VB ThinkTank S4 | Sequoia Capital's Investment Insights and Strategic Outlook on Internet Healthcare

Time: Thursday, April 16, 2015 (Afternoon)
Location: IC Coffee, Zhongguancun Entrepreneurship Street
Speaker: Chen Penghui, Partner at HongShan

Key Insights from Guest Speakers
I. Characteristics of Internet Startups in Other Fields
II. Internet Healthcare from a Process Perspective
III. Payment Model
IV. Three Major Entry Points for Healthcare Entrepreneurship
V. The Future: The First Phase of the Competition Has Concluded
VI. How HongShan Supports Its Portfolio Companies
VII. Questions and Answers

Guest Profile
Chen Penghui
Partner at HongShan China Fund, focusing on investments in the healthcare and medical sectors. Previously invested in BGI Genomics, Amcare, Zhejiang Beta Pharma, and Kunming Jida Pharmaceutical, and led the NYSE listing of Shanghua Pharmaceutical.
According to VCBeat’s statistics, Sequoia Capital is the investment firm with the most investments in China’s internet healthcare sector. In the first quarter of this year, among the top 10 largest financing deals in the United States, Sequoia invested in the first- and eighth-ranked companies, HealthCatalyst and Practo, respectively.

Guests' Highlights
1. HongShan seeks to identify entrepreneurs who aspire to build great companies.

2. The healthcare industry is arguably one of the few remaining sectors most resistant to transformation by the internet. Precisely because it is so difficult to disrupt, there remain many pain points that are not easily identified or monetized.Entrepreneurial opportunities exist across all niche sub-sectors., we believe that each segment, every platform, or indeed every model has its own opportunities.

3. The entrepreneur's business model, or monetization model, is still in the process of continuous development.

4. From the perspectives of pre-visit, during-visit, and post-discharge phases, each of these three stages presents numerous pain points. Meanwhile, segmentation can be made by disease type, scenario, implementation strategy, or setting (in-hospital vs. out-of-hospital), giving rise to a diverse array of startups. A key consideration here is that internet healthcare ventures must carefully examine the three core stakeholders—hospitals, physicians, and patients—to determine which serves as the most critical entry point.

5. The first phase of the competition has concluded; the second phase will determine who performs better. In the first phase, the key was whether you could envision the opportunity; in the second, it is about who executes more effectively. The coming one to two years will be critical. If companies fail to explore a suitable business model, many may not secure their next round of financing. However, those that find the right model have the potential to become industry giants. Although competition is already intense and there are numerous players, we believe this sector is just getting started. Many new companies will emerge, transforming today’s healthcare-seeking habits much like ride-hailing services changed past transportation habits. In the future, the entire healthcare process—whether inside or outside hospitals, pre-consultation or post-consultation—will become unimaginable without the support of mobile terminals. We anticipate that certain companies will establish industry standards, reshape user behaviors, and grow into large enterprises valued at tens or even hundreds of billions.

6. The three essential tasks for any startup areRecruit Talent, Secure Funding, and Leverage Resources. Ninety percent of the work is still done by the founding team, with HongShan contributing the remaining 10%. However, we aim to leverage our 10% contribution to transform the company into a more successful and greater enterprise.

I. Characteristics of Internet Startups in Other Fields
First of all, thank you to VCBeat for inviting us to discuss mobile health. My name is Chen Penghui, and I am responsible for healthcare investments at HongShan.

It would be inaccurate to attribute the surge solely to HongShan’s aggressiveness; rather, the tailwind behind internet healthcare has been exceptionally strong. Over the past year, 100 internet healthcare companies secured financing. If we estimate based on a funding success rate of one in ten startups—or even a higher ratio of one in five or six—we can gauge the sheer number of entrepreneurs who have entered this space. If the broader internet sector is considered a prevailing wind, then internet healthcare has been the prime beneficiary riding that gust over the past two years.

Over the past two years, and particularly in the last year, we have witnessed intensifying competition in the internet healthcare startup sector. Every Monday, we invite an entrepreneur to our office for a sharing session. In the past, we primarily engaged with pharmaceutical companies, medical device and equipment manufacturers, and hospitals. However, over the last two years, the majority of these sessions have focused on internet healthcare.

So, where do these entrepreneurs come from? Our analysis shows that they largely fall into three categories: those with a medical background, those previously in the internet industry, and former investors who have ventured into internet healthcare.

Why Is Mobile Health So Popular?

We have reached the conclusion that the healthcare industry is one of the few remaining sectors most resistant to transformation by the internet. Precisely because it is so difficult to disrupt, there remain many pain points that are not easily addressed or monetized. This also means that opportunities exist across various sub-sectors, with each entrepreneur aiming to solve different pain points. Mr. Xu from Mindray and Professor Chen have already provided a thorough analysis of internet healthcare from their respective professional perspectives, offering excellent insights.

Compared with internet healthcare startups, internet startup projects in other fields exhibit a typical characteristic: within two years in these industries,The two or three startups that have emerged will essentially determine the trajectory of this field over the next five years., the top three players in many sectors will spawn companies valued at billions or even tens of billions of U.S. dollars, while those trailing behind face significantly fewer opportunities.

II. Internet Healthcare from a Process Perspective
Let us carefully consider what internet healthcare and mobile healthcare truly entail. Let us examine the entire process of seeking medical care: when we take out our smartphones, what aspects can be implemented on the mobile end, and what cannot.

Pre-hospital Consultation:When you take out your smartphone, the first thing you can do is what a friend just mentioned: a lightweight consultation. If you feel slightly unwell and want to consult a doctor but prefer not to go to a hospital, you can use Chunyu Yisheng (Spring Rain Doctor).

Registration:When deciding to go to the hospital, if you are unsure which hospital to choose, there are many companies that can help with hospital selection, including appointment registration services such as Guahao.com, Huakang Panorama, and JiuYi160.

In-Hospital Process Reengineering:From the moment you step into a hospital, there are many companies poised to transform the healthcare delivery process. A major pain point in traditional hospital visits is spending two hours queuing for registration only to have a ten-minute consultation with the doctor—or even less if seeing a renowned specialist like Professor Chen. After the brief consultation, the doctor may order imaging tests, requiring another 20-minute wait. Once the scans are completed, patients must wait anywhere from several minutes to days to receive their test results. They then return to the doctor for a prescription and queue again to make payment. This process is not only inefficient but also highly time-consuming. Consequently, numerous companies have emerged to streamline hospital workflows. These solutions enable patients to handle various steps—such as appointment scheduling, retrieving imaging results, and making payments—directly through mobile terminals. Many enterprises are currently engaged in optimizing these in-hospital processes.

Post-Discharge Management:Furthermore, a crucial aspect following medical consultations is the provision of guidance, services, and support to patients after they return home. This is commonly referred to as chronic disease management. This sector has attracted a significant number of participants, as it is widely recognized as a lucrative market opportunity. Consequently, numerous companies have emerged, ranging from those offering general post-consultation follow-up services to those focusing on highly specialized, vertical niches. It is easy to envision the vast market potential across all major diseases in China: from hypertension and cardiovascular/cerebrovascular diseases, which affect over 200 million people, to diabetes, with nearly 100 million patients, as well as age-related and respiratory diseases. Any condition affecting tens of millions of individuals represents a substantial market, thereby attracting entrepreneurs in the internet healthcare space. This has made the industry extremely dynamic. For instance, we have encountered no fewer than five or six companies dedicated solely to post-consultation follow-up for diabetes patients, and the same applies to hypertension. There are many other types of chronic diseases as well.

Previously, we examined the three stages of the healthcare journey: pre-consultation, during consultation, and post-discharge, each of which presents numerous pain points. Alternatively, segmentation can be based on disease types, scenarios, implementation strategies, or settings (in-hospital vs. out-of-hospital), leading to the emergence of diverse enterprises. A key consideration for internet healthcare startups is to determine which of the three stakeholders—hospitals, physicians, or patients—serves as the most critical entry point.

Light consultations are clearly an interactive platform connecting doctors and patients, where hospitals play a minimal role. Post-consultation follow-up is also an interactive platform linking doctors and patients; however, the hospital serves as a critical setting in this context, as it presupposes that the patient and doctor have met in person and undergone diagnosis and treatment. Therefore, the hospital setting is essential. Appointment registration, in essence, is an interactive platform between patients and hospitals.

From the perspective of these platforms, we believe that each segment, platform, or business model presents its own opportunities. However, there is a question we have consistently posed to entrepreneurs, and one for which we ourselves are eager to obtain a clear answer: Many startups, even those that have raised tens or hundreds of millions of dollars in financing, are still in the process of evolving their business models or monetization strategies.

III. Payment Models
When it comes to business models, there are essentially three types. The first is B2B, where the payer could be insurance companies, pharmaceutical manufacturers, or medical device enterprises such as Mindray. The second is B2C, with patients bearing the cost. However, we more frequently observe the third type, often jokingly referred to as “B2B2C2VC,” in which the ultimate payer remains unclear, but venture capital (VC) firms foot the bill upfront; this represents the most prevalent category among the three. Many entrepreneurs approach us, saying, “Don’t worry about my business model for now; look at how many doctors and patients I have onboarded—my physician network numbers 50,000, 80,000, or even 100,000, while my patient base has already reached hundreds of thousands or even millions.”

For instance, companies that undertake hospital scenario transformations can significantly reduce waiting times within hospitals, making processes such as reviewing films, obtaining imaging results, or making payments much simpler. How do they charge? Hospitals do not have such a fee item. They told us not to worry, as e-prescriptions are about to be opened up. In the future, medication purchases will inevitably be made through apps. By connecting pharmaceutical manufacturers directly with patients, they can capture the margins previously held by pharmaceutical distributors. Although this logic may seem convoluted at first glance, it does hold some merit upon careful consideration.

What is the purpose of my saying this? Regardless of the model, we have not yet seen a company with strong monetization capabilities emerge, which differs from the United States. In the U.S., there is a major payer, namelyMedical InsuranceIf you provide chronic disease management for patients, the likelihood of their returning to the hospital will decrease, thereby helping hospitals reduce costs. In other words, it will help health insurance plans save money in the future by preventing and managing conditions so that minor illnesses do not progress into serious ones, and serious illnesses do not deteriorate into life-threatening diseases. Insurance companies are highly willing to pay for such services. Many popular internet healthcare startups in the United States rely heavily on reimbursement from insurance providers.

What is the current situation in China? The majority of insurance coverage in China consists of state-sponsored medical insurance, with commercial health insurance accounting for less than 10% of the overall insurance market. Moreover, commercial insurance in China falls far short of the coverage levels and willingness to pay for internet-based healthcare services seen in the United States. The absence of a powerful payer in China is closely related to our current insurance payment structure.

Second, traditionallyPharmaceutical and medical device companies with strong payment capacityAmong the mobile internet companies we currently observe, their role as payers remains relatively limited. Companies like DXY, which operate physician education platforms with a large user base of doctors, may be an exception; their extensive network of physicians represents a key demographic that pharmaceutical and medical device companies seek to engage and influence. Even so, we have not yet seen any internet healthcare companies achieve significant scale by primarily targeting pharmaceutical and medical device firms as payers. However, this trend is shifting. We are witnessing many pharmaceutical and medical device companies launching their own mobile health communities or apps and integrating their products into these ecosystems to create a closed loop. This development, in my view, will help address, to some extent, the monetization and business model challenges faced by certain mobile health enterprises. From this perspective, we are seeing the gradual emergence and maturation of payers in China.

Third, we discussedPatient PaymentProfessor Chen made it very clear just now. From a physician’s perspective, doctors provide patients with high-quality chronic disease management services—for instance, preventing stroke in individuals with hypertension—so patients should pay for these services. In principle, this is something everyone should acknowledge. However, when it comes to individual practice, I have observed an interesting phenomenon: many chronic disease management companies seeking financing from us tell us that patients are currently unwilling to pay physicians, and thus a subsidy model directed at physicians is adopted. We then ask what the next step after subsidies is, how long the subsidies will last, and whether patients will step up to assume payment responsibilities once the subsidies end. Whenever this topic arises, entrepreneurs cite the example of Didi and Kuaidi, arguing that we need not worry, as Didi and Kuaidi became the number one player in the transportation sector through subsidy campaigns.

But is it truly unnecessary to provide subsidies? At least from the perspective of patient payments, there remains a significant issue to be addressed in China. What is the underlying reason? In fact, a culture of paying for non-free or premium online services has not yet taken root; most people still expect internet-based offerings to be primarily free. That said, I believe there is unmet demand, and patients facing particularly acute pain points are willing to pay. However, establishing chronic disease patients as paying customers will require a long journey.

We have engaged in discussions with companies specializing in the chronic disease management of hypertension or diabetes, which provide patients with recommendations and advice based on their blood glucose and blood pressure data. For such services, we believe that a one-time payment model is quite likely; however, to sustain recurring payments from patients, we consider it necessary to offer high-quality, personalized guidance and support. Internet healthcare startups currently lack the capacity to deliver such services, as providing personalized guidance requires a substantial patient base and a large pool of physicians. At this stage, we believe many companies are still in their early phases and require further development. Even after passing this initial stage, the level of patient acceptance of personalized guidance and their willingness to pay remain to be validated.There is an old Chinese saying: “A long illness makes one a doctor.” Many people feel that if the advice provided is merely general lifestyle recommendations—such as reducing salt intake, increasing physical activity, and maintaining good sleep quality—their willingness to pay is low. The key challenge lies in achieving true personalization and convincing patients that the advice originates from professional physicians, thereby enhancing their willingness to pay. This is an area many companies are currently exploring. We are confident that some companies will eventually succeed in developing not just a viable business model, but a highly scalable one. However, we have not yet observed many such companies emerging.

As I just mentioned, there are no fewer than five hundred to one thousand startups in this industry. Among so many companies, determining who will emerge victorious—or, from an investor’s perspective, which companies HongShan should choose to invest in—is indeed a challenging task.

IV. Three Major Entry Points for Healthcare Entrepreneurship
As mentioned earlier, we can categorize startups based on their entry points: some are physician-facing, some are patient-facing, and others are hospital-facing.

1、"The physician portal is becoming more specialized.", for example, companies such as DXY and Xingshulin, which appear to have higher entry barriers and greater technological sophistication. Their business models can be broadly categorized into four types:Utility Tools, Management Systems, Physician Communities, and Physician Training. We have invested in several companies in this field. We believe this is a critical entry point, which differs from traditional mobile internet or other segments of the mobile internet industry. Generally, in the mobile internet sector, those who win users win the market; however, we believe that in the healthcare internet sector, the dynamic may be reversed: it is"Win the Doctors, Win the World", because physicians exert a tremendous influence on patients. In the food delivery industry, accumulating a large customer base and establishing strong word-of-mouth reputation naturally leads to becoming the industry leader. In the field of internet healthcare, we believe that one can only become the market leader by aggregating a sufficiently large number of physicians, including a substantial cohort of high-quality practitioners. Although many companies in this sector currently lack clear monetization pathways, we consider this aggregation strategy to be the critical success factor for mobile internet healthcare.

2、Patient PortalThere are three categories,Telemedicine Platforms, Pharmaceutical E-commerce, Patient Communities. Many believe that pharmaceutical e-commerce is currently one of the easier sectors to monetize. However, if we examine the landscape, the largest pharmaceutical e-commerce company in China to date—without even comparing it to giants like JD.com or Alibaba, but rather against vertical platforms, including those specializing in cosmetics such as Jumei or other niche categories—is still significantly smaller, with annual sales of only around RMB 1 billion. Why is this figure so low? The reasons are straightforward.

Consider this: most people still purchase their first prescription medications at hospitals. For over-the-counter (OTC) drugs—such as those for headaches, colds, or coughs—would you prefer to place an online order and wait a day for delivery, or would you rather walk to the pharmacy next door and buy the medication in five to ten minutes? This illustrates why the OTC segment has not gained significant traction in pharmaceutical e-commerce. When suffering from headaches, colds, or fever, patients prioritize immediate access to medication rather than waiting a day for delivery, even if it means saving 20%.The best-selling products online are contraceptives. Why do people buy contraceptives online? Because it avoids embarrassment, allowing customers to purchase whatever and however much they want with complete confidence. The second major category is medical devices, such as ventilators and oxygen concentrators, which account for the majority of China’s pharmaceutical e-commerce market.In the future, as prescription regulations loosen, a significant portion of prescription drugs may be sold online. This is particularly true for repeat purchases of medications for chronic diseases, where time sensitivity is lower and price sensitivity is higher. Moreover, patients are already familiar with these brands and do not need pharmacists’ assistance in physical stores. Therefore, chronic disease medications that are less time-sensitive but highly price-sensitive represent a potential avenue for monetization and constitute a major opportunity from the patient acquisition perspective.

Who will secure this entry point? Beyond pharmaceutical e-commerce platforms, tech giants like Alibaba and traditional pharmaceutical companies are also entering the fray—for instance, Good Pharmacist, a subsidiary of Jointown Pharmaceutical Group. Companies specializing in hospital process reengineering are also competing in this space. This represents a substantial market opportunity, one that is particularly conducive to achieving scale. However, uncertainty remains as to who will ultimately succeed, leaving ample room for opportunity.

There are many other personalized needs within the patient portal, such as high-end medical insurance, chronic disease management, and smart wearable hardware. We believe that many companies are performing exceptionally well in these areas and will attract significant patient traffic. However, how to convert this patient traffic into a viable business model remains under exploration.

3、Hospital Entrance, which is what we refer to as the traditional hospital entry point. This segment encompasses traditional hospital information systems, telemedicine, O2O platforms, and regional healthcare cloud platforms, with many enterprises operating in this space. Here, I would like to focus on telemedicine, a niche sector where we observe strong demand and significant pain points. The rationale is easily understood: not everyone is as fortunate as those here present, living in major cities like Beijing, Shanghai, or Shenzhen, where one can either wait in line or leverage personal connections to access top-tier specialists. In many other regions, patients also seek guidance from China’s leading experts. If they can receive diagnoses from first-class specialists without having to purchase airfare and book two nights’ hotel accommodation to travel to Beijing or Shanghai, we believe this constitutes a highly viable business model.

There is another business model: even for those of us in Beijing, Shanghai, Guangzhou, and Shenzhen, after receiving a diagnostic report from one specialist, we often seek validation from another expert because we find it hard to believe that the diagnosis could be accurate. This demand has created significant opportunities for telemedicine.

Recently, the National Health and Family Planning Commission issued a document stating that remote services cannot be used for medical diagnosis but only for consultation. This means that, under current policies and regulations, telemedicine can only be conducted within hospitals. However, it is widely recognized that telemedicine confined to hospital settings struggles to develop into a large-scale industry. Many companies offering hospital-based telemedicine solutions primarily focus on selling hardware and software. For instance, establishing a telemedicine suite at Peking Union Medical College Hospital and partnering with a small county-level hospital in Yunnan Province—where another consultation room is set up—is heavily constrained by factors such as physicians’ availability and physical space.

The telemedicine model we envision, with its immense opportunities, must leverage physicians’ fragmented time rather than their official working hours. It should be accessible anytime and anywhere, rather than being confined to designated telemedicine rooms within hospitals during working hours. Therefore, while telemedicine currently represents a substantial market, it remains predominantly consultation-based; genuine medical diagnosis awaits further policy-driven advancements.

Furthermore, there are significant opportunities in appointment scheduling platforms and O2O queue management platforms. We have invested in Guahao.com (WeDoctor). A major advantage of such platforms is their ability to capture a critical entry point: the first step in seeking medical care is scheduling an appointment. By leveraging this initial touchpoint, these platforms can convert users into subsequent service offerings. For instance, post-consultation follow-up services integrated with the scheduling platform are likely to engage patients more effectively than standalone follow-up solutions lacking such an entry point. After scheduling an appointment through the platform and completing the consultation, if the doctor recommends downloading an app to maintain ongoing interaction, patients are more likely to comply. No one wants to install 20 different single-function apps on their phone. We believe that hospital appointment scheduling serves as an excellent gateway, paving the way for diverse business models. In our view, telemedicine represents a highly promising sector.

Of course, there are many other players, including websites, media outlets, and marketing service providers; we believe there are also many companies excelling in these areas. For startups, whether they focus on physician-facing or patient-facing entry points, the key future consideration is how to leverage these touchpoints to secure resources from physicians, patients, or enterprises, thereby enabling the successful implementation of their business models.

V. The Future: The First Phase of the Competition Has Concluded
We believe that every pain point currently visible or conceivable is already being addressed by market players. The first phase of this competition, which we consider concluded, was about identifying these opportunities; the second phase, which we have now entered, is about execution excellence. The coming one to two years will be critical. Companies that fail to establish a viable business model may struggle to secure subsequent rounds of financing, whereas those that succeed have the potential to emerge as industry giants. Although competition is already fierce and the market is crowded, we believe this sector is still in its early stages. Numerous companies will emerge to transform current healthcare-seeking behaviors, much like how ride-hailing services revolutionized transportation habits in the past. In the future, the entire healthcare journey—whether inside or outside hospitals, and before or after consultations—will be unimaginable without the support of mobile terminals. We anticipate that certain companies will set industry standards, reshape user habits, and grow into enterprises valued at tens or even hundreds of billions.

VI. How HongShan Helps Its Portfolio Companies
Finally, let’s discuss how HongShan helps our portfolio companies become champions in their respective niche markets.

Sequoia Capital has invested in over 300 startup companies across various industries. We have a deep understanding of the mindset of founders and entrepreneurs. Smaller enterprises require more assistance, whereas mature companies generally need less. The most critical way we support startups is by helping founders build strong teams. HongShan has recently undertaken numerous initiatives to this end. For instance, through our “HongShan Campus Tour,” we aggregate the hiring needs of the hundreds of companies in our portfolio and bring these entrepreneurs onto campuses to conduct recruitment drives. For mid-level core personnel, we have also made significant efforts by establishing a comprehensive HR system that helps entrepreneurs source talent across functions such as sales, operations, and finance. Notably, in a recent television program titled *Zhi Lai Zhi Wang* (Career Direction), HongShan assisted the CEOs of our portfolio companies in recruiting talent through various channels. We firmly believe that for early-stage startups, the team comes first. A strong team is sometimes even more important than a sound business model. A capable team can ultimately identify a viable business model, whereas a great business model will fail if not executed well. Therefore, we are committed to supporting companies in talent acquisition and can contribute substantially in this area.

Second is fundraising. Many people ask, “Since you’ve already invested, why do you still need to raise capital?” The point I want to make is that for many internet healthcare companies, a single round of financing is certainly insufficient; scaling up requires multiple rounds of funding. Leveraging our experience and network in the industry, we aim to help investors not only secure higher valuations in subsequent rounds but also identify valuable strategic investors. These strategic investors may include corporations across various sectors, such as Mindray and Pfizer, or tech giants like Alibaba, Baidu, and Tencent, which can provide startups with substantial traffic channels and resources in the internet space.

Third, we can help companies identify opportunities for strategic partnerships and resource alignment. Our portfolio is extensive, comprising companies in China and the United States across not only the internet healthcare sector but also traditional healthcare and broader internet industries. We frequently assist companies in identifying their weaknesses and addressing them. For instance, a company specializing in chronic disease management may require various resources, such as access to physicians, hospitals, or robust IT systems. These resources can often be sourced from our portfolio companies or through HongShan’s partner network.

In summary, I believe the three essential steps we must take when investing in any startup are:Talent, Capital, Resources. We have always said that the founding team handles 90% of the work, while we only contribute 10%. However, we hope that our 10% contribution can transform this company into a more successful and greater enterprise.

VII. Questions and Answers
Question: Thank you, Mr. Chen! I come from an IT background and am currently launching a startup. Startups can be divided into several stages. The first stage essentially involves the classic “chicken or egg” dilemma. You mentioned earlier that your investment considerations might focus on the second stage; does this mean the first stage is not taken into account? That is my first question. My second question concerns the second stage: it is quite likely that the initial direction of our product development may diverge from its later trajectory. For instance, we might start out aiming to build a telemedicine platform but end up operating as a community hospital. When such a strategic pivot occurs, what factors do investors consider? To put it bluntly, if we set out to build a human-centric solution but ended up creating something entirely different, how would investors evaluate this? My third question relates to future growth: whether we aim to scale the company into a great enterprise or position it for an eventual exit through acquisition, how do investors assess these differing endgames?

Chen Penghui: Regarding the first question, we never persuade anyone to quit their job and start a business. Those who come to us are already determined to become entrepreneurs. We believe that founders who need persuasion are not suitable investment targets for us until they have fully clarified their thinking. We hold that entrepreneurs must first make up their minds and demonstrate an unwavering, burn-the-boats commitment.

The second question: We have invested in many companies. Perhaps 50–60% of them have succeeded by sticking with their initial ideas from the outset, while quite a few others have also achieved success by continuously adapting their strategies in response to market changes. Guahao.com is a case in point. It did not start out as an appointment-booking service but has since evolved into a highly successful online hospital gateway platform. This is commendable. A good entrepreneur must possess the ability and judgment to adapt to market shifts. However, such changes should not be made capriciously every few days; rather, they should be the result of careful deliberation.

Third, should you invest in a company poised to become great or one that is likely to be sold? I believe each fund has its own philosophy; both types of companies can generate profits. For us, we unequivocally choose entrepreneurs who aspire to build great companies. Let me share a story: Why is Sequoia Capital named “Sequoia”? The sequoia tree, native to Northern California, produces the smallest seeds among all large trees, yet it grows into the tallest of all trees. Our aim is to help these seemingly small and fragile entrepreneurs grow into towering giants, with goals that extend beyond mere profit-making.

Question: Hello, Mr. Chen. Thank you very much for your sharing today. During your speech, I noticed that you emphasized doctors as the core resource of internet healthcare, and that only by engaging doctors can a viable profitability model be established. At the same time, I observed that many of the models you listed focus more on process improvements in non-clinical areas. Moreover, companies collaborating with doctors tend to work exclusively with physicians rather than with hospitals. I am even aware that some well-known mobile health companies specializing in online consultations have explicitly stated their intention to bypass hospitals and this institutional barrier by partnering directly with doctors. However, under China’s current healthcare system, independent medical practice still has a long way to go, making it difficult for doctors to operate outside hospital administration, whether in terms of voluntary contributions on medical platforms or operational models. Therefore, I would like to ask your perspective on the relationship between hospitals and doctors within mobile healthcare models. Do you believe that a company capable of collaborating simultaneously with both hospitals and doctors would represent a superior business model?

Chen Penghui: That is an excellent question. In fact, we frequently contemplate this issue as well. At the current stage, I agree with your viewpoint. A model that integrates both hospitals and physicians would be superior. From a patient’s perspective, trust is significantly greater in a physician or specialist they have met in person at a hospital than in one they have only encountered online, particularly during subsequent chronic disease management or consultation services. This is the first point.

Second, hospitals currently hold a very significant and dominant position in the minds of patients, although this may change in the future. When seeking medical care, we not only look for renowned physicians but, more importantly, choose specific hospitals. For instance, Jishuitan Hospital is the first name that comes to mind for orthopedic issues, while Xuanwu Hospital and Huashan Hospital are top choices for neurosurgery. Hospitals thus maintain a strong market standing. Whether this will shift remains to be seen; however, at present, if an entrepreneurial model can effectively integrate both high-quality physicians and reputable hospitals, it stands a greater chance of success.

Question: I found today’s session very inspiring. I represent Peking University Yixin, the first company in China to specialize in hospital informatization, and we operate as a B2B enterprise. My first question is this: For a company of our scale, with annual revenues reaching several hundred million yuan, would HongShan be willing to co-incubate ventures with us as we expand from B2B to B2C? Specifically, if we help hospitals streamline their external-facing services, would HongShan partner with us to support this transition from serving healthcare institutions to directly serving end consumers?

For the second question, I am currently responsible for a project in traditional Chinese medicine (TCM). I would like to ask whether there are already any ideas regarding TCM, such as mobile TCM or TCM big data?
Chen Penghui: I believe companies serving the B-side have several advantages. First, as you mentioned, they already generate substantial revenue, providing strong cash flow to support development in other areas of the business. Second, after serving hospitals for many years, these companies have accumulated extensive relationships and data within the hospital sector, which constitutes an inherent advantage. However, in my view, transitioning from B2B to B2C is a significant leap. Despite these advantages, success is by no means guaranteed. We have observed many such enterprises; we can discuss them further afterward to examine which companies have performed well and which have encountered detours. It is also crucial to determine how to leverage strengths while avoiding ingrained mindsets and weaknesses.

Second, we consider Traditional Chinese Medicine (TCM) to be a legitimate branch of medicine, and I personally hold TCM in high regard. However, we have not observed many startups focused specifically on the TCM sector, which indeed represents a current market gap. What are the reasons behind this? I believe there are multifaceted factors. For TCM, the four diagnostic methods—inspection, auscultation and olfaction, inquiry, and palpation—remain critically important. Clinical recommendations cannot be based solely on biomarkers such as blood pressure and blood glucose levels; facial diagnosis in TCM is particularly significant. That said, there is little difference in post-diagnosis follow-up care.

Question: We are a company specializing in neurosurgery and brain tumors. We currently serve only physicians and have not yet expanded to patients, having secured Series A financing. I would like to consult your opinion: For a company like ours that currently focuses solely on research services for physicians, is it imperative to expand into the patient market? In other words, for companies serving only physicians, is transitioning to direct-to-patient services the only viable long-term business model? Thank you!

Chen Penghui: In fact, many companies abroad that serve physicians have achieved significant success, as physicians are the most critical link in the entire mobile internet ecosystem. However, I personally believe that starting with physician education offers a more readily accessible market. While this market may not be particularly large, we have invested in Huayi Network, a company specializing in physician education. Physician education is merely the first step; whether or not to expand toward patients as a second step is open to extensive discussion. For instance, physicians are a key demographic that many pharmaceutical manufacturers and suppliers aim to influence. A crucial factor here is whether your platform features the most prominent physicians, as this will determine your future growth trajectory. For example, whether Professor Chen is a user of your website is something you might want to discuss further. I believe that if a website aims to serve physicians exclusively, it must be highly refined and specialized, effectively aggregating professional physicians onto your platform.

Question: In recent years, the proliferation of healthcare technology startups has fueled a boom in the internet healthcare sector. Media outlets covering healthcare have increasingly focused their attention on internet healthcare, with some even establishing new media companies specifically for this purpose. Given my background in media, I would like to ask whether Sequoia Capital (HongShan) has previously considered or plans to invest in vertical healthcare media outlets. If so, among the existing vertical healthcare media platforms, which business model do you find most promising?

Chen Penghui: I believe that medical media is certainly an excellent entry point. We have been closely monitoring this sector, where many outstanding companies have emerged, including new media platforms such as VCBeat. This is an area we continue to watch attentively. In my view, when investing in media companies, it is crucial to look beyond their core media functions and assess their capabilities outside the media realm; this is a key focus of our investment strategy. I am confident that highly successful companies will emerge from this space. Sina began as a media company, and Weibo has demonstrated strong media effects; both are now valued at tens of billions of dollars.