Healthcare: another gold rush in the making?
Early-stage investors, it would appear, have rediscovered their love for the healthcare sector. Since March, investors have concluded around 17 deals that have something or the other to do with healthcare. There may be more deals. This is based on a quick scan of the deals that have been reported by various media outlets. Still , it’s a substantial number that looks suspiciously like another gold rush is in the making.
Let’s break down the deals to see where the money is headed. There are at least five app-based start-ups in the mix. This month, HealthifyMe, an app that enables users to track their fitness and connects them with nutritionists and trainers, picked up $6 million in a Series A round of funds from IDG Ventures India, Inventus Capital and Blume Ventures.
In April, DocsApp, an app that lets patients consult with doctors, raised $1.2 million in a seed round led by Japanese venture capital firm Rebright Partners. In March, LoveCycles, a women’s health and menstrual cycle tracker, raised a $700,000 round from Prime Venture Partners.
It wouldn’t be a surprise to see more early-stage investors make a beeline for such app-based start-ups over other categories in healthcare. The space received a big push last year when Practo, the Sequoia Capital backed start-up, raised a $90 million Series C round of funds led by China’s Tencent Holdings. The valuation of the eight-year-old company, following the round, reportedly jumped to over $500 million.
Then there are a few companies that would fall in the so-called online pharmacy category. The most well known of the lot is 1mg, which raised a $15 million Series B round led by Maverick Capital Ventures, the venture capital arm of Dallas-based hedge fund Maverick Capital, last month. Another online pharmacy that got funded last month is CareOnGo. It raised an undisclosed sum in a seed round from FAO Ventures.
There are also a couple of outliers. Accel Partners recently led a Series B funding round in medical devices firm Consure Medical. It is working on faecal incontinence management technology, which is aimed at helping critical care patients among others. Earlier in March, the Indian Angel Network invested an undisclosed sum in stem cells research firm Transcell Biologics.
Brick-and-mortar healthcare services firms are still not back in favour with investors, relative to the interest in the healthcare technology segments. But there has been a smattering of deals in that area, too. A couple of days ago, AddressHealth, a pediatric services healthcare chain, raised $1.5 million from Gray Matters Capital and existing investor Unitus Seed Fund. Earlier this month, dental services chain Vatsalya Centre for Oral Health raised $1.6 million from S-Squared Capital Investments.
The home healthcare services segment, within the brick-and-mortar category, may become more interesting to investors soon.
In January, SAIF Partners led a $4 million funding round in Care24. India Quotient, which had seed-funded the company earlier, participated in the round. There have been some big funding rounds in this business in the recent past. Last year, Portea Medical closed a $37.5 million funding round led by its existing investor Accel Partners. World Bank arm International Finance Corporation jumped in to participate, contributing $7 million to the round.
The other notable deal in the segment last year was a big $10 million Series A round raised by Medwell Ventures from Fidelity Growth Partners India and Fidelity Biosciences.
It isn’t entirely surprising to see the heightened interest in the healthcare sector.
Mint reported in March, quoting a Deloitte research report, that India’s overall healthcare market is worth $100 billion and is expected to grow at a 23% compounded annual growth rate to touch $280 billion by 2020. The report further estimates that the market for pharma e-commerce alone will grow 10 times to $400 million by 2017.
The healthcare sector has also had a good run at the bourses lately, reigniting interest among investors. Last year, diagnostics services chain Dr Lal PathLabs’s public offering, which was subscribed more than 33 times, created profitable exits for its two private equity investors—WestBridge Capital Partners and TA Associates. Other successful public market outings include Narayana Hrudayalaya, which runs a chain of multispeciality hospitals, in December, and diagnostics labs chain Thyrocare Technologies Ltd last month. Thyrocare’s investors include CX Partners, Norwest Venture Partners and Samara Capital.
Healthcare should be on the radar of investors, both early and later stage. It’s one of those sectors that holds the key to solving massive problems in this country and offers multiple opportunities for non-linear growth. Investors just have to be careful that healthcare doesn’t go the food technology way. The after-effects would be disastrous.