In China's Oral Healthcare Sector, Only Upstream Companies Are Securing Funding
The capital winter continues.
The “2024 Global Healthcare Investment and Financing Analysis Report” shows that in 2024, a total of 811 financing deals were completed in China’s primary healthcare market, representing a 37.6% decrease from 2023; the cumulative total financing amount reached $7.3 billion, a 33% decline compared to 2023.
In the dental industry, there were 13 financing and investment deals in 2024, with a total amount of approximately RMB 900 million. In contrast, 2023 saw 27 financing events totaling around RMB 1.7 billion, representing a near halving.
The decline in funding amounts is linked to the broader venture capital environment; therefore, greater attention should be paid to changes in the structure of financing entities. VCBeat’s analysis reveals that in 2024, only Health-Miumiu and Dingzhi Dental Group secured funding among midstream and downstream dental companies, with all other recipients being upstream dental enterprises. This marks a significant departure from investment and financing trends in previous years: for most years prior to 2024, midstream and downstream dental companies consistently accounted for more than 30% of the total number of financing deals across the entire industry.In other words, within the oral care industry, nearly only upstream players are able to secure financing.
▲ Data source: Artery Orange Database; Graphic by VCBeat
This inevitably raises the question: What changes is the oral care industry undergoing behind the shift in investment trends?
The trend of capital flowing into the upstream segment of the dental industry has persisted for three years and is becoming even more concentrated at present.
“It’s not just the dental industry; other sectors are also seeing a trend of capital flowing upstream,” Chen Ge, Senior Vice President at Index Capital, told VCBeat. “I believe there are three reasons for this.”
First,Amid the prevailing capital market trend of investing in hard tech, early-stage ventures, and innovation, investment in the dental sector is also shifting toward the upstream segments of the industry chain with a focus on scientific and technological innovation., especially projects focused on foundational innovation and addressing critical technological bottlenecks are indeed more likely to gain favor and support from institutions.
Furthermore, global business expansion is a key investment theme,The difficulty of expanding services overseas is far greater than that of exporting products.Upstream dental companies with a strong national manufacturing footprint have already secured leading market positions in numerous niche segments. With further capital support, they continue to enhance their technology, products, teams, and brands, evolving into truly global industry leaders.
Finally, when capital first began flooding into the dental industry several years ago, it initially targeted the downstream sector. Driven by the broader trend of consumption upgrading, the frequency of dental visits grew rapidly. Meanwhile, the expansion of high-value services such as clear aligner orthodontics and dental implants further fueled industry enthusiasm, leading to rapid growth on the demand side. At that time, supportive policies encouraging the development of private medical services and allowing physicians to practice at multiple locations prompted more dentists to leave the public system, thereby effectively supplementing the supply side. As a result, the dental industry expanded rapidly from the downstream segment, attracting significant capital inflows. In recent years, with industry development and changes in the macroeconomic environment, dental service providers are undergoing a new cycle of transformation, shifting from the fast lane of rapid scale-up to the slow lane focused on operational efficiency, management excellence, and profitability. Consequently, investment enthusiasm in the downstream dental sector has cooled.
Meanwhile,The frequent investment by capital in upstream dental companies is also closely related to the uneven value distribution across the entire dental industry chain.
Upstream consumables and equipment companies generally demonstrate strong profitability, whereas companies in the mid-to-downstream segments exhibit relatively weaker earnings performance. What is the evidence? After reviewing the financial reports of three enterprises—Sinocera Material Technology, Meyer Optoelectronic, and Angelalign—VCBeat found that their gross profit margins stood at 39.65%, 50.45%, and 62.43%, respectively. These gross margin levels place them firmly among the top tier even when compared with more than 5,000 companies listed on China’s A-share market.
Midstream enterprises, represented by supply chain and information technology vendors, have an average gross profit margin ranging from 20% to 50%, while downstream enterprises, primarily dental service providers, have an average gross profit margin ranging from 10% to 40%, which is overall lower than that of upstream enterprises.
▲ Graphic by VCBeat
Beyond high gross margins,The upstream oral care sector also features three typical characteristics: First, the entry barriers are high. Upstream dental consumables and devices must undergo rigorous clinical trials and regulatory approvals, with cycles ranging from as short as two years to more than five years, resulting in prolonged timelines. Second, technological barriers are significant. Dental-related products are often the result of multidisciplinary integration, testing the convergence of engineering, biology, physics, and even aesthetics. Third, scalability is strong. Given the standardized nature of upstream dental products, companies can more easily expand into global markets and achieve economies of scale.
It is not difficult to observe that the macro venture capital environment, coupled with the uneven value distribution across the dental industry chain, has ultimately driven a significant increase in the proportion of financing directed toward the upstream segment of the dental sector.
When focusing on specific cases, upstream companies that secure financing are often those that have overcome critical technological bottlenecks in the industrial chain or achieved new progress in next-generation products.
▲ Data source: Artery Orange Database; Graphic by VCBeat
For instance, innovative materials play a crucial role in prosthodontics, as they not only influence the long-term efficacy and service life of dental restorations but also directly impact patient comfort and overall health. Consequently, material innovation has remained a central focus within the dental industry. Qinghao Puzhong, which secured tens of millions of yuan in financing in March 2024, specializes in the research and development of high-performance dental restorative materials. It is currently one of the few companies in the industry possessing technology for resin-infiltrated ceramic dental restorative materials.
For instance, 3D printing technology, a key future direction for the dental industry, is undergoing a critical transition from an “optional” to an “essential” choice after years of development. Promoting the industrialization and commercialization of related products has become a significant imperative for the industry. Raise Intelligent, which announced the completion of its Series A financing round exceeding RMB 100 million in October 2024, has established comprehensive independent R&D capabilities, including AI-driven design solutions and material research and development. The company provides fully integrated solutions encompassing the development, manufacturing, and sales of 3D printing equipment, software, materials, and technical solutions tailored to diverse industries and application scenarios.
One detail is worth noting,Among upstream companies that have secured financing, digitalization is a defining characteristic.The reason lies in the fact that the dental industry remains largely traditional, with low digital penetration across equipment, consumables, and management processes. Furthermore, constrained by the vast number of SKUs and fragmented demand within the sector, mid- and downstream enterprises often require comprehensive solutions. Consequently, upstream players have consistently focused their efforts on digitization aimed at improving diagnostic and treatment efficiency, as well as platform-based strategies designed to enhance user experience.
Take Dr. Clear, which received exclusive investment from Qiming Venture Partners in April 2024, as an example. Centered on big data models and artificial intelligence technologies, the company has launched a series of clear aligner orthodontic solutions during its development, with an annual production capacity exceeding one million clear aligners, serving dentists and orthodontic patients worldwide.
Baili Tiao Yi, exclusively invested in by Songbai Group in November 2024, focuses on AI application scenarios in dentistry. As a typical digital enterprise, it offers three core solutions: the Beyke iMind™️ AI-based Oral Disease Screening System, the Beyke iWhite™️ 3D-Printed Teeth Whitening Solution, and the Beyke Monitoring™️ AI-powered Remote Dental Consultation Solution.
Meanwhile, in addition to emphasizing technology,Upstream innovative enterprises must not only achieve greater domestic market share through import substitution but also actively expand overseas to engage in global competition with broader opportunities.Among the companies that secured financing last year, Lacee Intelligence, Jingmei Medical, and Dr. Kelier have all established a presence in overseas markets.
In summary, the upstream dental sector still holds immense growth potential and will remain a hot spot for capital investment in the near future.
As capital concentrates in the upstream sector, midstream and downstream enterprises are facing increasingly significant financing challenges.
“Compared with the past few years, financing has indeed become more difficult for mid- and downstream enterprises, but opportunities still exist,” said Chen Ge, Senior Vice President of Index Capital. “Among these factors, profit is of paramount importance to downstream dental service providers.“A review of past financing activities in the downstream dental services sector reveals a shift in capital logic from prioritizing scale to focusing on profitability, as investors have moved from backing nationwide chains to betting on regional leaders, and now favor companies specializing in sub-specialties and DSO models.”
Behind these changes lie two major challenges facing dental service providers: high customer acquisition costs and the relative difficulty of standardizing services compared to specialties such as ophthalmology. “Regional chain operators may find it easier to address customer acquisition issues, as brand effects tend to be stronger, thereby facilitating profitability. Meanwhile, enterprises focusing on sub-specialties can more readily standardize their services,” pointed out Chen Ge, Senior Vice President at Index Capital. “The core objective is to address the aforementioned challenges.”
In October 2024, Dingzhi Dental completed a Series A financing round worth hundreds of millions of yuan, exclusively invested by F-Prime Capital. Dingzhi Dental is a dental service provider specializing in dental implant services. The company boasts a top-tier team in the industry for complex implant cases, with team members being the inventors of dozens of national patent technologies for VIIV zygomatic and pterygoid dental implants. This gives Dingzhi Dental a clear advantage in the standardization and advancement of complex implant procedures, while also enabling it to have independent pricing capabilities and differentiated competitive advantages.
Furthermore, VCBeat has observed that,To navigate the transformation of the dental services industry amid the current price war, an increasing number of chain dental institutions are prioritizing comprehensive, lifelong oral healthcare services provided by general dentists to patients.
Historically, the revenue structure of dental institutions has been dominated by implantology and orthodontics, with a business logic heavily driven by marketing, thus prioritizing the acquisition of new patients. However, as price wars intensify and factors such as centralized procurement for dental implants take effect, industry consensus has shifted toward treating common and frequently occurring conditions and providing long-term oral health management for patients. Consequently, institutions are redirecting their focus toward managing returning patients, aiming to secure more stable, long-term cash flows by enhancing patient loyalty and increasing visit frequency.
This aligns with the development trajectory of mature dental markets such as that of the United States. Taking the U.S. as an example, 70% of American dentists practice general dentistry, and only 20%–30% of cases involve complex conditions requiring specialist involvement or treatment by specialists. In light of this, cultivating more highly competent general dentists will become a key priority in the dental services sector going forward.
Next, let us examine the midstream of the dental industry. Unlike other healthcare subsectors, both the upstream and downstream segments of the dental industry are highly fragmented. The upstream market features a vast array of dental products, with more than 100,000 SKUs alone. On the downstream side, 60% to 70% of institutions are private clinics, resulting in a large number of widely dispersed dental facilities. This structure makes midstream distributors and information technology providers critically important, drawing significant capital attention to the sector in recent years. Notable companies that have emerged include Songbai Dental, Sinopharm Dental, LinkCare, Lizhi, Ya E Online, and Health-Miumiu.
“Midstream companies are currently facing operational challenges, with the core issues stemming from declining consumer demand on the demand side and shrinking profit margins on the supply side due to factors such as volume-based procurement. As the middle segment of the industrial chain, midstream enterprises are inevitably squeezed from both ends,” said Chen Ge, Senior Vice President at Index Capital.The current juncture presents a prime opportunity for consolidation within the oral care industry. As an increasing number of small, traditional players exit the market, leading enterprises are seizing opportunities for mergers and acquisitions. Industry concentration is on the rise, paving the way for accelerated revenue growth and improved profitability in the future.“One or two, or even two to three, companies with very large revenue scales will surely emerge in the midstream sector.”
It is worth noting that midstream companies in the dental industry, in addition to focusing on distribution or informatization services, are gradually transforming themselves into comprehensive platforms and accelerating the integration of online and offline operations. Some enterprises have even begun to lay out their own branded products. Taking Health-Miumiu (Hangzhou) Medicine Co., Ltd., which secured nearly RMB 100 million in Series B financing in June 2024, as an example, the company is not only vigorously developing its supply chain platform but also expanding into multiple business modules—including digital product R&D centered on DaaS systems, data services, medical services, supply chain services, and value-added services—based on the needs of dentists.
It is foreseeable that after completing the transformation of their business models, the midstream and downstream segments of the dental industry will inevitably see a recovery in financing, and the sector will give rise to new types of enterprises with stronger profitability and resource integration capabilities.
Despite ongoing challenges, the industry’s overall upward trajectory remains unchanged, as does capital’s enthusiasm for high-quality dental enterprises: At the start of this year, innovative companies including LinkCare and Nuoyi Mai'er secured new rounds of financing.
Firstly,Innovation Remains the Most Powerful Driving Force in the Dental IndustryOver the past two decades, China’s innovative forces have made significant strides in materials science, regenerative medicine, and precision manufacturing. The scale of Chinese-made products in the dental industry has grown substantially, and “Created in China” innovations are now emerging. These foundational breakthroughs will bring revolutionary improvements to a wide range of dental products.
Furthermore,China's oral care industry is still far from reaching its growth ceiling, with unlimited future potential.According to data from Frost & Sullivan and Zhongtai Securities Research Institute, the market size of China's oral healthcare industry is projected to grow from RMB 122.9 billion in 2018 to RMB 242.9 billion in 2028, representing a compound annual growth rate (CAGR) of 7.1%. This expansion is driven by both an increase in the number of patient visits and a rise in per capita spending on oral healthcare, resulting in concurrent growth in volume and price.
▲Data source: Frost & Sullivan, Zhongtai Securities Research Institute; Graphic by VCBeat
Secondly,An increasing number of enterprises are beginning to compete in the global marketplace, bringing tremendous possibilities for their growth.According to VCBeat, in the competition for internationalization, China has seen the emergence of a host of outstanding innovative dental brands, including Angelalign, Modern Dental Group, Aidite, Smartee, Fussen Technology, Upcera, Woodpecker, MicroCloud AI, Raysmile Intelligent, Jingmei Medical, Dr. ClearAligner, Ruisheng, Hugger, and DeepCare.
Finally, the oral care market is undergoing structural changes. On the demand side, the focus has shifted from disease treatment to functional enhancement and aesthetic improvement at the application level, endowing the oral care market with strong consumer-oriented characteristics. Therefore, the oral care industry holds unique appeal from an investment perspective. To some extent, it aligns with the healthcare sector’s overall features of high entry barriers, competitive moats, and a strong emphasis on professionalism, while also benefiting from the large consumer base and diverse business models typical of the consumer market. This inevitably makes oral care a sector consistently favored by capital.
Certainly, the future is bright, but the path must be traversed with steady, deliberate steps. On the journey of continuous innovation, every market participant should strengthen its core competencies, pursue constant breakthroughs, and actively embrace long-term value.