Five Key Insights for Domestic Startups After the Rationalization of Medical Venture Investment

It has been more than two years since the startup and investment boom in the internet healthcare sector began in 2014. It is evident that after a period of riding the “wind tunnel,” capital enthusiasm has returned to rationality, with the surviving companies being those that possess clear competitive advantages and viable business models. According to statistical data on healthcare investments, most projects that have reached later stages (Series C and beyond) entered the healthcare sector before 2010. This demonstrates that while the large-scale influx of “Internet Plus” initiatives appears to be the primary driver of the recent healthcare fervor, the foundation for internet healthcare enterprises to thrive and scale lies in sustained accumulation rather than transient hype.

Despite the slowdown in industry growth, according to data from VCBeat's VBInsight,In 2016, the digital health industry completed a total of 261 transactions, with total financing and investment exceeding USD 2.6 billion, ranking second highest since 2011. From this perspective, the current state of the healthcare industry is clearly far from being described as a “winter.” The pressure of funding droughts felt by some healthcare startups is actually the result of market metabolic mechanisms: since 2014, there has been an explosion in the number of new healthcare startups, leading to increased business redundancy.andHowever, the total growth in capital inflows into the industry has failed to keep pace, naturally leading to a decline in the proportion of companies securing financing. A closer look at major financing events reveals that Ping An Healthcare and Technology Company Limited set the record for the largest single-round financing by an internet healthcare startup globally.With a $500 million Series A round, iCarbonX, which has raised nearly RMB 1 billion in the medical big data sector, and Novogene, which has secured RMB 500 million in the genomics field, are among the companies favored by capital, with their single-round financing amounts showing an increase rather than a decline. The current state of healthcare venture investment can be summarized as follows: a greater number of startups, an increased total volume of financing, and more pronounced disparity in funding distribution.

A further interpretation of this phenomenon is that while the healthcare industry is booming and becoming increasingly crowded, the market has grown more unforgiving toward those who fail to adapt. Stakeholders are experiencing an amplified effect of survival of the fittest; the “winter” is a winter only for the laggards. Top performers secure more financing, thrive, and identify paths to profitability earlier. In contrast, those lagging behind due to certain weaknesses face a heightened risk of decline, particularly if they also encounter difficulties in securing follow-on funding.

Next, healthcare startups will face emerging opportunities driven by the gradual relaxation of policies, while also encountering increasingly fierce competition. According to statistics from the VCBeat database, since the concept of internet healthcare is not yet mature, the majority of companies in this field are still at Series A or earlier stages. Amidst the aforementioned polarized investment climate in healthcare, what advantages are more likely to help these enterprises stand out, and what issues may constrain their growth? Here, we summarize several key highlights from this group of early-stage healthcare startups and analyze the major challenges they face.

The concept of big health data has begun to sweep through the medical field, representing one of the most significant achievements brought about by "Internet Plus Health." This is because healthcare is an industry that places a high premium on effective data while simultaneously wasting vast amounts of it. Data derived from individuals will ultimately become a valuable asset for health management—by collecting personal baseline information, daily health behaviors, and other specific indicators, it enables the provision of tailored health recommendations and, when necessary, the selection of targeted preventive interventions.

Among early-stage mobile health enterprises, personalized health management platforms place greater emphasis on the collection and processing of personal information. For instance, platforms such as “Miao Health” enable users to integrate relevant data by connecting with smart devices, undergoing physical examinations, and completing online health assessments. The collected data is analyzed by professional medical and advisory teams, leveraging big data algorithms and personalized user analytics, to formulate tailored health behavior intervention plans. These plans encourage users to improve their health behaviors through task-based mechanisms and reward systems, thereby achieving the goal of enhancing overall health.

When information collection, data analysis, solutions, health interventions, and value-added services are integrated into a single platform, users experience a more refined mobile health management service.

Relying solely on technology or entrepreneurial ideas is no longer sufficient for internet healthcare companies to achieve long-term success. To remain invincible, they must embed themselves at the core of the medical ecosystem, extend their reach into all potential application areas, and identify the development and profitability models best suited to their strengths.

Among these startups, one approach to pursuing growth is the organic integration of multiple business segments. For instance, Ping An Healthcare has consolidated services such as health information push notifications, online consultations, appointment registration, and pharmaceutical e-commerce into a single platform. The key challenge lies in streamlining the connections between services and products to create a coherent system. The second approach involves diverse collaboration and promotion strategies. For example, companies specializing in disease prevention and healthcare partner with insurance providers to achieve the dual goals of reducing insurance claims and improving user health. Similarly, genetic testing companies are no longer satisfied with accumulating genetic databases through singular methods; instead, they are collaborating with physical examination institutions and personalized nutrition programs to expand their sample sizes.

During our corporate reporting at VCBeat (WeChat: vcbeat), we have observed a growing emphasis on professionalism. Whether it involves specific technologies, products, experts, or patent resources, healthcare startups are increasingly striving to achieve industry-leading excellence in these areas.

Upon closer examination, the healthcare industry has always been a sector with a relatively high concentration of intellectual resources. As increasingly complex technologies become integrated into this field, practitioners are coming to realize that the demands for specialization will only grow more stringent. For instance, in the current landscape, the most practically valuable resources remain specialized physicians and authoritative medical information; consequently, many companies have established partnerships with numerous renowned doctors as their foundational competitive advantage. Looking ahead, technologies such as medical big data systems and artificial intelligence (AI) are poised to become powerful new aids in healthcare delivery. As a result, both established and emerging healthcare players are eagerly promoting digitalization, sparking a surge in the adoption of medical AI. Not to mention advances in life sciences, which consistently stay ahead of clinical practice—here, holders of patents and intellectual property rights are the frontrunners. Even today’s most outstanding healthcare startups cannot afford complacency; they are constantly driven by the fear of being left behind by the market due to insufficient expertise, compelling them to pursue ever-greater levels of specialization.

On October 25 last year, the State Council issued the “Outline of the ‘Healthy China 2030’ Plan,” setting clear targets for the health service industry to exceed RMB 8 trillion in 2020 and reach RMB 16 trillion by 2030. Driven by these favorable policies, China’s healthcare industry is poised for comprehensive development.

Meanwhile, the constraints facing healthcare practitioners have not been fully lifted. As internet-based healthcare is a relatively new field, startups are driven by strong aspirations to transform the industry; however, most currently have only conceptualized business models without achieving actual profitability, focusing instead on user acquisition and data accumulation. Regarding profitability for healthcare enterprises, the payment system is one of the most critical influencing factors. Yet, policies have not provided significant support for payment mechanisms in internet-based healthcare, with social security reimbursement and medical insurance still excluding mobile healthcare services from coverage. Industry insiders view this as a major bottleneck restricting the overall development of mobile healthcare, one that cannot be resolved in the short term.

Another limitation is that while the broad policy direction has been established, the implementation of detailed measures requires time. Specific regulatory frameworks for risk management and incident response in online consultations and internet-based medical health information have not yet been developed. Consequently, greater assistance from innovative medical health enterprises is needed to help foster a more conducive environment for survival and development. In contrast, current mobile health applications operating outside traditional hospital settings face significant limitations. First, the seriousness and complexity of medical care mandate that practitioners comply with policy regulations and provide proper credentials, thereby facing risks of legal violations and criticism. Second, the development of the mobile health industry cannot rely solely on startups; it requires deep collaboration with industry resources to build a joint system where all parties complement and promote each other. However, the current system lacks sufficient completeness.。

China’s adoption rate of emerging technologies is actually very rapid. For instance, the shift from offline to online shopping achieved massive scale in a short period, and the deployment of offline mobile payment systems enabled people in many regions to go out without carrying cash in less than a year. However, when it comes to healthcare, technological transformation appears to be progressing slowly.

As a key national sector focused on public welfare, the healthcare industry is characterized by its strong resilience to economic cycles and sustained demand. While demand is indeed substantial, the current reality is that shifts in public mindset have not kept pace; there remains a pervasive belief that only physical hospitals can provide effective treatment, meaning the transition of medical resources to internet-based and mobile platforms must proceed gradually. Furthermore, many medical institutions still rely on outdated equipment and diagnostic methods, requiring time for new technologies to permeate grassroots levels.

Many new healthcare companies spawned by the wave of medical entrepreneurship have been eliminated from the market due to certain fatal factors. The survivors and new entrants may either face a harsh winter akin to that experienced by those who failed, or enjoy the nourishment of a warm spring with gentle breezes and fine rain. Based on the above trend analysis, we can summarize the key points for the survival and growth of startup healthcare enterprises: always prioritize clinical outcomes as the core; continuously distinguish genuine needs from false ones during operations; persistently pursue specialized medical resources and technologies; and maintain keen observation and judgment of the healthcare environment. Only by integrating these elements can a company achieve sustainability and truly embody the significance of “Internet Plus” in healthcare.