China, India & Singapore: places where healthcare startups go to flourish

Venture funding in healthcare globally reached a record $4.5 billion in 302 deals in 2015, a four fold increase since 2011. The pace seems slower when compared with the levels seen in 2014, which was about four per cent lower.

Funding is likely to continue at a higher rate, says the Powering the Future of Healthcare in Asia Pacific report by Baker & McKenzie, a US-based law firm, in partnership with The Propell Group.

The main reason for optimism is that a new generation of healthcare startups, focussing on the consumer market, has been gaining rapid ground across India and Southeast Asia.

High-growth sub-sectors include ‘Healthcare Consumer Engagement,’ ‘Wearables & Biosensors’ and ‘Personal Health Tools & Tracking’ — together they attracted the most funds in 2015.

Startups that get more funding are likely to acquire others — as has happened in sectors such as e-commerce and hyper-logistics.

Consolidation in the healthtech sector continued to pick up pace in 2015, with 187 M&A transactions, nearly double that of 2014 (95 deals). Such transactions included a few major deals such as IBM‘s $1 billion acquisition of Merge Healthcare and Emdeon‘s $910 million acquisition of Altegra Health.

China, India and Singapore

The last three years have seen a surge in healthtech start-ups in the Asia Pacific region, driven among others by a growing middle class affluence and health awareness, the need for chronic disease management, and the growing demand for senior healthcare products and services.

Among all countries, China, India and Singapore have become hotbeds for healthtech start-ups in Asia. Most of the startups that came up in the last year were about doctor and clinic discovery, which makes sense given that both India and China have a acute shortage of doctors given their large populations.

healthcare Graph1

Consumer health and wellness has also gained ground, as people with higher incomes look for options. Apps such as Practo, which has raised $124.5 million in venture funding, is among those which are tapping into this market in India and Southeast Asia.

Although more than 100 accelerators and incubators were launched across the region within the same period, few are health-tech focused although this trend is expected to change in the next 12 months, according to the report.

Corporations and strategic investors have also started foraying into the Asia healthtech sector, with insurance companies leading the charge. AIA Accelerator (powered by Nest) ran its first cohort of eight healthtech start-ups in 2015, which attracted 76 applications from 16 countries. Metlife has launched its own internal incubator, Lumen Lab, which has a clear healthtech focus.

Wearables on personal health tracking on the rise

The report also suggests that there has been a shift in healthcare funding trends. The top-ranked areas for funding in 2011 were ‘Healthcare Consumer Engagement’, and ‘Analytics & Big Data’.

In 2015, however, while ‘Healthcare Consumer Engagement’ continued to attract the most funding with $629 million, ‘Wearables & Biosensing’ and ‘Personal Health Tools & Tracking’ entered the top three most popular subsectors, attracting $499 million and $409 million in venture funding respectively.

Close to 900 investors participated in healthtech deals in 2015, up 25 per cent from 2014. The consumer-end of the market will continue to drive growth of such startups.

“There has been a notable increase in healthtech funding activities outside of the US, particularly in China and India in the past 18 months, where the need for affordable solutions is more acute. We can expect this trend to continue, particularly in the areas of digital therapeutics, data and analytics, and diagnostics,” Julien de Salaberry, founder and chief information officer, The Propell Group, said.

The report is a six-part series and is being released over a period of six months. It will conver the impact of technological innovation on healthcare in Asia, and will also highlight legal concerns that startups in the healthcare sector might face.

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