China Internet Healthcare Investment and Financing Report: Q1 2015

In 2014, the internet healthcare sector saw a surge in entrepreneurship and investment, with fierce competition among numerous players. But could this momentum continue to build in 2015? VCBeat’s Internet Healthcare Research Institute reviewed the financing and investment landscape of China’s internet healthcare industry in the first quarter of 2015 to uncover key insights.

According to statistics from VCBeat’s Internet Healthcare Research Institute, there were 26 publicly disclosed internet healthcare financing events in China in the first quarter of 2015, involving 25 companies and totaling over $400 million in investment—a 37.9% quarter-on-quarter increase compared to the same period last year.

Compared with each quarter of 2014, fluctuations were minimal, indicating a steady investment trend. Moreover, both the financing amount and the number of financing events in this quarter exceeded the average levels, underscoring strong overall momentum.

However, the monthly financing data for the first quarter shows a nearly 45-degree decline. In January, there were 14 financing deals totaling $288.05 million. In February, there were 9 deals totaling $110.04 million. In March, there were only 3 deals totaling $10.14 million. How long will this trend persist, and is a recovery possible? Let us now take a closer look at the investment and financing landscape in the first quarter of 2015.

Investment Focuses on the Early Stage

Among these, there were 7 angel-round financing deals with a disclosed amount of $8.4 million; 14 Series A deals with a disclosed amount of $138.18 million; 2 Series B deals with a disclosed amount of $21.61 million; 2 Series C deals with a disclosed amount of $172.44 million; and 1 strategic financing deal with a disclosed amount of $67.61 million. In terms of the distribution across financing rounds, activity remains concentrated in the early stages with relatively small amounts. VCBeat believes that early-stage investors are still adopting a tentative approach toward the emerging internet healthcare sector. Although the highest financing amount was observed in Series C rounds, only two deals occurred, primarily driven by two pharmaceutical e-commerce companies, Beibei.com and 111.com (Yihaodian). The combined amount raised by these two companies accounted for 42% of the total financing. VCBeat anticipates that this figure will grow as policies are gradually relaxed, leading to rapid development of the B2C model in pharmaceutical e-commerce. Moreover, pharmaceutical e-commerce is likely to become one of the most significant thematic investment opportunities in the industry in 2015.

In terms of average financing per project across all rounds, the figures for Q1 2015 saw a near-universal increase compared to the full-year averages of 2014. Notably, the angel round experienced the most significant growth, surging by 272%. In contrast, the average financing for Series B rounds declined by 23%. This indicates that even though investment institutions may have adopted a cautious, trial-based approach toward early-stage risky ventures, their overall investment intensity remained robust compared to the previous year.

Hardware-Software Integration Dominates Medical Investment Trends

Compared with each quarter of 2014, the hardware-software integration sector (wearable devices + apps) maintained its leading position this quarter, dominating investment trends in internet healthcare. A total of seven deals were completed, with an investment amount of USD 20.49 million, accounting for 5.0%. Compared with the investment sectors and amounts in 2014, the trend is evident: the hardware-software integration sector attracted the most attention, while pharmaceutical e-commerce showed the greatest financial potential.

In terms of the proportion of investment deals by subsector, the following changes are observed compared with each quarter of 2014:

1. The wearable sector is steadily rising; although the number of investments has fluctuated slightly, it continues to attract significant attention;

2. Resurgence in Pharmaceutical E-commerce: Financing deals rose to five this quarter, compared to four for the entire year of 2014. In 2014, excluding IPOs and acquisitions, the remaining two deals were secured at Series A and Series B stages, respectively. This trend indicates that the pharmaceutical e-commerce sector is gradually entering a maturity phase. First, business operators are increasingly embracing e-commerce and maturing in their operations; second, favorable policy and market conditions are providing support.

3. Online consultations have continued to exhibit their characteristic high volatility, with only one case reported this quarter. According to VCBeat, many online consultation products are still in a state of readiness, awaiting breakthroughs.

42% of investment projects are in Beijing

This quarter, internet healthcare investments were primarily concentrated across seven provinces and municipalities in China, with Beijing, Shanghai, and Guangzhou remaining the main hubs for internet healthcare startups. Specifically, there were 11 investment deals in Beijing, six in Guangdong, three in Shanghai, and three financing events in Zhejiang. The remaining investments consisted of one deal each in Hunan, Jiangsu, and Chongqing. Compared with each quarter of 2014, the geographic scope of funded regions has narrowed. Does this signal a waning of entrepreneurial enthusiasm, or is it a period of gathering strength? Regardless, VCBeat looks forward to seeing the seeds of entrepreneurship flourish throughout China.

Investment Overview of Key Areas in Internet Healthcare (Hardware + Apps)

Compared with each quarter of 2014, the field of flexible electronics (rigid-flex PCBs) remained popular in terms of attention this quarter, with a total of 7 deals. However, the financing amount dropped to its lowest point after peaking in the fourth quarter of 2014, reaching $20.49 million. Among these, Series A rounds showed the strongest momentum, accounting for 6 deals with a total financing amount of $18.877 million. Beijing attracted the highest attention with 3 deals, while Jiangsu, Hunan, and Guangdong each had 1 deal. No Series B or C round financing activities were observed this quarter.

Current data indicates that although financing in the hardware-software integration sector is on a downward trend, its popularity remains exceptionally high. This sector represents a key direction for the future development of interaction technologies. While its current user base is relatively narrow and the value-added features it offers are limited, these constraints are expected to be gradually overcome, as many niche areas within healthcare and medical services remain largely untapped.

Appendix: Companies in the Hardware-Software Integration Sector That Have Secured Financing