IMAGINE you have an accident and are taken to the nearest hospital for urgent medical care (touch wood!). On arriving, you receive the disappointing news that wards are full, with no vacant bed available. You are then transferred to another hospital, only to be greeted with the same scenario. You’re left to endure hours of waiting in the emergency room, in excruciating pain as you watch countless other patients in dire conditions, all vying for a much-needed bed.
This sobering story is not too far-fetched and if not well managed, will become a problem in our local health-care system.
The average wait time for admission into hospital wards in Singapore has gone up to over seven hours, CNA recently reported, and in some hospitals the wait time can even exceed a day.
This increase is due to the rapidly ageing population, resulting in more patients with complex medical needs and often requiring longer stays.
In order to cope with demand, the Ministry of Health’s Office for Healthcare Transformation has launched several initiatives. These include the Mobile Inpatient Care@Home initiative, which works with tech-enabled health provider such as Speedoc to offer hospitalisation-level medical care at home for more stable patients through their H-Ward virtual hospital programme, freeing up more hospital wards for emergency cases.
If this is already a challenge that a developed nation like Singapore faces, one can only imagine the severity of the health-care situation in other South-east Asian countries where there are fewer doctors and hospital beds per capita.
A NEWSLETTER FOR YOU
Garage
The hottest news on all things startup and tech to kickstart your week.
The health-care industry is under pressure not only to increase capacity but also to raise the efficiency of health-care providers, via digital technologies and streamlining of processes to meet unmet needs.
The industry has undergone significant transformation in recent years. The integration of generative AI into healthcare has also opened up a whole new world of possibilities for innovation. And the Covid-19 pandemic has further accelerated the adoption of digital health practices by governments around the world. As the health-care industry continues to evolve, it is likely that we will see even more exciting advances in digital health in the coming years.
As an early-stage fund, we are optimistic about digital health innovation and the potential it holds, particularly in this region where health-care technology is still nascent. Despite various regulatory hurdles, we are encouraged by the emergence of hundreds of promising digital health startups over the years, solving a wide range of health-care problems, including EMRs, chronic care management and decentralised care. In this article, we take a look at some key factors that venture capitalists (VCs) consider when evaluating digital health startups in this region.
‘Where is the Proof of Value?’
“Where is the Proof of Value?” This is a common question that we, as VCs, often ask founders. In the South-east Asian region, many startups tend to be overly fixated with digitising existing workflows and increasing adoption instead of creating products that provide sustainable value to both the payer and healthcare provider.
For instance, wearable devices are increasingly common. But while many were initially obsessed with tracking their everyday data, no real actionable insights emerged from the data collected, leading to data fatigue.
We often wear our Fitbits to sleep and receive sleep scores accompanied by sleep charts. But how do we make changes to sleep better? While the device tracks valuable data, it falls short in providing a comprehensive solution for better sleep. It is critical for digital health startups to demonstrate tangible and measurable value to their users in order to close the loop, as well as run a sustainable business in this highly competitive environment.
Does the team have the ability to commercialise the product?
Beyond proving that there is value, founders need to demonstrate the ability to commercialise the product. In digital health in particular, solving the “Cold Start Problem” is easily twice as hard compared to other industries, due to the complex interplay among the three key stakeholders: payer, patient, and provider.
It also typically takes some time for health-care providers and insurers to familiarise themselves with a new technology or service, before incorporating it into the health-care billing codes. For startups to succeed, they need to demonstrate financial benefits for both parties, whether through cost savings or as a new revenue stream from new treatments and services.
We also observe that founding teams that possess both clinical expertise and business acumen tend to be more successful when commercialising a digital health solution. Founders without medical background would need to work with partners with strong medical expertise, while founders with medical or scientific domain expertise would need to collaborate with strong commercialisation team members, to increase the likelihood of success.
Is there a moat?
Just as how a castle needs a moat to defend against invaders, digital health startups need a strong moat to reduce the chances of being replaced by another competitor. The risk of developing just a digital tool or platform is that health-care providers can choose to develop it in-house or switch to a cheaper alternative. While patents can be seen as a moat and are proof of novelty, early-stage startups often lack the know-how, time and resources to take legal action. Patents or digital tools alone are not defensible.
Integration and partnership with established stakeholders is the key to developing the moat in the health-care industry. This allows startups to leverage their partner’s credibility to gain the trust of other stakeholders. This can be especially beneficial when it comes to fundraising, as investors are more likely to trust startups that have at least a strategic partner involved. These partnerships also provide a platform for the startup to reach a wider audience and to expand their own market presence without high acquisition costs.
Is the business scalable?
Health-care services are typically associated with high customer acquisition costs and long sales cycles. So far, we have observed that the cost of acquiring direct-to-consumer (D2C) customers has proven to be very costly, and that the B2B2C model could be a better alternative in general, albeit a longer cycle. This model would involve working with established partners who already have a relationship with your end-users to educate and distribute your products or services.
We also look for strong user retention and engagement. Except in the case of chronic diseases or perhaps rehabilitation, health-care services are usually not required daily or weekly, but typically on an ad-hoc basis. Hence, a health-care digital product (such as teleconsultation) may not be used all the time.
But it is still important for the app to remain top-of-mind for the user. As investors, we would ask if the founders track user usage and behaviour regularly, such as monthly or quarterly and implement strategies to drive engagement and reduce user churn.
As well, we look for founders who think beyond a single product and plan for future product offerings at appropriate times, to increase customers’ average order value (AOV). For example, rather than offering a single blood test, a startup could consider providing a suite of complementary tests that are value-adding for the end-customer and increase “stickiness”.
For local startups, Singapore offers a good beachhead with its higher purchasing power and startup-friendly initiatives, but founders must have the desire and capability to expand beyond the local market. With a population of just 5.5 million, Singapore has a small customer base, so it is necessary for startups to expand regionally to surpass US$100 million in revenue – another metric that we look at.
The success of digital health startups hinges on the ability of founders to establish a strong connection within the industry, regardless of their background. Founders must understand the needs and perspectives of payers, patients, and providers, and demonstrate the value and scalability of their products.
Carmen Yuen is a general partner and Wayne Wee is investment analyst at Vertex Ventures South-east Asia and India
Keyword added to your list