New Entrepreneurial Frontier Emerges: The Rise of Light-Asset Elder Care

Preface:January 2016VCBeat Eggshell Research InstituteLaunched the first article "In-Depth Review of Asset-Light Entrepreneurship Models in Elderly Care”, this is the second article; subsequently, we will launch a series of studies focusing on the niche sector of asset-light entrepreneurship in elderly care...

Several Latest Data Points:On March 11, 2016, the National Development and Reform Commission released data showing that by the end of 2015, the population aged 60 and above had reached 222 million, an increase of 10 million from the previous year, accounting for 16.1% of the total population. The number of elderly care beds nationwide totaled 6.698 million, representing a 21.5% increase compared to 2014.

The chart above illustrates China’s fertility rates from 1950 to 2000. The first post-war baby boom generation, born between 1953 and 1957, has now entered old age, driving the annual increase in China’s elderly population to 10 million. The second baby boom—the largest in China’s history—comprises those born between 1962 and 1973 and is also approaching retirement age. When this cohort formally enters old age, the annual increase in China’s elderly population will exceed 13 million. According to the Hurun Rich List, this aging demographic represents one of the wealthiest groups in China today, with the highest concentration of high-net-worth individuals. They possess both the financial capacity and the willingness to actively express their consumption preferences. VCBeat Research Institute believes that with the emergence of this new “silver-haired” demographic, China’s elderly care industry will see comprehensive investment opportunities, whether in asset-heavy or asset-light sectors. The massive scale of population aging will reshape China’s entire economic and consumption structures!

Rapid Transition from the Era of Resource Competition to the Era of Capital Competition
A Brief Review of the Developmental Stages of China’s Elderly Care Industry: Since 2005, China’s elderly care industry has officially entered a large-scale phase of privatization. From 2005 to 2016, the industry progressed from a period of rapid privatization-driven growth to the current era of capital competition, with increasingly clear developmental trajectories and more mature business models.

Abroad, Asset-Light Elderly Care Startups Are Booming; Domestic Pioneers Are Actively Laying the Groundwork
Let’s begin with asset-light elderly care startups abroad: The chart below shows a simple search result from AngelList, a renowned overseas venture capital platform, which identified 595 asset-light elderly care startups. More than one-quarter of these elderly care ventures are positioned in elderly nursing care, followed by smart technology for the elderly and health management.

Over the past three years, more than 2,000 age-tech startups have been reported worldwide. In particular, as the U.S. Baby Boomer generation enters old age (with a population of 76 million born between 1946 and 1964) and aging becomes increasingly severe in Europe, a large number of asset-light startups serving the elderly have emerged in recent years in Western developed countries. These ventures span areas such as senior social networking, health management, rehabilitation and nursing care, financial services, smart technology, and cultural entertainment. This trend has also given rise to many investment firms, incubators, and various for-profit and non-profit organizations dedicated to funding aging-related entrepreneurial projects, such as Aging 2.0 and Access Health.

In contrast to the significant attention and support from capital markets for asset-light elderly care startups abroad, domestic capital markets in China have currently focused primarily on the asset-heavy sector of elderly care. Media outlets are saturated with news reports of wealthy investors making substantial acquisitions of elderly care communities and engaging in aggressive land grabs across the country. However, our research indicates that some domestic investment institutions have already entered or plan to enter the asset-light elderly care startup sector. For instance, BlueRun Ventures invested in the smart hardware startup Songshu Hulian in 2014, in the senior e-commerce platform Mi Baba (which has since failed) in 2015, and in the elderly care startup Ermao Care in early March 2016.

VCBeat’s Eggshell Institute has conducted extensive research and compiled a large number of domestic and international cases of asset-light entrepreneurship in the elderly care sector. It has selected several representative cases for analysis and summarized the current investment strategies and directions for the elderly care industry.

From Elderly Care Services to Smart Hardware: Pioneers Illuminate the Path Forward

1. Elderly Care Services: Kangle Nianhua

In the elderly care sector, many companies have entered the market through asset-heavy models such as operating senior care facilities. After accumulating sufficient operational and management expertise, they have expanded into asset-light businesses, including brand licensing, management consulting, and talent development. In contrast, Kangle Nianhua is a typical company that started out in the asset-light segment of elderly care services.

Kangle Nianhua began providing home-based elderly care services in 2008, accumulating management and service capabilities. In 2009, it successively secured the operation rights for multiple elderly care institutions under the “publicly owned, privately operated” model. In 2011, Kangle Nianhua Elderly Care Service Co., Ltd. was established, formally entering the commercial elderly care sector. In 2013, the company ventured into the digitalization of elderly care institutions and launched an elderly care training school. In 2015, it established an enterprise management consulting company and introduced its elderly care community brand. Reviewing Kangle Nianhua’s development trajectory reveals a highly planned and clearly structured growth process. Currently, the company’s business portfolio is highly diversified, encompassing the design, management, and operation of elderly care services, as well as consulting, training, elderly insurance agency services, and product research and development. We believe that this asset-light development model offers valuable insights for many enterprises seeking to enter the elderly care market with an asset-light approach.

2. E-commerce Platform for the Elderly: Mi Baba Ma

Mi Ba Ma was founded in June 2014 by former executives from NetEase, providing services and products for active middle-aged and elderly individuals aged 50 to 70. Its offerings span multiple sectors, including elderly care finance, O2O services, and customized elderly care solutions. The company received an initial investment of several million US dollars from BlueRun Ventures and launched its platform in October 2014. However, it ceased operations before August 2015, marking the project’s failure. VCBeat had previously tracked three relatively professional e-commerce startups targeting the senior demographic. By the end of December 2015, all of these vertical e-commerce platforms had failed. We attribute the primary reasons for their failures to the following three factors:

1. The direct purchasers of products for the elderly are not the seniors themselves but rather their children or relatives; the vast majority of these buyers lack awareness of how age-appropriate products improve the lives of older adults, equating them with ordinary consumer goods;

2. The frequency at which children purchase products for the elderly is too low. Most purchases made by children for their parents are in the form of gifts, characterized by high prices but low purchase frequency, and these products do not have stringent quality control requirements. Children’s attention to their parents is far less than their attention to children, which differs significantly from the maternal and infant e-commerce sector;

3. Compared with comprehensive e-commerce platforms, these vertical e-commerce platforms have not demonstrated advantages in product categories, pricing, or logistics; they are particularly less competitive against large integrated platforms such as Tmall and JD.com when the direct purchasers are young adult children.

Does the failure of several e-commerce projects targeting the elderly imply that such ventures have no chance of success? A comparison with international markets reveals that in developed countries with more severe aging populations, such as Japan and Germany, over 40% of seniors shop online. These figures indicate that China’s e-commerce market for the elderly holds significant growth potential, though it requires more time to mature. Meanwhile, we are observing more specialized, vertical e-commerce platforms for seniors in China actively exploring this space, and we look forward to hearing positive developments.

3. Smart Elderly Care: MaiMai Pension, Sankai Technology, YiLingHou

“Smart Elderly Care” has become a highly popular concept in the elderly care industry over the past two years. As business models in this sector are primarily B2B-oriented and closer to revenue generation, it is easier to establish clear commercial viability amidst the widespread profitability challenges facing the broader elderly care industry. Consequently, a large number of new players have entered the smart elderly care space in a short period; VCBeat alone has identified more than ten such companies. Among them, MaiMai Elderly Care, Sankai Technology, and Yilinghou Elderly Care stand out as three of the most well-known firms, as shown in the figure above. All three secured significant funding rounds in June and July 2015. The timing of these investments clearly highlights the surging momentum and distinct trends within the elderly care sector. With the continued rapid growth of mid-to-high-end elderly care institutions, smart elderly care has emerged as one of the most promising opportunities for asset-light entrepreneurship in the industry.

Number and Proportion of Elderly Care Institutions by Fee Range

The chart above presents statistical data on 23,984 elderly care institutions across China, as recorded by the Elderly Care Information Network. Based on national averages, if institutions with monthly fees ranging from RMB 3,000 to RMB 10,000 are classified as mid-range, and those charging over RMB 10,000 as high-end, there are 2,129 mid-range institutions and 55 high-end institutions. Together, mid-to-high-end institutions account for 9.1% of the total, representing a relatively small proportion. Given that most elderly care institutions in China are currently operating at a loss, the majority of those willing to invest in information technology infrastructure are mid-to-high-end providers seeking to enhance their service quality. From the perspective of overall industry development trends, new players are entering the institutional elderly care market almost every week, with the market growing at a rapid rate of 20%. Driven by strong demands for commercial returns, most of these new entrants represent target customers for smart elderly care solutions, indicating robust market demand. For companies such as MaiMai Elderly Care and YiLingHou, in addition to providing smart elderly care services to B-side institutional and community markets, they should also set their sights on the broader C-side consumer market. Once success is achieved in the B-side market and expansion into the C-side follows, industry giants will emerge in the smart elderly care sector, potentially giving rise to new unicorns.

4. Smart Hardware: Lifesense WeChat Blood Pressure Monitor

The Lexin WeChat Blood Pressure Monitor, developed by Guangdong Lexin Medical, is distinguished by its use of WeChat to connect children and physicians for health management. It provides daily blood pressure monitoring, intelligent blood pressure analysis, and regular health reports for parents. Lexin Medical secured tens of millions of RMB in Series A funding. According to data released by Analysys, Lexin Medical’s total sales of health electronics reached 10.8 million units in 2015, including 3.83 million units of smart hardware. On Chinese e-commerce platforms, Lexin Medical ranked first in sales of smart body scales and received the highest customer satisfaction ratings for smart blood pressure monitors.
In the first two years of the rise of smart hardware, most entrepreneurs focused their attention on young people, with few paying attention to the elderly population. In China, more than 80% of elderly people suffer from one or more chronic diseases. The physiological characteristics and lifestyle habits of the elderly determine that they are the true target audience for smart hardware.

In the startup sector focused on smart hardware for the elderly, we have observed a number of outstanding domestic and international companies and projects, many of which have secured venture capital funding. In China, notable examples include Squirrel Photo Frame and WeChat Photo Frame, which position themselves as providers of entertainment services for seniors, as well as Mango Tag, which tracks elderly users’ daily habits. Internationally, Amulyte and Lively offer monitoring services for the elderly, while SafeWander tracks the movements of patients with dementia. Since the end-users of smart hardware for the elderly are seniors, but the purchasers are predominantly their adult children, product design should focus on addressing the actual needs of the elderly. However, marketing strategies should target their children, leveraging internet-based marketing methods to create blockbuster products.

Distribution channels are the key to success; new entrepreneurial tracks have already emerged.

The figure above illustrates:For asset-light startups in the elderly care sector, online products or services generally need to rely on three key intermediaries—elderly care service providers, children/relatives, and offline institutions—to ultimately reach senior citizens. Attempting to establish direct connections with the elderly through online channels and build an effective business model is currently unfeasible. For the vast majority of seniors, online products and services can only be accessed indirectly through intermediaries and institutions. Therefore, for asset-light startups targeting the consumer (To C) market in elderly care, establishing direct relationships with service providers, family members, and offline institutions is a prerequisite for a viable business model. We believe that a B2B2C approach represents a more effective development path. In other words, for asset-light startups in the elderly care industry, the key to success lies in bridging the "last mile" and building distribution channels tailored to senior citizens.

The diagram above illustrates the asset-light entrepreneurial models and opportunities within the elderly care sector, encompassing various online and offline stakeholders. Through the “Internet Plus” strategy, it integrates the internet, the Internet of Things (IoT), and service networks. Significant asset-light entrepreneurial opportunities exist in establishing connectivity among online entities centered around seniors, between online and offline institutions, and among offline institutions themselves. Many of the entrepreneurial directions depicted already have corresponding startups operating in the market. In the senior-focused app segment, we see Qingjiankang 5060, positioned as a “Facebook for seniors.” For connections between seniors and their relatives, there is Songshu Xiangkuang (Squirrel Digital Frame). Between relatives and healthcare/service providers, we observe Ermao Care. For links between relatives and offline institutions, Hulingjia has emerged. Among offline institutions and offline service providers, Maimai Yanglao is a notable example. While some startups in certain areas have failed, we are witnessing an influx of new entrants. The dawn of success for asset-light entrepreneurship in elderly care stems precisely from this continuous arrival and exploration by emerging startups. For investors, new entrepreneurial tracks have appeared, and the time to position strategically is imminent.

Lead Author | Duan Mingjie (VCBeat Research InstituteSenior Researcher. WeChat ID: duanmingjie199045)