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The pandemic has served as a powerful stimulant for investment in the healthcare industry.

After enjoying policy dividends and a flood of capital from 2013 to 2018, the healthcare industry entered a “winter” adjustment period in 2019. Many sectors became red oceans with intensifying competition, and fundraising in the primary market became increasingly difficult. The outbreak in the first half of 2020 served as a shot in the arm for the healthcare industry, alleviating some of the growing pains associated with this adjustment period.

Meanwhile, the healthcare sector has also demonstrated strong resilience during the pandemic. The importance of the healthcare industry, particularly medical devices, has been further highlighted, making medical device companies highly sought-after investment targets.

As an early-stage venture capital firm specializing in the medical device sector, VINNO CAPITAL has achieved significant success through its unique investment perspective and style. The firm has invested in more than 20 healthcare companies, including Huamai Xingwei, Weigong Biology, Baichen Medical, and Anjikang'er, nurturing a cohort of industry leaders with substantial influence in their respective niches. Having successfully exited multiple projects, VINNO CAPITAL has delivered an investment return ratio exceeding 4x.

How Does VINNO CAPITAL Strategically Position Itself in the Medical Device Sector? How Does It Accurately Assess Project Value? And How Does It Seize Investment Opportunities Amid the Pandemic? With these questions in mind, VCBeat conducted an exclusive interview with Dr. Qi Wei, Vice President of Investment at VINNO CAPITAL.

VINNO CAPITAL was established in Shenzhen in 2015. Ding Mingfeng, its Chairman and Founder, brings extensive experience in the telecommunications industry, having previously served as President of ZTE New Telecommunication Equipment Co., Ltd. and Senior Vice President of ZTE Corporation. Mr. Ding firmly believes that “ICT and medical devices represent the future of humanity.” Given that Shenzhen is also the domestic hub for the medical device industry, VINNO CAPITAL has focused its investments on sectors related to ICT and medical devices, leveraging both industry prospects and geographic advantages.

Investment success is a probabilistic event, and skilled investors can increase the odds. Qi Wei, Vice President of Investment at VINNO CAPITAL, believes that good investors need to possess two key traits:

First, know what to do and what not to do; good investors always have their own focused niche.“We favor investment managers with industry backgrounds over those with purely financial backgrounds.” For instance, Dr. Qi Wei has a background in medical devices and previously worked at Wondfo Biotech and Mindray Medical. He possesses a strong academic foundation and extensive practical experience in the research and development of immunoassay reagents, microfluidic chips, and in vitro diagnostics (IVD). Currently, he focuses on investments in the biopharmaceutical and precision medicine sectors.

Qi Wei stated, “We have consistently emphasized the ‘dock’ model internally. Each investment manager specializes in a specific niche, where they possess extensive networks and resources. This enables them to rapidly identify high-value projects and provide comprehensive services. Subsequently, synergies among these projects will foster an integrated ecosystem.”

Second, a good investor must possess strong logical thinking and have comprehensive, in-depth insights into the industry.“Each investment manager possesses the ability to conduct independent market analysis. We map out industry landscapes, adopt a high-level vantage point, and select valuable projects with a comprehensive perspective.”

VINNO CAPITAL has assembled a medical investment team with a global perspective and extensive industry expertise. Leveraging its strong technological foundation and years of operational experience, the firm provides portfolio companies with strategic insights and resource support, facilitates access to industry networks and connections with investment institutions, and enhances their competitiveness.

With exceptional technological foresight and market acumen, guided by a clear strategic positioning, the VINNO CAPITAL team has developed an investment methodology for technology-driven enterprises, continuously refining and enriching it through practice to gradually cultivate a distinctive investment style. The investment approach of VINNO CAPITAL can be summarized as follows:Focus on only a few niche segments, and establish their own core competency circles in these niche sectors;Value Over Price, not blindly pursuing high cost-performance projects, but investing in the best companies at reasonable prices;System Layout, leverage the advantages of the ecosystem to enhance corporate value through proactive value-added services;Seeking Leading Projects in Niche Industries, investing only in projects with the potential to enter the first tier, where the top 20% of projects capture 80% of the industry market;Combating Risk Through Concentrated Investment, and continue to increase investments in promising projects.

The primary principle of rational investment is to allocate capital based on market prospects. VINNO CAPITAL focuses on the rapidly growing medical device sector. In 2006, the market size of China’s medical device industry was RMB 43.4 billion; by 2018, it had exceeded RMB 500 billion, with an average annual growth rate of approximately 23.5%, making it a high-quality segment within the healthcare industry.

Qi Wei believes that the core logic behind the high growth of China’s medical device sector hinges on four key points:

Deepening population aging drives the natural growth of industry space.Higher income levels correlate with a greater share of per capita healthcare expenditure in GDP. In the United States, healthcare spending accounts for over 18% of GDP, whereas in China, it represents only 6.6%. This indicates substantial growth potential for China’s medical device sector, with the opportunity for multiple companies to achieve market valuations in the hundreds of billions over the next decade.

China’s relatively low level of healthcare resource allocation compared with major countries creates additional incremental growth opportunities for the industry.China’s level of health resource allocation is significantly weaker than that of foreign countries, a problem that was rapidly exposed during the pandemic.

New Healthcare Reforms Dismantle Drug-Dependent Hospital Revenue Models, Benefiting the Medical Device Industry.Globally, the market share ratio of pharmaceuticals to medical devices in the healthcare market is typically 1:1, whereas China’s drug-to-device ratio has long been close to 10:1, indicating substantial room for expansion in the medical device market share.

With numerous sub-sectors, technological innovation and M&A integration enable platform-based enterprises to break through growth ceilings and achieve continuous expansion.The medical device sector is a broad landscape with numerous sub-segments. While such expansive sectors often give rise to large corporations, Chinese companies are currently at a relatively early stage, focusing on specific tracks or niche areas. In the future, many of these enterprises can achieve significant growth through organic expansion and strategic M&A.

Meanwhile, in recent years, leading companies in high-growth, large-scale niche segments of China’s medical device sector have begun to emerge, accelerating the pace of import substitution. The onset of the pandemic further hastened this trend, propelling Chinese-made diagnostic reagents, face masks, ventilators, and other products onto the global stage and ushering in a period of unprecedented prominence for China’s medical device industry.

Qi Wei believes that in the post-pandemic era, the Chinese government will increase financial and resource investment in the medical device sector, the Centers for Disease Control and Prevention (CDC) will strengthen infrastructure deployment, policy-making will align more closely with the actual needs of the industry, and more enterprises will enter this field. “These developments indicate that the golden age of domestically produced medical devices has arrived. Moving forward, VINNO CAPITAL will increase its investments in the healthcare sector.”

With numerous companies in the medical device sector, how can investors assess project value? VINNO CAPITAL’s investment team primarily selectsClear market demand, well-defined business model, and technical expertise within the founding teamprojects. Returning to the essence of value, profitability is the primary criterion for VINNO CAPITAL in selecting projects. Secondly, VINNO CAPITAL places great emphasis on the background of the founding team. “The team determines the success or failure of a company. If the team lacks sufficient experience and accumulation, even if it initially heads in the right direction, it will quickly fall behind.”

Furthermore, VINNO CAPITAL leans toward investing in technology-driven teams. “Technological innovation is fundamental. Although founders with a technical background often lack marketing prowess, we are willing to support them as long as they demonstrate learning agility and potential.”

Guided by this philosophy, VINNO CAPITAL invested in Huamai Xingwei in 2015. Today, Huamai Xingwei’s microfluidic chemiluminescence product series demonstrates significant technological advantages. In 2017, VINNO CAPITAL invested in Weigong Technology, one of the few companies in China with independent intellectual property rights for its flow fluorescence detection platform, breaking the international monopoly on core technologies for fluorescent microsphere encoding. In 2018, VINNO CAPITAL invested in Baichen Medical, which focuses on mass spectrometry testing and has rapidly achieved breakthroughs in its niche sector by leveraging its technological strengths...

This pandemic has also provided new insights for VINNO CAPITAL in assessing corporate value. “Companies that made money during the pandemic are not necessarily good ones, but those that failed to generate profits certainly have underlying issues.” The pandemic served as a litmus test for businesses, comprehensively evaluating their capabilities. Qi Wei stated, “Moving forward, when selecting investment targets, investors should prioritize a company’s judgment, acumen, execution, and responsiveness, while also paying close attention to its cash flow and innovation capabilities.”

Initially, VINNO CAPITAL primarily focused on domestic substitution, covering diagnostic sectors such as in vitro diagnostics and medical imaging, as well as therapeutic sectors including minimally invasive surgery, medical robotics, cardiology, and orthopedics.

Qi Wei stated that product definition capabilities and innovation based on customer needs are the keys to the success of domestic substitution. “The Investment Logic of Domestic Substitution Is Essentially a Strategy of Competitive Differentiation, therefore we place great emphasis on a company’s ability to define its products, grasp customer needs, and integrate global resources. Only by gaining a deep and comprehensive understanding of customer needs and competitors’ weaknesses can a company succeed in this sector.”

“In summary, to succeed in domestic substitution, companies must shift away from an insular, lab-bound mindset and instead adopt a customer-needs-driven approach with a global perspective on technology resource allocation, closely aligning with the actual scenarios of customers’ procurement decision-making.”

Previously, the investment rationale for import substitution was based on a low-cost strategy. However, in recent years,The window of opportunity for purely low-cost import substitution products is gradually closing, and innovation is becoming a prerequisite for import substitution.It is evident that import substitution in China is shifting from being primarily driven by follow-on innovation to being centered on independent innovation and the integration of global resources.

New technologies have become a key focus for VINNO CAPITAL in recent times, encompassing novel diagnostic technologies, new biotechnologies, and emerging data technologies. Qi Wei stated, “Over the past five years, our primary focus was on domestic substitution. As opportunities for domestic substitution diminish and competition intensifies, our investment strategy over the next five years will center on new technologies, as well as emerging areas driven by consumption upgrades and market evolution.”

Nevertheless, the substitution of domestic products for imports is not devoid of investment opportunities. “In particular, the pace of import substitution has accelerated further in the post-pandemic era. VINNO CAPITAL believes that POCT, PCR molecular laboratories, home testing products, antiviral and anti-infective therapies, localization of energy-based surgical devices, industrialization of medical robots, and innovative product lines in endoscopic systems are all niche sectors and tracks worthy of continued investment.”