Tongdu Capital Backs Health Tech Startups Addressing Industry Pain Points and Driving Value Chain Upgrades

Recently, Tongdu Capital released a report titled “Tongdu Insights: Analysis Report on Entrepreneurship and Investment & Financing in Smart Health (2015).” Drawing from the development trajectories of smart health in China and the United States in 2015, the report outlines the development trends for China’s smart health sector in 2016. Furthermore, Tongdu Capital noted in the report that it favors startups that leverage advanced technologies and high-quality services to genuinely address pain points in the field and deliver substantial value to industrial chain upgrading.

Tongdu Capital is a venture capital firm focused on innovation and entrepreneurship opportunities in the healthcare sector. Since 2014, Tongdu Capital has been dedicated to research and investment practices in this field.

In 2015, against the backdrop of the government’s healthcare reform initiatives, a wave of startups emerged, while traditional enterprises actively pursued transformation and strategic positioning. From an investment perspective, Tongdu Capital aims to compile key information and representative events in this sector—particularly startup investment activities—with the hope of providing insights for industry practitioners and entrepreneurs.

In its report, Tongdu Capital consolidates concepts such as “Internet Healthcare,” “Mobile Healthcare,” and “Mobile Health” under the umbrella term “Smart Healthcare.” From its perspective, healthcare will extend toward comprehensive health management in the long run. While traditional medicine focuses on disease diagnosis and treatment, comprehensive health places greater emphasis on maintaining and improving health status, disease prevention, and post-illness rehabilitation management. This broader scope represents the future direction of development. Furthermore, technology is diversified, exerting varying degrees of impact across different levels and depths within the health sector; therefore, it should not be confined to a single technological approach.

“Smart Health”refers toYes:By leveraging next-generation information and communication technologies, such as the Internet, the Internet of Things (IoT), and big data, to provide the public with more intelligent health services—including medical care, health management and promotion, health insurance, and supporting services for pharmaceuticals and medical devices—with the aim of improving the quality and efficiency of health services, reducing health-related costs, and promoting the physical and mental well-being of the general population.

In addition, to facilitate research, Tongdu Capital has segmented the smart health sector along dimensions such as users, business models, and payers. The segmentation primarily encompasses ten subsectors: innovation in diagnosis and treatment processes, health informatization, disease management, medical media and communities, telemedicine, health consultation and management, health consumption, pharmaceutical e-commerce and pharmacy services, intelligent devices, and novel diagnostic and therapeutic services.

2015: Accelerated Transformation and Innovation in China’s Smart Health Market

The Chinese smart health market has witnessed accelerated transformation and innovation, with 2015 being a particularly prominent year. From a policy perspective, comprehensive and in-depth healthcare reforms have been implemented, accompanied by a continuous stream of major new policies at the State Council level. The industry faces both challenges and opportunities, poised for structural restructuring. Economically, resident health expenditure has continued to rise, indicating significant potential for future growth in per capita health spending. Socially, "Healthy China" has been elevated to a national strategy, and demographic shifts will exert a profound impact on the smart health sector. Technologically, 2015 was a harvest year for medical technology, marked by milestone progress in precision medicine, led by advancements in molecular biology and immunology.



2015 was not only a year for the transformation and strategic layout of the traditional pharmaceutical industry, but also a year when internet giants and insurance companies crossed industry boundaries. Frequent large-scale investments or mergers and acquisitions occurred, with some non-pharmaceutical listed companies undergoing a complete transformation into the broader health sector or adopting a dual-core business strategy. Traditional pharmaceutical enterprises are important participants in smart healthcare, possessing industrial advantages accumulated over many years. However, they have also revealed weaknesses when confronted with the impact of new technological forces represented by the internet. Therefore, it has become a common strategy to compensate for these weaknesses by investing in or acquiring innovative companies, or by forming strong alliances with internet companies to maintain competitive advantages.



Tongdu Capital selected 230 startups that publicly disclosed financing information in 2015 as the research sample,Entrepreneurship and investment/financing activities are primarily concentrated in the angel and Series A stages, with a focus on early-stage investments. In terms of entrepreneurial directions, they are mainly distributed in niche sectors such as innovation in diagnosis and treatment processes and health consumption. Moreover, several large-scale financing rounds occurred in 2015 for companies beyond the Series B stage. Most of these companies were established relatively early, originating during the PC internet era. With the advent of the mobile internet era, they achieved rapid development and gained capital recognition by leveraging their accumulated medical resource advantages over the years. A typical example is Guahao.com, which represents an innovation in diagnosis and treatment processes. There are also companies that emerged during the mobile internet period, such as Medlinker, which focuses more on physician tools and communities, competing for doctor resources. Pharmaceutical e-commerce has also gained capital recognition under the expectation of favorable policies.



Tongdu Capital has further subdivided ten major sectors and selected representative companies for reference. Taking the pharmaceutical e-commerce and pharmaceutical care services sector as an example, it is categorized into four models: B2C, B2B, O2O, and pharmaceutical care services. However, these business models are continuously evolving, with increasing integration among them, and may eventually converge in the future. The classification criteria are based on the model each company initially adopted to enter the market, to facilitate categorization.



2015：The U.S. Smart Health Market Remains Hot

Market Environment for Smart Health in the United StatesFrom a policy perspective, the United States has been consistently attempting to regulate and encourage the development of smart health, with active promotion across all levels of government. From an economic standpoint, U.S. healthcare expenditures have remained persistently high, creating strong demand for cost containment. The increase in mergers and acquisitions between insurance giants and healthcare institutions in recent years also aims to enhance operational efficiency. From a social perspective, consumers are playing an increasingly prominent role in smart health, giving rise to new business models. Meanwhile, as the practice environment changes, a growing number of physicians in private practice are returning to integrated healthcare systems, leading to shifts in the industry’s structure. From a technological perspective, three of the ten breakthrough technologies selected by the Massachusetts Institute of Technology (MIT) are related to healthcare and medicine, and startups are beginning to genuinely apply technologies such as 3D printing, AR/VR, and big data analytics to the medical field.



The overall data for the U.S. digital health sector in this report are primarily sourced from Rock Health. The total investment and financing amount in the United States in 2015 ($4.5 billion) was comparable to that of 2014 ($4.3 billion), indicating a continuously vibrant market with positive expectations for digital healthcare. In 2015, there were 302 disclosed financing deals exceeding $2 million, with an average deal size of approximately $14.8 million, representing a slight increase compared to the previous year.



Tongdu Capital has selected representative cases from various specialized sectors in the United States. The primary objective of most of these cases remains to enhance healthcare efficiency and reduce costs. Furthermore, as public awareness of smart health continues to grow, an increasing number of consumer-centric startups are emerging, with greater emphasis being placed on user experience.



The following is6 Innovative and Representative Startups from China and the United StatesofBrief Introduction.



KuaiMa Medical,Starting with rational drug use in hospitals, reducing prescription risks by avoiding physician prescribing errors or misuse through prescription review, standardizing physician behavior, ensuring medication safety, and lowering healthcare costs, while gradually evolving toward Pharmacy Benefit Management (PBM), represents an attempt to control medical expenditures.

Leya Network,By curating high-quality offline dental clinics to provide users with consultation and appointment services, and by partnering with insurance companies to launch dental insurance products that enable direct billing, this initiative represents an attempt to integrate commercial health insurance with medical care scenarios.

Burning Rock Biotech,Centered on bioinformatics and next-generation sequencing (NGS) technologies, it provides clinical and research services for genetic testing in personalized cancer therapy, representing an endeavor to apply genetic technologies to precision medicine.

Three Chinese startups, each representing three critical directions in the development of smart healthcare: medical cost containment, commercial health insurance, and precision medicine.

Pill Pack，Starting with rational drug use, the system integrates with pharmacy systems to retrieve prescription information, which is then categorized and labeled for delivery. With intelligent medication reminders at the user end, it perfects even the smallest details of medication management, delivering an exceptional user experience.

Oscar Health，At its core, it is a health insurance company. While its insurance products lack significant innovation, it has garnered considerable consumer acclaim and become highly sought-after in the capital markets by delivering a superior user experience through 24/7 telemedicine, nursing services, and appropriate guidance.

Flatiron Health，is a typical example of leveraging big data technology. As a pioneer in the oncology niche, it collects and cleanses tumor data, with the future aim of addressing medical challenges through data-driven solutions.

Most U.S. startups aim to build competitive moats by leveraging their unique strengths; these three cases primarily reflect the impact of consumer experience and technology.

Based on the aforementioned analysis, Tongdu Capital has summarized six major trends in the development of smart health in China.ItsVCBeat believes that China’s smart health sector is still in its early stages of development, with key constraints on explosive industry growth gradually being overcome, offering immense opportunities in the coming years. Tongdu Capital is optimistic about startups that leverage advanced technologies and high-quality services to effectively address pain points in this field, thereby delivering significant value to the upgrading of the industrial chain.



Tongdu Capital stated that in 2016, “Tongdu Insights: Analysis Report on Entrepreneurship and Investment & Financing in Smart Health” would be released on a quarterly basis.