Deng Feng in Conversation: A Snapshot of Northern Light's Investment Portfolio and Focus Areas

On Tuesday, April 19, 2016, the “Lighting 2016: Molecular Diagnostics in Precision Medicine” Forum, hosted by Northern Light Venture Capital (NLVC), was held at the Marriott Hotel in the HNA Tower, No. 26A Xiaoyun Road, Chaoyang District, Beijing. NLVC’s “Lighting” themed events are closed-door salons focused on discussions around companies already invested in by NLVC and its recent key investment areas. The primary objective is to help more startups understand NLVC’s investment philosophy, thereby facilitating more effective alignment and communication between entrepreneurial ventures and Northern Light Venture Capital.

Deng Feng, Founder of Northern Light Venture Capital; Zhan Qimin, former Academician of the Chinese Academy of Medical Sciences and former Vice President of Peking Union Medical College; and Han Yusheng, Founder and CEO of Burning Rock Biotech, all attended the event and delivered keynote speeches.

Deng Feng, Founder/Managing Director of Northern Light Venture Capital

VCBeat reporters attended the event, and Deng Feng’s keynote remarks are summarized below.

• Over the past 11 years since its establishment, Aurora Venture Capital’s persistent focus can be summarized by two keywords: first, “technology,” and second, “early-stage.”

Aurora Fund Management manages a total of eight funds, including four U.S. dollar-denominated funds and four RMB-denominated funds. As of now,Invested in 170 companies, with 70% of the investments made at Series A., 10% are Series B rounds, there are also some Pre-A rounds, as well as a number of incubated projects.

The companies invested in by Aurora Investment are basically all related to technology, initially in the TMT sector, such as the internet and IT.Since 2008 and 2009, Aurora Venture Capital has begun investing in healthcare, life sciences, clean technology, and renewable energy., in the healthcare sector, Northern Light Venture Capital entered the market later than investment firms such as Qiming Venture Partners and Legend Capital, but has been expanding its presence in this field at a relatively rapid pace in recent years.

• Which sector will drive China’s long-term development over the next decade? Without a doubt, it is healthcare.

Investment in sectors closely tied to people’s daily lives and in urgent need of improvement—such as healthcare, tourism, and education—will continue to increase, bringing growing opportunities.

Over the past 5 to 10 years, numerous health-related technologies have witnessed rapid development on a global scale, such as genetic and molecular testing technologies, which have created new opportunities for innovation and entrepreneurship. In this light,Economic growth, greater emphasis on lifestyle, and advancements in health technology are three powerful, mutually reinforcing drivers that have increasingly fueled investment enthusiasm in the healthcare sector.This trend began in 2014 and 2015, and I believe investment in this sector will increase further this year. In March 2016, Zero2IPO released statistical data comparing fund fundraising over the same period, showing that most newly established funds were focused on the healthcare and medical sectors.

We have observed several phenomena in the field of medical technology,First, China's technological fields, such as molecular diagnostics and gene sequencing, are on par with global standards., and developing faster than other regions globally,Second, there is a growing emergence of entrepreneurs from cross-industry backgrounds., In the past, most entrepreneurs in the medical field had accumulated extensive experience within the industry and were often seasoned practitioners; nowadays, there has been a significant influx of entrants transitioning from the broader health sector.Third, from the perspective of the development of China's capital market, mergers and acquisitions are also a major trend., will also increase.

• Over the past one to two years, there has been a growing number of new funds in the United States dedicated specifically to the healthcare and pharmaceutical sectors, which may signal the beginning of a global wave of innovation and entrepreneurship in medicine and pharmaceuticals.

At the beginning of the 21st century, U.S. venture capital firms paid little attention to the healthcare and pharmaceutical sectors. However, a decade ago, many American investors recognized the high returns on investment in healthcare. Compared with the United States, China’s per capita health expenditure is significantly lower, amounting to approximately one-sixth of that in the U.S. when measured against per capita GDP. According to China’s 13th Five-Year Plan, the share of the healthcare sector in China’s GDP is expected to increase substantially, thereby creating greater opportunities for startups. In certain fields, Chinese technology has achieved global competitiveness; some portfolio companies of Northern Light Venture Capital have already sold their products worldwide, and it is believed that such enterprises will become increasingly numerous in the future.

The investment climate in China’s pharmaceutical sector is improving. Previously, few funds invested in the pharmaceutical industry, with most capital flowing into medical devices, instruments, consumables, and services. In the United States, developing an innovative drug often requires hundreds of millions, or even billions, of U.S. dollars, and the R&D timeline is exceptionally long—ranging from seven to eight years to over a decade. The pharmaceutical R&D sector is characterized by asset-light operations and high returns, making it well-suited for venture capital investment.

China’s pharmaceutical industry generates annual revenues in the trillions of yuan. There are numerous publicly listed Chinese pharmaceutical companies, many of which command high price-to-earnings (P/E) ratios and deliver solid returns.So, does pharmaceutical R&D require massive investment? In fact, the cost of drug development has not been continuously increasing.With technological advancements, China has many advantages over the United States in pharmaceutical research and development. During the period of China’s 12th Five-Year Plan, many innovative drugs were undergoing Phase II clinical trials. Pharmaceutical R&D used to be highly complex, involving processes such as drug screening, and was very time-consuming; however, current technological progress has the potential to shorten this process. In August 2015, former U.S. President Jimmy Carter was diagnosed with a brain tumor and treated with the fourth type of cancer immunotherapy. A follow-up examination in November showed that the tumor had disappeared. Many people believe that biopharmaceuticals in the oncology field will present a new wave of investment opportunities.

• Our most significant investments are in pharmaceutical-related sectors, including biologics, chemical drugs, and medical devices, as well as pharmaceutical distribution channels, specialized hospitals, and hospital information systems.

Investment in China’s health sector continues to rise; overall, pharmaceuticals account for the largest share, while biotechnology also garners significant attention.


We have segmented this industry into categories including pharmaceuticals, medical devices and instruments, healthcare services, as well as online sales and other sectors. The areas marked with blue dashed lines in the figure above represent the fields that Aurora Venture Partners has previously invested in or is currently monitoring.

l  Medical Devices and Equipment Sector

Numerous new technologies have emerged in this field, such as medical imaging technologies—ranging from image sensors and imaging equipment to image processing, remote diagnostic applications, and AI-integrated imaging diagnostics. This also includes new technologies and equipment in orthopedics, as well as investments in related consumables manufacturers.

Aurora Fund also places significant emphasis on platform-based companies. We believe that by securing a larger base of hospitals and patients on the front end, new products can be continuously introduced on the back end. These products can be developed in-house or acquired through mergers and acquisitions.

l  IVDDomain

In 2015, gene sequencing was the hottest segment in the field of molecular diagnostics. Aurora Venture Capital entered this sector early, investing initially in BGI Genomics, Burning Rock Biotech, and Annoroad Gene Technology, and more recently in Basecare Medical. These four companies focus on different areas. In addition, we have also invested in companies specializing in microfluidics technology, fluorescent PCR, and digital PCR.

l  Pharmaceutical Distribution Sector

Our earliest investment in a healthcare service project—CITIC Pharmaceutical—is a venture in the pharmaceutical distribution sector. This project provides services aligned with healthcare reform, redirecting patients from tertiary hospitals to community health stations, community health centers, and community hospitals, as well as to elderly care and rehabilitation facilities, thereby promoting tiered diagnosis and treatment and supporting the healthy development of China’s healthcare industry. Additionally, we have invested in Yunnan XinKang, the leading company in China operating community clinics.

l  Internet Healthcare Sector

In the realm of internet healthcare, or “E-health,” Northern Light Venture Capital focuses primarily on hospitals and physicians. For instance, E-Psychology is China’s largest mental health service platform, while Xinlianda introduces mobile healthcare into hospitals by deploying mobile devices within hospital settings.

l  Biopharmaceutical Sector

We believe that the biopharmaceutical sector demands a high level of specialized expertise. Since 2010, we have invested in companies providing antibody services and developing antibody products, and more recently, we have invested in a pharmaceutical company focused on hypoglycemic agents.

To reiterate, Aurora focuses on startups with two fundamental criteria: first, new technology; second, early-stage. We continue to monitorDistinctive Digital PCR Technology, enabling faster testing times, more compact testing equipment, and lower testing costs. Additionally,Diagnostic Tools, Devices, and Instruments Based on Big Data Analysis of Clinical Medical Data, a crucial aspect of precision medicine is data analysis. This encompasses both data sourcing, including acquisition, and subsequent large-scale data analysis through bioinformatics, which holds significant importance for various diseases.

The genomics industry holds substantial future potential, driven by in-depth advancements in new technologies, instruments, and applications. Should any company achieve breakthroughs and establish a competitive edge in this domain—not just Aurora Fund—many venture capital firms in China would be eager to invest.

We are also monitoring other sectors, including microbiology. IVD remains closely tied to molecular diagnostics, which is a key investment focus for Northern Light Venture Capital.

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