Vivo Capital's Cao Yibo vs. Gengmei CEO Liu Di: Core Mission of Aesthetic Platforms is to Help Consumers Access High-Quality, Reasonably Priced Services (Xingdong Medical Tech Open Class Session 11)

Event Name:Xingdong Xiangyi HuiIssue 1Open Course
Event Dates: November 7–8, 2015
Organizers: Legend Star, VCBeat, BlueRun Ventures
Guest Speaker:

Cao YiboManaging Director, VIVO Capital
Possesses extensive experience in the Chinese pharmaceutical industry. Prior to joining Vivo Capital, served as Head of Strategy and Business Development for Nycomed’s North Asia region, where he played a key role in restructuring Nycomed’s China operations.

Liu DiCEO of Gengmei
In July 2015, Gengmei, a medical aesthetics app, completed a Series B financing round worth tens of millions of U.S. dollars, led by VIVO Capital and participated in by Sequoia Capital.

Below are highlights from our guests’ remarks. For the full presentations, please follow VCBeat’s WeChat account (vcbeat) to watch.

Investment Logic of the Gengmei App

Cao Yibo

1. Compared with other mobile health initiatives, medical aesthetics is an industry that is more closely aligned with end users, as most other projects target patients. Although some jokingly refer to being unattractive as a “disease,” this is merely in jest; in reality, consumers of medical aesthetic services are typical, healthy individuals.
2. VIVO Capital is a relatively traditional fund with a 100% focus on healthcare investments. It manages approximately $1.8 billion in assets and has offices in Silicon Valley, Beijing, and Shanghai. In China, it targets companies in their growth stage for investment.

3. The medical aesthetics industry is a sector that VV Capital has long favored. We previously invested in Revance, a company developing topical botulinum toxin, a revolutionary anti-wrinkle product currently in Phase III clinical trials. We also invested in Tria, a company specializing in laser hair removal and skin whitening devices. Its products have already been commercialized and became best-sellers on Taobao even before their official launch in China, partly due to endorsements by lead actors in popular Korean dramas. Additionally, we have invested in projects such as Bioform, a provider of dermal fillers for plastic surgery. While we maintain a strong focus on the medical aesthetics sector, our previous investments have primarily been driven by technological innovation.

4. Conservatively estimated, the market size of China's cosmetic and plastic surgery industry has reached RMB 50 billion. Pain points in this sector include: high marketing costs, with excessive marketing accounting for half of the total medical aesthetics market; inadequate hospital evaluation mechanisms—while patients can often identify the best hospitals for treating various diseases, such clarity is lacking in the medical aesthetics industry due to the absence of a robust evaluation system; furthermore, many small clinics with leading-edge techniques suffer from insufficient patient traffic, as the significant disparity in scale among aesthetic surgery institutions makes it difficult for smaller players to bear the high costs of promotion.

5. The core mechanisms of medical aesthetics platforms are as follows: First, they must verify the qualifications of hospitals and physicians. Second, to address excessive marketing, they should enhance transparency through user feedback sections, thereby mitigating information asymmetry. Third, by integrating resources from plastic surgery institutions, they create value for users and expand the customer base for these institutions.

6. The Chinese medical aesthetics market exhibits several unique development trends. For instance, the user base skews younger, with 50% of cosmetic surgery procedures in China performed on individuals aged 20 to 35, reflecting relatively high aesthetic expectations; by contrast, the average age of users in the United States is higher. Additionally, minimally invasive procedures have become mainstream in the medical aesthetics market, with many providers focusing on enhancing user experience. Furthermore, there is a strong culture of community sharing, as consumers are generally willing to share their personal experiences, even posting unblurred before-and-after photos of their surgical results.

7. The medical aesthetics industry is currently attracting significant attention from investors, with many companies securing substantial financing. However, the industry still needs to address certain challenges, such as the inability to curb excessive offline upselling and the lack of clear service standards.

Liu Di

1. In the mobile health sector, I am a serial entrepreneur. I launched my first project in 2009, a patient-physician community for rare diseases, with the aspiration of creating a world-changing initiative. By 2011, I realized that this model faced certain business model challenges and lacked viable monetization channels. Consequently, I joined Chunyu Doctor, serving as Product Director, then Marketing Director, and ultimately rising to Vice President of Business Development, where I remained until 2013.

2. Gengmei defines the scope of the consumer healthcare market. The consumer healthcare market comprises health and medical services that are not covered by hospitals or medical insurance, but which healthy individuals are willing to purchase to improve their quality of life, including plastic surgery, dentistry, andrology, and obstetrics and gynecology.

3. Gengmei is the company most closely connected to users in the medical internet sector. Founded in August 2013, the company started with just one person, Liu Di, RMB 10,000 in initial capital, and a Weibo marketing account.

4. The biggest challenge at inception was the lack of physicians; attracting China’s top plastic surgeons to the platform posed a significant hurdle. The key lay in understanding the distinct needs of physicians, hospitals, and users. Hospitals possess professional expertise and provide specialized content to build user trust, yet they struggle with brand visibility. Therefore, we needed to offer these physicians and hospitals a channel for brand building. As an internet company, we have the resources to help hospitals and physicians amplify their brands, thereby enabling our internet healthcare platform to secure access to physician and hospital resources through this approach.

5. Plastic surgeons enjoy a high degree of independence; for them, attracting patient flow and generating revenue are the top priorities. Gengmei’s strategy was to first secure the most prominent doctors in the industry. The first key opinion leader they onboarded was a leading figure in China’s plastic surgery sector. Gengmei produced a video featuring this industry luminary’s insights on the medical aesthetics field, promoting Perfect Clinic (the initial name of Gengmei’s product). This campaign successfully attracted a large number of renowned plastic surgeons to the platform.

6. At the end of last year, Gengmei produced a video targeted at precision users and distributed it on the largest video platform, which significantly boosted downloads of the Gengmei app. As this program was user-oriented, its content was tailored to the preferences of the target audience. For physicians, the aim was to convey respect for the industry and demonstrate how the platform could assist them. For users, the goal was to clearly communicate the benefits they would gain from the service. Prior to producing the video, the Gengmei team followed over 1,000 core users on Weibo to better understand their psychological needs. By analyzing the content these users engaged with, the team developed the persona of a shrewd, sharp-tongued character who exposes celebrities’ plastic surgery procedures for the video.

 



Question: The monetization model behind the APP is traffic redirection. Currently, overtreatment is a serious issue in the medical aesthetics industry, particularly among Putian-affiliated providers. How do you control this risk?
Liu DiOn one hand, I believe that from the service supply side, we must define what kind of doctors and institutions should provide services. Because our industry is particularly chaotic, it actually presents an opportunity for internet companies or platforms. When people lose trust in the industry as a whole, they have no choice but to trust us. Once top-tier schools, hospitals, and doctors join this platform, it becomes relatively smooth to expand to mid-tier hospitals and doctors, as they will be willing to join the platform. Fudan University publishes an annual departmental ranking; that year, we listed the plastic surgery departments of the top 26 best Grade 3A hospitals in China. We then spent two to three months inviting those doctors to join the platform, before gradually opening up registration for doctors from other public hospitals. Aesthetic medicine consumers are not price-sensitive. If a doctor can truly deliver superior results, consumers will still purchase their services even if they cost RMB 1,000–2,000 or even RMB 10,000–20,000 more than those of other doctors. More importantly, they need to trust that the medical services provided by your platform are indeed of high quality. As long as we can demonstrate that China’s best doctors and medical resources are available on our platform, users will be willing to pay a brand premium for any service offered on our platform.
Cao Yibo: It is impossible for any channel to completely avoid partnering with subpar merchants. Our goal is certainly to replace physicians with lower professional standards through a model that emphasizes greater professionalism and ethical integrity, rather than targeting any specific individuals. Furthermore, there is no perfect, entirely objective method to prove that a platform is superior. When making investment decisions, we also need to analyze other similar business models. For instance, among the 30 partnered merchants, whether Gengmei has higher brand recognition serves as a relatively objective indicator.

Question: Have you considered the legal risks of using celebrity plastic surgery as a guidebook?
Liu Di: It is a well-established fact that most individuals in the entertainment industry have undergone some form of cosmetic surgery. Furthermore, we made thorough preparations before proceeding with this matter. Additionally, if a product becomes involved in a dispute with a celebrity and we are ultimately found to be at no fault, it would serve as a valuable publicity opportunity for us.

Question: Where are users most densely concentrated?
Liu Di: Acquiring users has become increasingly challenging; however, consumers are now more concentrated within specific niche segments. Our top priority is to identify the online spaces where our target users congregate. For us, Sina Weibo offers the most cost-effective channel for user acquisition. It is essential to clearly define your consumer demographic. Furthermore, we must maintain high sensitivity to data and understand the cost-effectiveness of various platforms in order to select the ones best suited to our needs.

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