Chen Weiguang vs. Zhang Yusheng: The Key Intersection of BlueRun Ventures and MobiHealth

Event Name:StarHealth Medical HubIssue 1Open Course

Event Dates: November 7–8, 2015

Organizers: Legend Star, VCBeat, BlueRun Ventures

Guest Speaker:

Chen Weiguang
Partner at BlueRun Ventures
Joined BlueRun Ventures 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 as a board member for several innovative companies, including Ganji.com, Chunyu Doctor, MedicalTrees, Echo, and QingCloud.

Zhang Yusheng
Founder & CEO of Xingshulin
Formerly served as Research Manager in the Medical Strategy Department at Wellpoint, the largest health insurance group in the United States. Named one of Fast Company’s 100 Most Creative People in China Business in 2015, and champion of the inaugural China Pharmaceutical Internet Entrepreneurship Competition.

BlueRun Ventures is an early-stage venture capital fund that primarily invests in angel and Series A startup projects. With branches in Silicon Valley and South Korea, it is an international venture capital firm. BlueRun Ventures has invested in more than 70 projects in China and has funded numerous mobile health companies since 2011.

As a partner at BlueRun Ventures, Chen Weiguang has invested in numerous prominent internet healthcare companies, including Chunyu Doctor and Xingshulin. The Xingdong Xiangyi Hui Venture Capital Camp invited Mr. Chen Weiguang and Zhang Yusheng, CEO of Xingshulin, to the open lecture for an engaging dialogue, conducting an interactive discussion on key issues such as early-stage entrepreneurship in mobile health and investment decision-making.

VCBeat has summarized the key points made by the two individuals in their conversation:

Topic 1: How Doctors Can Start Businesses

As an early entrepreneur in the internet healthcare sector, Zhang Yusheng offers many pertinent suggestions to those currently starting businesses in this field:

First, clarify the direction of your entrepreneurial venture——

Chen Weiguang:Investors merely provide direction and suggestions; ultimately, it is the entrepreneurs themselves who must solve the problems. Entrepreneurship requires identifying one’s weaknesses and being able to address them rapidly within a short period. In building Xingshulin (Apricot Forest), what specific problem do you ultimately aim to solve?

Zhang Yusheng:When I first started my venture, I prided myself on being the physician who best understood the internet and the internet professional who best understood healthcare. However, with the evolution of digital health, I no longer dare to make such claims. I completed an eight-year clinical medicine program at Peking Union Medical College; conducted research on medical big data in the United States; and upon returning to China, founded the Xingshulin project in 2011, which now covers 30% of hospitals and physicians across the country.

Zhang Yusheng:Before discussing the direction, let me share a brief anecdote. Peking Union Medical College Hospital (PUMCH) has its “Three Treasures”: the library, the medical records department, and the senior professors. The hospital adopted the Johns Hopkins model at its founding, and these three elements are indispensable for becoming an excellent physician. PUMCH’s library features meticulous classification; since the admission of its very first patient, comprehensive medical case records have been maintained, enabling efficient retrieval of medical record indices and systematic accumulation of valuable resources. Thus, these “Three Treasures” remain essential to cultivating outstanding physicians.

However, the “Three Treasures” of Peking Union Medical College Hospital are exclusively available to its own physicians. We aspire to transform these “Three Treasures,” currently unique to Peking Union, into universal tools for all doctors, helping them build collaborative networks to solve clinical problems. We strive to become China’s leading company dedicated to serving physicians. Our goal is to present all complex cases in China along with expert commentaries on our platform. For instance, our medical record folder product can collect case data; we aim to facilitate the sharing of complex medical records in the future, thereby accumulating expert experience. Currently, there is an insufficient supply of effective medical services in China, and the time doctors can allocate to each patient is far from adequate. A key challenge, therefore, is how to enhance the professional competence and capabilities of physicians.

Secondly, find your passion.——

Chen Weiguang:What Are the Challenges Faced by Physicians Transitioning into Entrepreneurs?

Zhang Yusheng:In fact, whether starting a business is difficult or not is relative. There is a saying that it is the greatest fortune in life to discover one’s passion during one’s prime and put it into practice. Therefore, I believe that entrepreneurship is not difficult. However, as a physician by training, I have found starting a business to be more challenging than any of my previous experiences, because the process reveals many of your shortcomings. At times, you may find yourself unable to overcome certain weaknesses on your own, necessitating collaboration with others to help you address them.

Topic 2: What Is the Biggest Challenge in Entrepreneurship

Zhang Yusheng candidly shared the challenges encountered during his entrepreneurial journey and the solutions he implemented.

Challenge 1: Building the Team

Zhang Yusheng: I made many mistakes in team building. The initial team included two members with medical backgrounds, one from a technical background, and one from a product background. BlueRun Ventures decided to invest in us after our first meeting. During the second meeting, BlueRun pointed out issues with our company’s equity structure, recommending that my equity stake be increased. They also noted that the other two technical co-founders had limited capabilities. As it turned out, the investor’s assessment was correct. Two years later, I indeed asked those two technical co-founders to leave the company because they were unable to lead their teams effectively. Although this was quite a setback at the time, the experience taught me that unless one is a serial entrepreneur, there is likely to be bias in personnel selection.

Two Key Lessons I’ve Learned: First, when uncertain about an individual’s competence, meet with more candidates. Second, consult the top experts in the industry and ask them how they would evaluate a marketing hire. By repeating this process, you will develop a hiring guide akin to a recruitment manual, thereby cultivating your own experience and judgment in talent selection.

Therefore, when it is difficult to distinguish who the truly suitable partners are, you must engage in continuous trial and error. In times of uncertainty, ask more questions and seek deeper understanding to identify the truly capable individuals within your circle. Additionally, failing to encounter candidates who appear to fit a role can lead to the mistaken belief that the position is unnecessary. For instance, I previously believed there was no need for a Marketing Director; however, only after recruiting an outstanding one did I realize the immense value a skilled Marketing Director brings. Thus, securing top-tier talent is crucial. It is essential to find individuals who can collaborate with you seamlessly.

Challenge 2: Business Model

Chen Weiguang:What does Xingshulin currently perceive as its biggest challenge?
Zhang Yusheng:Overall, the key lies in building a replicable business model. Our current revenue stands at approximately RMB 10 million, but we have yet to establish a scalable and replicable business model.

Challenge 3: Develop Your Own Product Operations Strategy—

Chen Weiguang:How to Persuade Doctors to Use Our Product?
Zhang Yusheng: Initially, we leveraged social networks such as Weibo, visited 20 to 30 hospitals, and posted promotional posters. Later, we developed a systematic approach to achieve user growth.

Chen Weiguang: Which types of companies will you collaborate with?
Zhang Yusheng:There are three main categories. The first is pharmaceuticals. The second is smart wearable devices, such as handheld ECG monitors. Our collaboration with the handheld ECG provider has been highly successful and well-received among physicians. Cardiologists use our electronic medical record (EMR) system, while patients can utilize our handheld ECG devices after discharge. The data collected can be transmitted to the physicians’ EMR platforms for comparison with historical records. Our system features standardized interfaces capable of collecting various metrics, including blood oxygen saturation and blood pressure. The third category involves a system we have developed for processing and standardizing medical case data, which is currently being deployed in partnership with insurance companies.

Topic 3: How Entrepreneurs Should Choose Early-Stage Investors

Chen Weiguang:What are the challenges in the fundraising process?
Zhang Yusheng:My personal advice is to remain perpetually prepared for fundraising, maintaining a state of constant readiness without complacency. For instance, proactively identify potential investors for your next funding round. Continuously learn from and document feedback received, and leverage your existing investors to expand your professional network, thereby enhancing the likelihood of successful fundraising.
I have two suggestions. First, when selecting early-stage investors, entrepreneurs must carefully examine the investment terms to ensure alignment of interests. For instance, BlueRun Ventures’ core terms are aligned with founders’ interests, as they do not include valuation adjustment mechanism (VAM) clauses. This fosters mutual trust and enables a long-term partnership. Second, entrepreneurship demands significant personal growth and breakthroughs in character. Founders should consider whether their investors can support this journey—by providing constructive feedback on weaknesses and facilitating access to additional resources.

Topic 4: Zhang Yusheng Interviews Chen Weiguang

Chen Weiguang, from an investor’s perspective, also offers guidance to entrepreneurs:

Question 1: Why is BlueRun Ventures bullish on mobile healthcare?

Zhang Yusheng:Why Does TMT-Focused BlueRun Ventures Pay Attention to Healthcare? Why Did It Invest in Mobile Health Projects as Early as 2011?
Chen Weiguang:In 2008, I returned to China from Silicon Valley, having previously worked in investment in the United States. After returning, I sought treatment at a tertiary hospital due to illness, where I had a very poor experience. Subsequently, I engaged in discussions with friends working in the healthcare sector to understand why medical practices had become so distorted.
Healthcare investment can be divided into two categories: the first comprises traditional healthcare projects, such as new drugs and medical devices; the second focuses on mobile health. I believe that any meaningful transformation of China’s healthcare system must stem from the integration of healthcare and IT; focusing on only one aspect will inevitably fall short of addressing the challenges.
In 2011, we devoted significant time to evaluating internet healthcare projects. We reviewed more than ten teams, approximately two-thirds of which were focused on hospital-related initiatives, while the remaining one-third, such as Chunyu Doctor, aimed to improve doctor-patient relationships. Hospital-centric projects were highly appealing due to their existing profitability and cash flow. However, after internal discussions, we concluded that regardless of the approach, it would be impossible to fundamentally alter the prevailing healthcare environment. Although hospital-focused projects were profitable, they lacked scalability. In contrast, ventures like Chunyu Doctor, Xingshulin, and Haodafu resembled a “Long March”—arduous and with an initially unclear business model, but ultimately capable of achieving significant scale. Ultimately, we chose the latter path. Despite the challenges involved, it offered the potential to create substantial value and address longstanding issues within traditional healthcare.
My advice to entrepreneurs is to find investors who are patient with your project and truly understand it, assessing whether they have the capacity to explore future revenue models alongside you. Furthermore, there must be mutual alignment in values between investors and entrepreneurs; otherwise, disagreements are likely to arise. After all, developing a viable revenue model requires the concerted efforts of many stakeholders, given the extensive number of parties involved in the pharmaceutical industry chain.

Question 2: What qualities does BlueRun Ventures value in entrepreneurs?

Zhang Yusheng:"Nowadays, it’s executives from Fortune 500 companies who are starting businesses. When I started my venture, the competition wasn’t this intense. So today, would BlueRun Ventures still invest in a project like mine? What are the key factors that determine whether you invest or not? What is most likely to impress you?"
Chen Weiguang:We will not invest in customized projects developed solely for hospitals. Because the hospital system is not market-driven, it is currently very difficult to undertake projects exclusively for hospitals. However, if such projects serve as an entry point to acquire more physicians and customers, the outlook would be more favorable.
The opportunities in mobile health remain substantial, with the key determinant being the team. The internet industry has developed over many years, resulting in a relatively mature talent pool and a culture that is easier to integrate. Digital health requires the integration of professionals from diverse backgrounds, including internet technology, healthcare, and big data. Meanwhile, the CEO must effectively coordinate and manage the team.
Second, the team must possess innovative thinking. Otherwise, you may only accumulate users without necessarily establishing a viable business model, which requires continuous trial and error to succeed. Having reviewed numerous mobile health projects, we have identified the business model as the most significant challenge. Therefore, the team must be capable of rapid iteration through trial and error, breaking through bottlenecks, and establishing new revenue models.

Question 3: What support does BlueRun Ventures provide to entrepreneurs?

Zhang Yusheng:What kind of support can BlueRun Ventures provide to portfolio companies at various stages?
Chen Weiguang:First and foremost, investors must endorse your venture; this is critical. Beyond endorsement, they must possess the capability or insight to collaborate with you in exploring viable business models, which is equally important. We place significant emphasis on whether a CEO can remain resolute in pursuing the chosen strategic direction.
Take Chunyu Yisheng as an example. Initially, it offered telephone consultations, but several issues soon emerged: this approach not only consumed significant physician time, but patients also considered the RMB 50 fee for a 30-minute consultation too expensive. Moreover, telephone interactions did not allow for the accumulation of patient–physician data. After six months, we recognized that this model was unsustainable and discussed with Zhang Rui shifting the service format to voice messaging and text-based communication. This change enabled users to accept lower costs while allowing physicians to make use of fragmented time slots.
In fact, many projects need to raise funds to Series B or C before they can become profitable. Therefore, whether investors can endorse entrepreneurs and help them find the next round of investors are all factors that founders of early-stage projects should consider.

Audience Q&A:
Question 1:Should entrepreneurs sign agreements with investors that allow for investor redemption?

Zhang Yusheng: This is quite specific and not necessarily applicable to everyone. I believe there are several key points in the early stages. Primarily, this concerns the initial terms, as there is considerable uncertainty in the early phase. Investors often embed certain performance requirements into these terms; if entrepreneurs fail to meet them, they face clearly defined penalties, which is arguably unfair. However, each situation requires case-by-case analysis and should not be generalized.

Chen Weiguang: I understand your question. Since each fund has vastly different return requirements, there is no right or wrong answer; it depends on the level of risk one is willing to take. Such clauses are relatively uncommon in early-stage investing because the investment amounts are smaller and, as Yusheng noted, the failure rate is higher. Even with such a clause in place, the capital often cannot be recovered. Therefore, these clauses tend to become more prevalent from Series B rounds onward.

Especially when the market is performing well, founders tend to have higher expectations, and investors assign higher valuations to companies. In such scenarios, investors often demand redemption clauses to ensure at least the return of their principal investment. Therefore, this practice is relatively common in later-stage financing. There is truly no right or wrong in this regard.
I have been in the investment industry for nearly 20 years, and I have yet to see an investor successfully redeem their stake from a startup. More often than not, when a company is performing well, founders may offer redemption, only for investors to respond by injecting additional capital. This scenario is far more common.

Question 2:Mr. Chen, when you speak with some startups, you may have a sudden insight that a particular company is worth investing in. What is the underlying logic behind this intuition?
Chen Weiguang: As I just mentioned, the team is critically important. A key factor is whether the CEO can effectively manage a multidisciplinary team that integrates internet, healthcare, and big data expertise, and whether they possess strong leadership appeal. As I stated earlier, these three groups of professionals come from different companies and diverse industry backgrounds.
Furthermore, the founders and the founding team are not driven by the pursuit of wealth. The healthcare sector differs significantly from the internet industry; in e-commerce or game development, financial returns can be realized quickly. However, I believe the path to profitability in mobile health is long. We must be guided by a sense of mission, aiming to create something meaningful for both the healthcare industry and its users, rather than chasing short-term, substantial profits. This principle is of great importance to me.

Question 3:What Are the Odds of a Doctor Becoming an Entrepreneur?
Zhang Yusheng: It is difficult for medical professionals to leave the field, as they typically remain at the same hospital throughout their careers. Therefore, it is quite natural that it is hard to find doctors who are willing to embark on entrepreneurial ventures. However, I can share with you some general avenues where such individuals might be found.
First, target individuals with prior medical training who are now working in the market-driven sector, such as those in the medical affairs departments of pharmaceutical companies or medical device firms, as well as professional or managerial staff at many private hospitals. The cost of recruiting these individuals is lower than that of hiring from institutions like Peking Union Medical College Hospital (PUMCH), which incurs the highest recruitment costs as the leading institution in China.
Second, if there are certain resources you deem indispensable, consider engaging the individual as a consultant first. Offer a small equity stake in exchange for their commitment to dedicate a specified amount of time weekly or monthly, or to provide access to key resources. This arrangement can serve as a bridge to potentially recruit them full-time in the future when opportunities arise.