What Internet Healthcare Founders Must Understand: Key Insights from Investor Wang Jun
VCBeat Think Tank No. 10 | Hangzhou Station
Date: Wednesday, August 19, 2015
Location: Hangzhou Qingchuang Iteration Innovation Space
Presenter:Jingwei ChuangTouInvestmentManager Wang Jun
Wang Jun's Brilliant Insights
I. 2014 Was the First Year of Internet Healthcare
II. The Evolution of the Internet Healthcare Industry Outpaces That of Finance
III. Development and Strategic Layout of Capital in the Internet Healthcare Industry
IV. Key Factors Influencing the Success of Startups
V. Q&A with the VCBeat Community
Wang Jun, Investment Manager at Matrix Partners China, isHangzhouOne of the Top Ten Angel Investors in 2015, he is primarily responsible for sourcing, screening, and evaluating investment opportunities in the clean energy and healthcare sectors. Mr. Wang Jun previously worked at Hangzhou National High-Tech Industrial Development Zone Technology Consulting Co., Ltd. and Puhua Investment Group. His investment portfolio includes Dongchuang Shares, Xieneng Technology, TuanP.com, Liqu.com, Youqingqu, and 12580.com. Mr. Wang holds a Bachelor’s degree in Management from Yang-En University and an MBA from Shanghai Jiao Tong University.
At the 10th VCBeat Think Tank Salon, Wang Jun shared with entrepreneurs the evolution of mobile health, the development and strategic layout of capital in the internet healthcare industry, and the key factors significantly impacting companies.
Wang Jun's Brilliant Insights
1. 2014 was the inaugural year of internet healthcare:In 2014, there were enough star projects, sufficient strategic deployments by BAT (Baidu, Alibaba, and Tencent), and a surge in media outlets focusing on this industry. The year 2014 saw the construction of the industry’s ecosystem, laying the foundation for development in 2015.
2. Accelerated Evolution of the Internet Healthcare Industry:In the first half of 2015, the pace of change in mobile health was significantly faster than that of e-commerce from 2009 to 2010. This acceleration includes a quicker evolution in industry understanding, as well as entrepreneurs’ ability to identify strategic directions and business models more rapidly. Therefore, companies must integrate resources to enhance their speed. A key consideration is how to reconcile external rapidity with internal sluggishness.
3. Development and Strategic Layout of Capital in the Internet Healthcare Industry:Nowadays, both enterprises and venture capital firms are actively positioning themselves, and it is possible that within three years, some players will successfully access the capital markets. Entrepreneurs need to analyze competitors in their specific niche and understand the strategic focus at each stage. Taking the O2O (Online-to-Offline) model in healthcare services as an example, it exhibits strong defensive characteristics because offline medical resources constitute asset-heavy infrastructure, and 95% of patients seek care at hospitals within their own province. If a company has a pronounced regional advantage, market entry by competitors may present opportunities for mergers and acquisitions.
4. Key Factors Affecting the Company:Key factors that significantly impact the company include resources, talent, and partners in media and promotion. In internet-based projects, failing to capture attention puts one at a considerable disadvantage.
Thank you very much to VCBeat for providing us with this opportunity to exchange ideas! I have reviewed numerous projects. Around 2013, I authored a report on mobile health and recommended that our company systematically evaluate the mobile health sector. Since then, I have engaged in ongoing discussions with many mobile health projects and founders, which has yielded valuable insights. Our conversations have primarily focused on how to align internal corporate strategy with industry dynamics. In the following, I will share my perspectives across several key areas.
First, let’s examine how certain peripheral industrial ecosystems have evolved. I trust that many of you have already read numerous reports on industrial evolution published by VCBeat. First, we will discuss the relevance of these reports to our work. Second, we will analyze capital dynamics and competitors within specific industry segments. Competition is not necessarily detrimental, as it can help galvanize and energize the sector. However, if the sector becomes overheated and we fail to keep pace, that would indeed be problematic.
I. 2014 Was the First Year of Internet Healthcare
Regarding the interpretation of industry reports, there are clues worth exploring. I have proposed that 2014 was the inaugural year of internet healthcare, as it witnessed a sufficient number of star projects, substantial strategic investments by BAT (Baidu, Alibaba, and Tencent), the emergence of numerous media outlets focusing on this sector, and the rise of specialized media such as VCBeat. Therefore, 2014 marked the dawn of internet healthcare.
As the inaugural year, 2014 remains a significant milestone. The changes that occurred in 2014 laid substantial groundwork for the industry’s development in 2015. One key aspect was that certain projects launched in 2014, such as Guahao.com, served as foundational “entry points” within the internet infrastructure. With these entry points established, an ecosystem could emerge. Later, when WeChat and Alipay joined the strategic layout of the mobile healthcare industry, payment capabilities were integrated. With both entry points and payment mechanisms in place, the market officially opened. Once the market opened, users began to visit, and with visitors came paying customers. Thus, the industry’s ecological chain took shape, bearing similarities to the evolution of the mobile internet. At the time, while investing in the mobile internet sector, we carefully mapped out the underlying infrastructure of this industry and the relationships among various ecosystem components, which brought greater clarity to our subsequent investment decisions. In fact, such systematic analysis is also highly valuable for founders. Having entered the torrential flow of this industry, they are, in a sense, bound to a chariot—that chariot being the momentum of industrial development. This developmental trajectory binds founders, partners, senior executives, and every practitioner within it. Naturally, as investors, we are even more tightly coupled with the industry’s progression. Therefore, it is essential for us to understand how the industry evolves.
Another significant event in 2014 was the emergence of Chunyu. Chunyu addressed the issue of lightweight medical consultations. Of course, this characterization was summarized later in their retrospective. Lightweight consultations differ from in-depth, vertically specialized diagnosis and treatment. Admittedly, DXY also stood out in 2014, although it had been developing quietly for many years; 2014 merely marked the year when capital market recognition of DXY surged.
II. The Evolution of the Internet Healthcare Industry Has Outpaced That of Internet Finance
A significant evolution occurred in 2015, with the emergence of numerous vertical solutions. It appears that the internet healthcare industry is evolving faster than many other sectors. I often speak with founders who ask, “Is it acceptable for my equity to be diluted to this extent?” I typically respond with a single question: “What growth rate do you aim to achieve? And what strategy should you adopt to reach that pace?” Upon reflection, they recognize the intense competition and the rapid development of the industry, concluding that they must accelerate their growth by integrating resources. Over the past six months, the pace of change in mobile health has been much faster than that of e-commerce between 2009 and 2010. Personally, I believe it is even slightly faster than the growth seen in internet finance. Furthermore, I consider the mobile health market to have a larger scale and greater depth than the mobile finance sector. This rapid pace offers us valuable insights: when formulating strategies, we must closely monitor competitors’ actions and understand the overall velocity of the industry.
Perceptions of industry development are evolving at an accelerated pace.Let me provide an example. In the e-commerce sector, 2009 and 2010 were often referred to as its "Year One." 2009 marked the inaugural year of Tmall, but it was still a relatively quiet period; the following year was widely regarded as the true "Year One." Media reports at the time defined 2010 as the starting point, largely because media responses to the rise of e-commerce—and to editorial strategic layouts—tended to lag behind. In contrast, within the mobile health industry, 2014 is universally recognized as the "Year One." Thus, while industry development used to progress more slowly if viewed from a five-year retrospective perspective, it is now advancing much more rapidly. As a result of these changes over the past five to six years, the convergence of public perception toward new trends and emerging industries with capital, resources, and top-tier founders has accelerated significantly compared to the past.
Faster Discovery of Business ModelsIn 2014, the conceptualization, terminology, and analysis of many projects progressed quite slowly. In this regard, I believe VCBeat has made significant contributions. They promptly identified emerging industry concepts and provided meticulously detailed analytical reports, for which I have great admiration. Their reports, through precise conceptual positioning and project coverage, have guided public understanding of the industry. This is a positive development. Given that China’s healthcare services have been inadequate for many years, accelerating progress benefits the entire industry and the general public. During this process, many individuals have identified highly effective solutions. VCBeat has covered vertical sectors such as diabetes, oncology, and cardiovascular and cerebrovascular diseases. What we need to address is how to interpret these reports. It is understandable that the pace has accelerated, partly driven by collective efforts. We can anticipate what will unfold in 2015 and 2016, examine future trends, and assess the rhythm of evolution, leaving us with substantial room for reflection.
How to Combine External Speed with Internal Slowness.The entire healthcare-related industry has actually developed at a relatively slow pace, spanning from pharmaceutical R&D to medical device R&D. Therefore, the evolution of mobile health is rapid compared to the industry as a whole. However, healthcare itself is a meticulous and gradual endeavor; if a service is not delivered properly, it may lead to medical disputes. This is fundamentally different from a standard transaction, as healthcare involves patients’ health and lives. So, how can the external speed be integrated with internal deliberation? This poses a challenge for every founder. I believe that enterprises capable of addressing these issues will undoubtedly stand at the forefront of the industry.
III. Development and Strategic Layout of Capital in the Internet Healthcare Industry
What Should Internet Industry Capital Focus On?We can review reports from publicly listed companies to understand their activities and strategic layouts. In this regard, I find that securities firms perform exceptionally well, whereas listed companies tend to respond more slowly. Internet companies can learn about the healthcare sector more quickly, while healthcare companies are somewhat slower in adopting internet-based practices.
Everyone is familiar with the Chunyu Incubator, right? After investing in Chunyu during its Series B round, an investor noticed that many employees were leaving to start their own ventures. He asked, “Why not establish our own incubator? This way, we can invest in startups founded by individuals within the ecosystem.” As you can see, Chunyu is also accelerating its strategic layout.
Venture capital funds also have their strategic allocations, and we frequently see reports on this topic. Previously, two or three media outlets compiled reports on companies that secured financing in 2014. Investment strategies and operational approaches adopted by healthcare-focused venture capital firms, publicly listed companies, angel investors, and other players when making these allocations continue to drive diverse changes within our industry.
For a project, seeking financing from different companies and individuals can have varying impacts. Key considerations include the quality of information they provide, their level of focus on the industry, and their ability to offer meaningful support. I understand that VCBeat can help consolidate investor information, and I hope you can also recommend high-quality projects.
Competitors in the niche market.In August 2015, we need to focus on the number of competitors, their business models, product solutions, promotional strategies, and the founders’ styles, all of which are trackable. In the following six months, the focus should shift to comparing operational data: capital reserves, market coverage, team quality, and user base. If these metrics are not established within half a year, we must reconsider whether our model is replicable by others and identify our true competitive advantages. After another six months, attention should turn to the industry landscape, our available resources, and market share. Two years later, we need to consider future capital access channels and integration strategies. For instance, Chunyu Doctor is currently laying the groundwork for future capital access. Note that this refers to strategic positioning rather than full market penetration, as the latter can be daunting. Strategic positioning may take one to two years, while integrating an entire industry chain could require two to three years; within three years, some players may successfully penetrate the capital market. This pace is faster than that of the e-commerce sector, where few companies have achieved capital market penetration within three years—Jumei Youpin and Vipshop being notable exceptions. The mobile healthcare sector in which we operate may take slightly longer to penetrate the capital market, but it will happen relatively quickly. Therefore, projects in these niche sectors that successfully access the secondary capital market serve as landmark benchmarks for their peers.
For example, in the O2O model of healthcare services, which includes ground promotion, physicians, and solutions, if the solutions are identical, then whoever secures the local physician resources, along with user volume and the strength of the operations team, will have a significant impact.
Fortunately, China’s healthcare service sector exhibits strong defensive characteristics. This resilience stems from two key factors. First, offline medical resources constitute a capital-intensive asset class, requiring significant time for market penetration; gaining access to hospitals is particularly challenging. Second, the current saturation rate of physicians’ multi-site practice stands at only 2%, indicating that available resources are relatively limited. Nevertheless, late entrants may still find opportunities if they can secure abundant resources, while early movers enjoy first-mover advantages. Consequently, this is a relatively asset-heavy market.
Second, 95% or even more patients seek medical care at hospitals within their own province. Therefore, it may be more effective to thoroughly penetrate and capture the market on a provincial basis. Of course, each party has its own strategic approach: targeting the majority segment comes with its own advantages and risks, while focusing on a niche market allows for deeper penetration and distinct benefits. The key lies in our solution strategy; by securing a provincial territory combined with its user base, we could potentially attract 95% of the patients.
Resource Integration in M&A Plans.If our competitive moat is distinct, it creates opportunities for others to enter and integrate resources. However, this requires coordination; without it, the situation devolves into a clash between an elephant and a bison—where both sides charge at each other, resulting in mutual destruction. This is certainly not the outcome we wish to see in the industry. If the elephant and the bison can coexist harmoniously, it benefits everyone. Such synergy prevents market disruption, avoids collateral damage, and better serves both project sponsors and investors. Achieving this coordination is challenging. If we ourselves evolve into a “bison,” we must constantly identify those capable of mediating interests between “bisons” and “elephants” and draw closer to them. In doing so, we should be willing to share our territory and integrate our resources with these mediators.
Historically, during wartime, the saying “a single spark can start a prairie fire” held true. The Eighth Route Army gradually evolved into a formal revolutionary force. However, some factions within the unrest transformed into local bandit groups, operating outside established norms and lacking legitimacy. These bandits were akin to wild bulls: once they occupied a territory, others would stay away due to the prohibitive costs of entry. In fact, during cooperative negotiations with the Eighth Route Army, certain individuals managed to tame these “wild bulls” single-handedly. This was because these “wild bulls” were astute; they were actively seeking which powerful faction to align with and which military group to merge into, hoping to cooperate with the regular forces of the Eighth Route Army. This amounted to hitching their fate to the chariot of history. Those who failed to do so meant that their small factions and their comrades would inevitably be eliminated during the process of consolidation. While such outcomes were particularly brutal in times of war, our business competition may be somewhat more civilized. Nevertheless, this involves the interests of the capital, partners, and teams represented by the leading figures. Therefore, everyone should consider this matter with great caution.
IV. Key Factors Influencing the Success of Startups
First is resources, which will directly determine pricing and directly determine plans—not at the strategic level, but even at the planning level. For example, if a competitor’s on-the-ground promotion costs 250 yuan per device installation, should our cost be 300 yuan or 200 yuan? How should we set our price? This is actually related to our own research, user responsiveness, and demand preferences.
The second factor is talent. When numerous players in an industry compete for a candidate, it indicates that the individual is highly exceptional. In such cases, negotiation strategies must be adjusted, including how to promote our company’s image. I have observed that some companies resort to unscrupulous tactics, such as highlighting the presence of many attractive women when promoting their corporate image; nevertheless, their proactive attitude toward attracting talent is commendable.
The third factor involves media and promotional partners, with a focus on content freshness and the cost of promotional channels. Finally, consider the cash flow environment: how much capital has been self-raised, and when will operational cash flow be generated? Timing urgency may vary; at times it is less critical, while at others it may become pressing. Companies with positive cash flow are in a stronger position to negotiate favorable terms with banks.，I’ve found that our counterparts in the banking sector are more robust than us—they drink heartily, often downing full glasses, which makes business negotiations smoother. Since their primary objective is to ensure timely repayment by corporate clients, there remains room for collaboration, though it requires proactive efforts from our team. This is particularly true for technology-focused sub-branches that specialize in financial innovation.
Everyone should pay attention to these significant influencing factors. While one might act capriciously during this process, such liberty belongs only to industry titans and the wealthy. For most entrepreneurs, starting a business is a carefully orchestrated battle that requires premeditation and thorough preparation. Once you are on board this chariot, you must meticulously plan your moves. Seek support from external allies, such as leveraging influential figures and cultivating strong relationships with the media. If founders and their teams reflect on their entrepreneurial insights within the industry and organize them into articles for proactive submission to industry media outlets, these platforms will have compelling reasons to prioritize covering our content. This is what we call interactivity. In the internet sector, failing to capture attention or leverage the power of the external media environment puts a project at a significant disadvantage.
Ultimately, the ability to align stakeholders around core elements such as talent, capital, resources, and strategic planning hinges on the capabilities of the team and the founders.
V.Answers to Questions from the VCBeat Community
Question 1: I work inPost-Vertical Stroke: Planning to Introduce Japan’s Rehabilitation and Elderly Care Industries to China. From an investment perspective, what should I pay attention to in such long-cycle startups? How should I find partners?
First, this niche sector has not yet received due attention in China. Since it is currently overlooked, you can produce a report to inform stakeholders about the state of this industry. By organizing and presenting this information first, you will attract resources and momentum toward yourself—a straightforward logic.
Then, you should select some faster market entry strategies, such as smart hardware for the elderly, including care and companionship services, which are relatively asset-light. Post-stroke care primarily requires continuous nursing and companionship. In this sector, you can either adopt an O2O (Online-to-Offline) model or build a closed-loop system independently; if an O2O model is not feasible, establishing a self-contained closed loop is an alternative, although it is inherently slower than O2O. Additionally, lightweight product formats involving doctor-patient interactions, such as online consultations, also offer a quicker path to market.
Its speed stems from its ability to develop ahead of competitors, a claim that is verifiable. For instance, Chunyu, with its relatively light asset model, was able to pioneer services such as medical appointment accompaniment before others.
Second, you mentioned how to find partners. In the process of rapid expansion, learn from industry peers about the solutions they previously implemented to gain a foothold in the fast-paced market. Additionally, many investors in the elderly care industry have transitioned from real estate, so you might consider collaborating with real estate companies. Physician groups are also a viable option.
Q2: Sometimes"The government is the initiator of medical resources and also a major buyer. In this regard, we have yet to fully clarify the relationship and logic between the government and the market."
Government policy direction is crucial, yet it presents certain challenges. For instance, regarding the coordination between hospitals and the government that you just mentioned, I have the impression that the government’s involvement in coordinating these solutions lacks sufficient depth and business acumen. Some of its directives are often diluted at the implementation level, meaning that its rhetorical slogans do not necessarily translate into binding administrative mandates.
Let me provide an example. In 2009, the government, specifically the Ministry of Health, issued a policy that tied the proportion of online appointment registrations to the political performance evaluation of hospital directors. It was only with this mandate that the policy was efficiently implemented, which also contributed to the success of Guahao.com. Before 2009, whether or not people paid attention, this industry had already been explored by early players. For instance, our colleagues invested in iKang Guobin, one of the earliest companies to offer online appointment registration services. However, it did not succeed because hospitals were unwilling to cooperate and integrate their resources. In 2009, the Ministry of Health drafted a strategy stipulating that, starting from 2010, hospitals whose online appointment registration volume did not exceed 20% would undergo a three-year rectification period. Hospital directors failing to meet this target would receive deductions in their administrative performance evaluations and scores. This measure proved highly effective, spurring the development of the entire industry.
Therefore, the role of government should indeed be closely monitored, including policies on multi-site practice. I recommend that you pay attention not only to the guiding nature of policies but also to their efficiency and effectiveness. Without efficient and effective policies, it is difficult to achieve rapid promotion even when cooperating with them for pilot programs.
Question 3:May I ask for your views on physician groups, including their future development paths?
We often describe the current landscape of physician groups as follows: most are merely those who have lifted a leg, not yet taken a step forward—they have only raised one foot. Some have indeed stepped forward with one foot while keeping the other behind, but the vast majority are still onlookers. Within physician groups, it is primarily those who have actually taken steps—rather than just lifting a foot—who are shaping the industry’s structure.
However, they represent the second wave of forces. Who constitutes the first wave? It is the internet-based medical service platforms. I define these platforms as functioning more like physician agents or brokers. The concept of a “physician group” should, in my view, refer to entities founded by individuals with a clinical background who subsequently expanded into brokerage services. Recognizing the profitability of agency services, they established a platform to aggregate medical resources and meet patient needs. As their founders were physicians themselves, their surrounding ecosystem naturally evolved into a physician group.
Regarding physician groups, some operators function essentially as brokers; their approach to solutions lacks the mindset of internet companies, platforms, or service providers. While their strategic thinking may not be particularly profound, they do possess extensive access to physician resources. However, some players have begun to engage in deeper reflection and learning, developing more comprehensive and in-depth solutions. In this process, significant capital, resources, and media attention are converging toward them. Should they eventually deliver highly effective solutions, the physician group industry could experience a genuine leap forward.
In short, two points: first, they are a major force; second, their solutions are more in-depth.
Question 4:We are a startup team primarily focused on the maternal healthcare sector. If multi-site practice for physicians is to be expanded, how can we enable doctors to operate independently? For instance, patients need to undergo imaging examinations at hospitals, as 70% of diseases currently require diagnostic imaging for resolution. However, merely advocating for multi-site practice without providing the necessary hardware equipment will not solve the problem.
You just mentioned two issues. First, the practice environment for physicians involves more than just equipment; each aspect requires a different solution. Therefore, you should focus on the pregnant population during this stage.
Moreover, many issues faced by pregnant women are syndromic in nature. While they may seek care from a specialist when a specific disease arises, they remain pregnant throughout the process. Interestingly, when visiting specialists, these patients often do not receive the level of attention warranted by their pregnancy status, despite the fact that their conditions are complex and holistic due to the presence of a new life and the physiological changes in the maternal body. If you observe closely, you will find that the consultation time for pregnant women is similar to that for other patients—typically six to seven minutes. However, the health concerns of pregnant women are far more complex than what can be adequately addressed in such a short timeframe. This discrepancy reveals significant opportunities for deeper exploration and value creation. There is indeed willingness among stakeholders to pay for services addressing these needs. Congratulations—you have entered a healthcare service sector with a robust payment model.