Ouyang Xiangyu of Legend Capital: Relay Partnerships with Top-Tier Companies Represent the Future Investment Trend

On December 23, Mr. Ouyang Xiangyu, Managing Director of Legend Capital, was invited to deliver a keynote speech titled “Current Status and Analysis of Investment in China’s Healthcare Industry” at the VCBeat Future Healthcare 100 Forum. The following is the content of his speech:

Legend Capital is a professional venture capital firm established in 2001, primarily investing in startups at the early and growth stages. Ten years ago, we began extending our investments into the healthcare sector, where we have invested in approximately 50 companies.

In 2015, Legend Capital established an investment fund focused on the healthcare sector, with investments spanning multiple areas including overall healthcare, diagnostics, medical devices, healthcare services, and biopharmaceuticals.

First, I believe that healthcare investment in 2016 was not cold at all; on the contrary, it was extremely hot. Capital was abundant. Many institutions, including venture capital firms, industrial capital, listed companies, and commercial insurance companies, have established their own professional healthcare investment teams, including dedicated healthcare funds. This reflects a surge of capital flowing into the sector.

Second, several hotspots have rapidly emerged within the healthcare industry. Some so-called “blue ocean” sectors, including mobile health, precision medicine, and genomics, are gradually becoming “red oceans.” This trend fully demonstrates that these areas are receiving increasing attention from the industry, representing future trends and directions for development. In this process, we can clearly perceive certain irrational behaviors, primarily manifested as short-sighted pursuit of quick profits.

From my past experience, a company’s growth requires more than a decade, or even longer, of accumulation. Among the third-party diagnostic companies invested in by Legend Capital, KingMed Diagnostics, the largest outsourced service provider, has a history of nearly 20 years to date. Among the private hospitals invested in, Wuhan Asia Heart Hospital, the largest cardiac specialty hospital, has been in operation for 16 to 17 years. These enterprises have become industry leaders only after undergoing thorough market testing.

Whether in mobile health or precision medicine, many leading companies are bound to emerge across various fields in the future. However, we also believe that this requires a gradual process of cultivation. It is short-sighted and overly eager for quick success to assume that an industry can be disrupted within three to five years by applying purely internet-centric thinking.

Another notable trend is cross-industry integration. Many insurance companies, upon entering the healthcare sector, have not only made investments but also built their own industrial ecosystems. Listed companies are similarly extending their reach; pharmaceutical firms, for instance, have expanded their investment portfolios from drugs to medical devices, diagnostics, and related fields. This cross-sector expansion has been a significant change observed over the past year.

From our investment experience, a company’s journey from its early establishment through the growth stage to an initial public offering (IPO) is a relatively protracted process. Throughout this period, investors participate in what resembles a relay race; it is unlikely for any single investor to accompany a company from its inception throughout decades of development. The investment horizon of a fund rarely exceeds ten years.

Within Legend Capital’s investment strategy, there is a remarkably straightforward approach: selecting the top-tier companies in an industry and engaging in long-term, continuous collaboration with them. Such partnerships may well span across multiple fund cycles, starting from startups’Seed Stage,Angel Stage,Early stage,This approach extends all the way through to a company’s IPO, and even encompasses mergers and acquisitions as well as large-scale industrial collaborations. This relay-style model represents an innovative investment strategy and methodology that Legend Capital will adopt in its future investments.

Furthermore, as healthcare policies become increasingly standardized—such as the implementation of stricter Good Manufacturing Practice (GMP) regulations in the pharmaceutical sector and more rigorous oversight of data authenticity in drug approval submissions—the regulatory framework creates a more favorable competitive environment for high-quality enterprises. This shift enables superior companies to gradually outcompete and displace inferior ones, embodying the principle that “good money drives out bad.”

In the future, investors will face immense challenges, as today’s market is not short of capital, nor is it lacking in innovative projects. However, if an investor lacks the capacity to provide services across the entire industrial chain, capital chain, and value chain, it will be difficult to offer sufficient support and assistance to portfolio companies. In the competition for assets, your advantages and distinctive features will fail to stand out.

As an investment firm, it is not only essential to have the ability to select high-quality enterprises, but more importantly, to provide comprehensive and robust value-added services tailored to each stage of a company’s development. Beyond capital, what growing enterprises need most includes industrial resource support, corporate governance improvements, and even assistance with future integration into the capital markets.

Legend Capital has consistently upheld the investment philosophy of “wealth with integrity.” Over the past year, we have not only invested in healthcare companies driven by purpose and passion, but also actively sought out enterprises capable of reshaping the industry landscape through our investments.

As an investor, I am committed to contributing to the healthy development of society. To this end, we have established a charitable foundation together with our portfolio companies, aiming to provide health assistance and care to impoverished children in need.