Amid Capital Winter, Four Healthcare Companies Secure Nearly RMB 9 Billion in One Week

Text| Hao Xueyang, Deng Xueyuan

In August, as summer waned and early autumn arrived, capital in the primary market cooled, making the “winter chill” theory a new buzzword. Whether it was the frequent reports of large-scale layoffs at companies or the successive closures of startups, everything seemed to signal that the cold winds of the capital winter were growing stronger. Yet, in this season seemingly ravaged by chilling gusts, the healthcare sector repeatedly secured significant capital injections, including Happy Dentistry, Jingyi Shares, Quyi Network, andGenePlusWith a total financing amount of nearly 900 million, the counter-trend path of the healthcare industry has become a remarkable sight in the midst of winter. Now, VCBeat (WeChat ID: vcbeat) takes you through what happened during this extraordinary week.

Is There a Capital Winter? Data shows that the number of angel and VC investments in the first half of the year dropped by one-third. This overall downward trend can be described either as a capital winter or as a normal phase in the capital cycle.

The primary market cooled off in the first half of this year, largely due to the impact of the secondary market. Last June, the entire A-share market experienced a significant decline, and under the reverse effect of leverage, LP assets shrank substantially. Many billionaires became millionaires overnight.

For many venture capital (VC) firms, the limited partners (LPs) of their first funds are often individuals or family offices. Consequently, turbulence in the secondary market quickly and severely impacts investments in the primary market. If fundraising encounters difficulties, it will inevitably affect the pace and scale of the fund’s investments. Therefore, the precipitous decline in LP assets has made fundraising for primary market funds increasingly challenging.

Private equity funds encompass three core stages: investment, management, and exit. The collapse of the primary market has not only intensified fundraising challenges but also, due to the high entry barriers of China’s A-share market and the New Third Board (NEEQ), resulted in the absence of a free capital market akin to NASDAQ. This structural deficiency has made fund exits particularly difficult. Among companies that successfully secure financing, only one-sixth achieve exit through initial public offerings (IPOs), while one-third exit via mergers and acquisitions (M&A). The overall exit rate stands at a mere 0.1%. Furthermore, the postponement of the Strategic Emerging Industries Board (Zhanxin Ban) and liquidity constraints on the New Third Board are also significant contributing factors.

The bubble in the mobile internet sector caused companies lacking clear business models and relying on cash burn for aggressive expansion to suffer sudden breaks in their capital chains, forcing them to withdraw completely from competition. However, VCBeat (WeChat ID: vcbeat) argues that, relative to the capital cycle, a company’s industry cycle and product cycle are more critical to its survival.

Currently, China is undergoing a new round of consumption upgrading. Startups often tout their concepts with extravagant claims, acting as if they are a century ahead of the competition. However, beneath this glossy exterior often lies an unsound business model. These artificially created “pseudo-demands” may deceive investors during capital frenzies, leading to so-called “strategic positioning” for non-existent strategies. Yet, missteps in supply chain positioning and inadequate forecasting of product life cycles have turned products that founders enthusiastically believed would change the world into a series of failures.

The objective existence of economic cycles, much like the four seasons, entails distinct investment logics at each stage. Summer is scorching; during this phase, market participants are often in a feverish state of mind, tending to cluster around conceptual investments, which, while risky, can also give rise to several unicorns. In winter, as passion wanes and rationality returns, investors become relatively conservative, often favoring companies with a stronger offline presence, robust cash flow, and solid self-sustaining capabilities.

Let’s first look at the most significant financing events in the healthcare sector in August:

Joyous Dental

August 23,Happy Dentistry Announces RMB 350 Million in Series A Financing, with Huatai Healthcare Industry Fund, Zhongwei Anjian Venture Capital Fund, and Zhuhai Century Equity Investment Fund serving as the lead investors.

Happy Dental Clinic Co., Ltd. was established in 2007 as a chain dental healthcare organization integrating medical care, scientific research, teaching, training, and management. Happy Dental is its flagship brand, offering services such as cosmetic dentistry, orthodontics, and dental implants. Currently, Happy Dental has established 8 dental hospitals and nearly 60 chain dental clinics in more than ten cities, including Beijing, Shanghai, Shenzhen, Tianjin, Shenyang, Xi’an, Wuhan, Nanjing, and Jinan.

Following this round of financing, Happy Dental will allocate the funds to enhance the quality of medical services, develop specialized dental disciplines with distinctive advantages, innovate healthcare operation and management models, strengthen the diagnostic and treatment capabilities of primary care services, and explore collaborative models with public hospitals.

Jingyi Shares and Quyi Network

August 25,Kyee Shares Announces RMB 97 Million in Series C+ Funding。

Historical data shows that in December 2012, Kyee Group secured RMB 55 million in Series A financing, with SoftBank China as the investor. In March 2014, the company raised RMB 93 million in Series B financing, led by CDH Investments and participated in by SoftBank China. In August 2015, Kyee Group obtained RMB 221 million in Series C financing, led by Shengshijing Investment and participated in by SoftBank China and Honghui Capital. It is evident that Kyee Group raised substantial amounts in each round of financing.

Shanghai Jingyi Technology Co., Ltd., established in 2004, is a renowned enterprise in the healthcare informatization industry. Its business scope covers mobile health, medical Internet of Things (IoT), nursing education, Hospital Resource Planning (HRP), supply chain platforms, Healthcare Customer Relationship Management (HCRM), cloud-based Hospital Information Systems (HIS), and public health.

Currently, Kyee Group has provided technologies, products, and services to more than 3,000 medical institutions in China. The company has established technology centers in Shanghai, Xi’an, Nanjing, and other cities, and jointly founded a joint research center with Shanghai Jiao Tong University.

At the very same time that Jingyi Shares secured financing,Quyi Network Announces Completion of RMB 216 Million in Series B+ Financing。

Interestingly, Quyi Network is Jingyi Shares’ strategic initiative in the smart healthcare sector. The project covers the entire patient journey, including consultation, medication dispensing, medical record management, and referral, thereby achieving a high degree of integration in healthcare delivery.

Gene+

On August 26,Beijing Genetron Health Technology Co., Ltd. Announces Successful Completion of RMB 200 Million Series A Financing, marking the largest Series A financing round to date in China’s precision medicine sector, specifically in the field of liquid biopsy. This round was led by BGI Genomics, with participation from Volcanic Stone Investment, Sinopharm Capital, and other investors.

Genetron Health is a company specializing in the field of oncology genetic testing, founded in Beijing in April 2015. Since its establishment, Genetron Health has built high-throughput sequencing genetic testing laboratories, bioinformatics analysis systems, and oncology medical interpretation teams according to the highest industry standards. It has independently developed core technologies such as ER-Seq, mTBI, and mClone, initially forming a non-invasive, precise, and dynamic ctDNA detection system. The company provides customers with a series of clinical services and products, including precision oncology medication guidance, treatment efficacy monitoring, postoperative recurrence detection, and early screening.

Currently, Genetron Health’s service network covers 18 key provinces and municipalities across China, more than 100 hospitals, and hundreds of oncology clinical experts. To date, Genetron Health has launched over 60 ctDNA research collaboration projects, served more than 1,000 cancer patients, accumulated tumor samples and data from over 6,000 cases, and generated up to 60 TB of tumor gene sequencing data.

An analysis of these four cases reveals the current four major investment directions and logics of VC/PE:

For companies currently navigating the “capital winter,” it is imperative to promptly scrutinize their business models and strive to meet key criteria: addressing essential needs, leveraging high technology, maintaining mature offline distribution channels, and demonstrating strong self-sustaining revenue generation. If these criteria are not met, companies should swiftly escape the trap of vanity metrics and KPIs and accelerate strategic transformation. In these challenging times, valuation is not the primary concern; as the adage goes, “survival of the fittest.” The paramount priority is to enhance the company’s margin of safety through adequate capital reserves.

Furthermore, under conditions of limited funding, aggressive expansion—whether in terms of staffing or business scope—should be avoided as much as possible during downturns; greater caution is required to ensure the security of the capital chain.

For investors, this is an opportune moment. VCBeat (WeChat ID: vcbeat) It is noted that over the past 24 months, more than 900 early-stage funds have successfully completed their fundraising. This indicates that, in contrast to the “capital winter” faced by entrepreneurs, VC/PE firms are currently in a wait-and-see mode with substantial cash reserves on hand. Capital booms often lead to inflated valuations for certain star companies, whereas capital winters help bring corporate valuations back to rational levels. The spring for VC/PE may just be beginning.