Chen Weiguang of BlueRun Ventures: "What Outpaces a Horse Carriage Is Never Just a Faster Horse Carriage" – Insights from StarMed HealthTalk Public Lecture Series #9

Event Name:StarHealth HubIssue 1Open Course
Event Dates: November 7–8, 2015
Organizers: Legend Star, VCBeat, BlueRun Ventures China
Featured Speaker:

Chen Weiguang
BlueRun Ventures ChinaPartner
Joined BlueRun Ventures China in 2001 as a Partner, based in Beijing, focusing on early-stage investments in mobile healthcare, mobile internet, big data, and enterprise applications. Currently serves at Ganji.com and Chunyu Doctor,Xingshulin, board member of multiple innovative enterprises including Echo, Qingyun, and others.

Mr. Chen Weiguang’s presentation was titled “Profit Models of Mobile Health》Below are highlights from the guest’s remarks. For the full speech, please follow VCBeat on WeChat (vcbeat) to watch.

 Profit Models of Mobile Health

1. The business model of mobile health is not as clear-cut as those of e-commerce and online advertising, with no definitive answers.

2. Profit equals newly created value minus marginal cost; if marginal costs increase, profitability becomes impossible. Optimizing the existing ecosystem does not necessarily yield profits, nor does it guarantee disruption or the creation of greater value. For instance, successful startups are never merely iterations of outdated models—consider Alibaba’s e-commerce platform, which did not evolve from traditional horse-drawn carriage businesses.

3. While the healthcare ecosystem certainly faces significant pain points, if thinking remains confined to optimizing the industrial chain, it will be impossible to fundamentally rectify the distorted links. Hence, what surpasses a horse-drawn carriage in speed is certainly not a faster horse-drawn carriage.

4. Restructuring the value chain equates to reducing marginal costs; the key is to determine whether one can bypass hospitals and reconfigure the healthcare delivery chain. One may enter the market with an incremental improvement (a “faster horse”), but such an approach cannot create substantially greater value. Ultimately, success hinges on human motivation, which in turn drives profitability. For instance, can a service that merely facilitates appointment registration generate profits? Not necessarily, as it remains trapped within the legacy healthcare system. A model that works in Beijing may not succeed in Guangzhou. Consider Ganji.com, backed by BlueRun Ventures China, which fundamentally restructured the classified advertising value chain, thereby rendering print media obsolete. Had Ganji.com sought to collaborate with print media rather than disrupt it, it would not have achieved its current success. In other words, if you focus only on building a faster horse, you may end up with no horse at all.

5. If hospitals spend only two minutes per patient, it is because physicians lack motivation. Physicians are a critical factor; if their incentives are not linked to successful treatment outcomes, the distorted chain will persist. Specifically, medical outcomes should drive physician motivation, ultimately leading to profitability.

6. In the HMO model, physicians’ compensation is directly linked to cost containment, with a focus on health outcomes. If physicians prescribe fewer medications and reduce medical expenditures, it creates a sustainable profit model akin to insurance. Implementing an HMO requires two prerequisites: a sufficient number of physicians and a large enough user base. Whether lightweight online consultations can generate a substantial user volume depends on your personal capabilities and team proficiency. As a U.S.-originated model, can HMO be applied in China? Entrepreneurs must experiment and undergo a localization process. However, since few players are currently engaged in this space, opportunities remain.

7. Ultimately, health management is still data-driven. For instance, Xiaomi’s high smartphone sales volume and low customer acquisition cost make it easier for the company to sell fitness trackers. Companies specializing in smart hardware should consider two key factors: customer acquisition cost and the ability to ensure user stickiness.

8. Acceptance of mobile healthcare takes time; at this stage, it remains an issue of user mindset. Patients seek out the best doctors, yet these top-tier physicians may not be motivated by a mere 50 yuan in consultation fees.

9. Several Profit Models of Mobile Health:
(1) Membership Model: A SaaS-based, prepaid model that attracts users with low fees; some teams have already generated millions in revenue.
(2) Advertising model: Collecting user data for pharmaceutical companies, recommending drugs, and running advertisements.
(3) HMO model; physician-patient relationship, with fees charged to patients.

10. We consulted both traditional Chinese medicine (TCM) and Western medicine practitioners back then, concluding that Western medicine still offered viable treatment options, whereas TCM truly seemed to have no effective solutions. Competent TCM practitioners do have their followers; therefore, building a community through innovative approaches might provide a promising entry point. A TCM entrepreneur presenting a project on-site believed they had already found an effective solution, but unfortunately, no one was willing to believe it.

11. Selling pharmaceuticals differs from selling ordinary consumer goods; health-related matters should still be handled through physicians. Given the dominance of Alibaba and JD.com in the market, it is difficult to compete with them in online drug sales. However, if you have access to physicians and medical data, there are still opportunities, as this enables the provision of precise, targeted services.

12. We favor investing in disruptive ventures led by idealistic entrepreneurs. For instance, the team behind Chunyu Yisheng believed that China lacked a private physician system. However, this brings us back to the initial question: gaining patients’ trust and their willingness to share their health data is a gradual process.


Above: Mr. Chen Weiguang is signing a copy of the book for a lucky online participant of this open lecture.

Question: What is the business model for personalized medicine involving pharmaceutical companies and patients?

Chen Weiguang: This model does not yet exist in China but is emerging abroad. Pharmaceutical manufacturers traditionally require multiple layers of partners, such as distributors or medical representatives, to reach hospitals. However, as manufacturers find these costs increasingly prohibitive, they are exploring whether the internet can be used to directly collect patient data and recommend personalized treatment plans. In fields such as oncology and complex diseases, foreign companies are already implementing direct-to-patient models that bypass hospitals and intermediaries. By focusing on specific disease areas and leveraging patient data, pharmaceutical companies can sell drugs directly to patients, thereby shortening the supply chain. For instance, 23andMe in the United States uses genetic data to recommend suitable medications or inform patients of their disease risk probabilities. This approach exemplifies personalized medicine while circumventing traditional hospital channels.
Question: What is the HMO model?
Chen Weiguang: What is the HMO model? For example, a patient pays $1,000 to receive medical care within a specified network, such as visiting designated doctors and hospitals. The medications prescribed are also from a specific formulary, and the physicians’ income is derived from this $1,000 payment. Thus, the ultimate goal is to ensure that physicians’ incentives are directly aligned with treatment outcomes. Insurers also favor this model because they consider the costs to be controllable.
Why has auto insurance grown so large? While 4S dealerships are fully market-oriented, hospitals are not, which poses challenges for insurers in developing commercial health insurance.

Question: What is a patient community?
Chen Weiguang: A patient community refers to a platform where patients with the same disease communicate, share their treatment experiences, and recommend reputable physicians. This model faces significant challenges both domestically and internationally, primarily due to patients’ insufficient motivation to share their insights.

QuestionCan hospitals be disrupted? The Physician Partnership Practice (PPP) model of the Zhangqiang Doctor Group operates without owning hospitals but instead enters into cooperative agreements with them. What are its drawbacks? Is China’s internet healthcare sector overheated, especially when compared to the relatively cooler market in the United States?
Chen Weiguang: Let me first address your third question. Internet healthcare in the United States is extremely hot, even more so than in China. I am quite clear on this matter: valuations are higher, with many companies valued at $2–3 billion, despite lacking a clear profit model.
Returning to the first question, hospitals will inevitably remain in existence; what warrants discussion is whether a new ecosystem can be created outside of hospital settings. After all, people still need to engage with physical establishments, and hospitals cannot be completely disrupted.
The second question: Dr. Zhang Qiang’s PHP model represents a commendable attempt. To create new user value, it must be delivered through innovative service models. The key challenge lies in whether physicians can deliver high-quality care, with the provision of standardized, high-level services being the most difficult aspect.

Question: What is the relationship between light consultations and appointment registration?
Chen WeiguangAppointment registration serves as an effective entry point, addressing a rigid user demand. However, if a company positions appointment registration as its core service, profitability becomes problematic, as it fails to engage with the core of healthcare delivery. Light consultations can only meet the needs of certain patient groups in specific scenarios; therefore, offline medical services are essential to constitute a comprehensive care offering.

Question: Besides pharmaceutical companies as third-party payers, what other potential payers are there? In addition to personalized medicine, what other projects do pharmaceutical companies have?
Chen Weiguang: Currently, the volume and scale of advertising placed by pharmaceutical companies in mobile health remain limited. Whether they will adopt targeted advertising remains to be seen over time. Third-party players also include insurance companies. The key factor is having a sufficiently large user base and physician network; if these conditions are met, insurance companies are willing to collaborate. While insurers excel in actuarial science, they may not necessarily have access to precisely targeted users. In China, due to local characteristics, only insurance companies hold the necessary qualifications, so any insurance-related business must involve partnerships with insurers.

Question: Your PPT’s revenue model does not mention data. I believe data also holds value. What are your thoughts?
Chen Weiguang: The "CP" on the PPT refers to data value. The practical challenge is that data is difficult to monetize directly; therefore, it is essential to leverage data to create diverse business models. A sample size of a few hundred does not constitute big data—it is merely content. Only big data composed of a sufficiently large sample size holds meaningful value.

Question: There are several leading enterprises in mobile healthcare: Guahao.com and Chunyu Yisheng, which offers lightweight consultation services. We understand that Guahao.com must generate profits through alternative business models, while Chunyu Yisheng is still exploring its path. Could you share some of the missteps Chunyu has encountered along the way? Is there potential to charge for online services? Regarding the insurance company model, such as diabetes-specific health insurance, Taikang Life launched such a product this year, but sales have been underwhelming. What is your outlook on the future growth trends of health insurance?
Chen Weiguang: My views do not represent those of Chunyu. Chunyu has its own strategic direction. While offline consultations can generate revenue, achieving this in the short term is uncertain, largely due to long-standing cultural perceptions among Chinese patients who find it difficult to accept paying RMB 100–200 for online medical consultations. However, setting prices too low would fail to attract high-quality physicians to provide services on the platform. Therefore, reaching a short-term profit target of RMB 1 billion is unfeasible; it may become possible in a few years, as this requires a gradual process.
Online consultations can only address a portion of user scenarios, with the remaining 40% being handled offline. I believe that whether it is Chunyu Yisheng, Haodf, or Guahao.com, all are attempting to expand into offline services. However, for companies with an online-centric DNA, it remains to be seen whether they can effectively manage offline resources and ensure comprehensive offline service delivery.
I believe there is still a certain opportunity in the insurance sector. While other areas of insurance have been thoroughly saturated, the highly profitable health insurance market remains largely untapped. Previously, insurance companies obtained data from hospitals, but this data was unreliable and did not enable cost control. Therefore, if effective cost containment can be achieved, persuading insurance companies to collaborate for mutual profitability still holds promise.

Question: XYWY.com has achieved profitability and is preparing for an IPO. Could you provide an in-depth analysis?
Chen Weiguang: They previously collaborated with pharmaceutical companies and ran extensive advertising campaigns, which likely enabled them to achieve profitability.

Question: How do you view companies providing software services to private dental clinics? What is your perspective on their business models?
Chen Weiguang: This is a SaaS model. It is difficult to charge clinics, so I believe achieving profitability in the short term will be challenging. Clinics are reluctant to adopt the SaaS model because they perceive its effectiveness as inferior to that of Baidu.

Question: You mentioned that Alibaba’s e-commerce dominance, driven by the deregulation of prescription drugs, leaves no opportunities for other companies. Are there still opportunities in niche segments?
Chen Weiguang: As long as you have patients and physicians, and physicians record patient data on your platform, there is an opportunity. For instance, in a project involving prescription drugs and electronic prescriptions, machine-generated prescriptions can transmit structured prescription data to the medical insurance authority for manual review. I believe there is still potential.

 

 

 

 

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