has been continuously exploring the development path of the ENT specialty field in China.The revenue model of the Hangzhou Central Clinic has been successfully established. Six months after the operation of the acquired satellite clinics in Hangzhou, the year-on-year revenue doubled, achieving cash flow balance. The performance of the ENT Day Surgery Center in Shenzhen also far exceeded that of Hangzhou in its first year of opening. TreeENT Health's business and medical treatment models have been initially validated by the market.

Behind the success of the single-store model is the solid medical quality that cannot be separated.

How to Measure the Medical Quality of a Private Hospital?

In the view of Xu Jinghuan, the founder of TreeENT Health, TreeENT Health mainly focuses on three aspects of medical quality: "safety, efficiency, and warmth," which are also the core values of TreeENT Health.

First, safety is mainly reflected in the medical quality standard system."The entire medical quality management system of TreeENT Health is strictly formulated and implemented in accordance with the international DNV quality standards." TreeENT Health founder Judy Xu told VCBeat, "The TreeENT Health clinic in Hangzhou is the first outpatient and day surgery center in China to be certified by DNV international standards."

Secondly, safety is also reflected in the authority and professionalism of the TreeENT Health medical team. An international-standard medical quality control system, advanced specialized diagnostic and treatment equipment, and a well-developed physical environment have attracted a large number of experts from various specialized fields to join, forming empowerment and sharing medical resources within the region.

Xu Jinghuan also introduced that, abroad, nearly 80% of ENT surgeries are day surgeries.To ensure medical quality and safety, TreeENT Health not only selects ambulatory surgery procedures that meet the requirements of the National Health Commission, but also adopts internationally advanced minimally invasive techniques and rapid recovery methods.Moreover, each surgery at TreeENT Health is personally performed by the chief surgeon, with a dual-anesthesiologist support system in place to ensure minimal trauma, the shortest possible operation time, and rapid recovery. The management period extends until the surgical patient is fully recovered.

According to Zhang Min, Managing Director of Cenova Capital, "Compared with traditional surgical operations, the success of a day surgery relies not only on the sophisticated skills of the chief surgeon but also heavily depends on the anesthesiologists, nursing team, and postoperative care behind the scenes. The professional anesthesiologist team and nursing team at TreeENT Health provide strong support for chief surgeons to carry out day surgeries."

Not only that, but Chersy, Executive Director of Eight Roads Capital, also revealed, "The day-surgery model adopted by TreeENT Health can, to a certain extent, allocate doctor resources rationally and optimize doctors' working patterns."

In addition,To ensure efficiency, TreeENT Health has also established a set of standardized service processes: 1 minute to register for an expert appointment, 1 hour for consultation and examination, and surgery and discharge completed within 1 day.

TreeENT Health provides fully appointment-based services, allowing patients to "book an expert appointment within 1 minute" through various channels. Time-slotted appointments ensure each patient has ample time to communicate with their primary doctor upon arrival. Additionally, with one-on-one guidance, patients can complete necessary tests and examinations within the outpatient facility. Through continuous optimization of operational processes and pathways, patients can efficiently complete their consultation and all required tests within an hour, saving time and creating a near-closed-loop consultation process.

It is worth noting that,VCBeat found that the departments opened by TreeENT Health are not only otorhinolaryngology but also ophthalmology, pediatric surgery, etc. Xu Jinghuan revealed that this was based on big data analysis which showed that patient groups complement each other and their diseases overlap. Therefore, TreeENT Health chose to add departments with high overlap with otorhinolaryngology to provide multi-disciplinary diagnosis and treatment services, alleviating parents' concerns and improving patients' medical experience.

Private institutions often face the challenge of maintaining medical quality and operational standardization after expansion. How does TreeENT Health solve this problem?

In response,Xu Jinghuan told VCBeat that, regarding medical quality, TreeENT Health adheres to the DNV International Healthcare Quality Management System; in terms of operations, it has built three major operational systems focusing on clinical pathways, service processes, and product standardization.

Among them,Productized service design is a very important part of TreeENT Health's expansion.

Unlike the traditional medical consultation model, TreeENT Health has identified market opportunities in many ENT (ear, nose, and throat) projects. Based on this insight, they have designed screening and treatment products that align with TreeENT's unique characteristics, offering targeted non-invasive or invasive product-based treatment solutions.

Notably, after the initial success of the Hangzhou model, TreeENT Health did not choose to expand immediately. Instead, it focused on refining its internal operational logic and strengthening its core capabilities. Once the optimized operational logic and model were validated at the Shenzhen center, TreeENT Health accelerated its nationwide expansion across China.

According to Xu Jinghuan,TreeENT Health's Shanghai Day Surgery Center is about to open, and a Guangzhou specialty hospital will also be established in 2022. In the next three years, TreeENT Health will build an ENT specialty chain layout in the Greater Bay Area and the Yangtze River Delta region featuring "1 specialty hospital + several day surgery centers + N satellite clinics" to achieve tiered medical treatment for mild, moderate, and severe patients, thereby reaching as many patients as possible and meeting various outpatient needs. In the more distant future, TreeENT Health will achieve full coverage of the Beijing-Tianjin-Hebei region, as well as Central and Southwest China, becoming a platform that gathers top ENT experts and talents from across the country.

Xu Jinghuan stated, "At present, the single-store model of TreeENT Health in Hangzhou and Shenzhen has developed relatively maturely. The expansion of stores within the same region and across regions has been successfully validated. This round of financing will help TreeENT Health achieve its three-year development goals and continuously enhance the support and management capabilities of TreeENT's middle and back offices."

The expansion of stores naturally cannot be separated from the support of capital.

At the end of the interview,Zhang Min, Managing Director of Cenova CapitalVCBeat revealed the core reasons for Cenova Capital's investment in TreeENT Health: First, they are optimistic about the rapidly growing market demand for otolaryngology services each year, with multi-level and diversified medical service offerings presenting an opportunity for private healthcare. Second, the success of TreeENT Health’s "single-clinic model" and "cross-regional replication" operations in Hangzhou has demonstrated the potential for market success in the relatively underserved field of otolaryngology. Third, TreeENT Health’s standardized systems across various dimensions, its product offerings that differentiate from public hospitals, and its highly efficient team all provide strong support for rapid growth in the future.

Chersy, Executive Director of Sequoia Capital ChinaIt was stated that the ENT specialty, like ophthalmology and dentistry, has a certain consumer attribute. However, the marketization of ophthalmology and dentistry is already relatively mature, and the competition is also quite intense. Therefore, Eight Roads Capital believes that ENT will be the next blue ocean market similar to ophthalmology. The business model and operational model of TreeENT Health have achieved phased success in Hangzhou and Shenzhen; its adoption of the "day surgery center" model can not only meet most of the requirements for ENT surgeries but also has a certain cost advantage compared to the expansion of traditional hospitals. "We are optimistic about the development of the ENT specialty, value the business capabilities of TreeENT Health's core team, and are confident in the future prospects of TreeENT Health's business model."

Cenova Capital, established in 2010, is one of the earliest professional funds in China dedicated to investment in the healthcare and life sciences sectors, committed to promoting the transformation, upgrading, and innovation of China's healthcare industry. Cenova Capital currently manages six healthcare industry funds, including both US dollar and RMB funds, with contributors including well-known wealth funds in Asia, government institutions, and large domestic and international insurance companies and financial institutions.

Eight Roads Ventures is a global venture capital firm backed by Fidelity Group, with over $8 billion in total global assets under management. Its investment team spans across China, India, Japan, Europe, and the United States. Thanks to its unique funding characteristics, Eight Roads Ventures can flexibly allocate capital to support innovative companies in disrupting or leading the market. Globally, Eight Roads Ventures focuses on investing in early-stage and growth-stage enterprises within the healthcare and technology sectors, having already invested in more than 300 fast-growing innovative companies. In China, Eight Roads Ventures has over 25 years of venture capital experience and has invested in more than 130 companies in the healthcare and technological innovation fields.