APAC’s healthcare industry is undergoing unprecedented transformation in the first half of 2023, presenting both challenges and opportunities. This article is your guide through this evolving landscape for corporations and startups in healthcare ventures.
In this dynamic healthcare era, adaptation is key to thriving. We'll explore the shifting sands of investment trends, diving into the why and how of healthcare investment, revealing the surprising changes in investment areas, and uncovering the rise of B2B partnerships as a key driver of success.
Whether you're a corporate or a startup, get ready to be equipped with the strategies and insights you will need to excel in the realm of healthcare.
Recent APAC’s Health Investment Trends
How has the way we invest in healthcare changed?
In the wake of the global pandemic, the healthcare sector has become the epicenter of innovation and transformation. However, the first half of 2023 has presented both challenges and opportunities, reshaping the way we invest in healthcare ventures.
1. Global Health Funding in Recovery
The healthcare industry, like many others, experienced a surge in spending during the peak of the pandemic. As the world began its path to recovery, healthcare funding trends started to reflect this transition. In 1H 2023, global healthcare funding is still rebounding, but at a notably slower pace. The decrease of 49% compared to the previous year is indicative of a return to a more stable and sustainable investment climate.
2. Asia-Pacific (APAC) in Flux
Zooming into the Asia-Pacific region, we witness a similar narrative with its own unique twists. APAC, historically a hotbed for healthcare venture funding, is undergoing a substantial transformation. APAC's share in global health funding has dwindled to a mere 8%, a stark contrast to the 29% it commanded in the preceding year. This represents the lowest APAC share in the history of healthcare funding, signifying a profound shift in the global healthcare investment landscape.
3. Regional Variations Tell a Tale
Beneath the surface of these overarching statistics lies a complex story of regional variations. Established innovation hubs like China, India, and Singapore, which were once magnets for healthcare investments, have seen their funding levels plummet by over 75%. The reasons behind this decline are multifaceted, including geopolitical tensions, economic uncertainties, and changing investor sentiments.
On the flip side, emerging innovation hubs such as Vietnam and Thailand are experiencing a windfall, with funding levels more than doubling. These regions offer promising prospects and a fresh wave of innovation, attracting investors seeking new opportunities.
4. Survival Challenges for Startups
In the current landscape, startups may face considerable headwinds in their fundraising efforts. The diminished funding climate means that securing capital is increasingly challenging. This necessitates a fundamental reevaluation of fundraising strategies, forcing startups to innovate not only in their products and services but also in their approaches to securing investment.
As we delve deeper into this guide, we'll explore strategies that startups can adopt to navigate this challenging environment successfully. By understanding the shifting investment landscape, businesses can chart a course towards sustainable growth and resilience in this new era of healthcare ventures.
Factors Leading to Current Trends
Why have these trends emerged?
The dynamic shifts in healthcare investment trends observed in the first half of 2023 are not random but driven by various interconnected factors. Understanding the forces driving these trends is crucial for both investors and healthcare stakeholders to make informed decisions and adapt to the evolving landscape.
1. Economic Instability
Heightened geopolitical tensions, particularly between the United States and China, have caused investors to recalibrate their strategies. Uncertainties in the Chinese market have led to reduced funding levels, impacting the entire APAC region. Prudent caution is shaping investment decisions.
2. The Quest for Exit Strategies
A lack of viable exit strategies for startups is contributing to the decline in funding. Traditional IPOs are less appealing due to market instability and underperforming newly listed healthcare companies. Investors seek alternative paths to liquidity, making them more discerning in their investment choices.
3. Overvaluation Conundrum
Many startups in 2022 boasted inflated valuations that didn't align with their actual performance. This overvaluation trend led to disappointments when these startups failed to meet expectations. Consequently, investors are now scrutinizing startups more rigorously, placing a heavier emphasis on substantiating valuations.
4. Valuation Correction
The current landscape witnesses a significant valuation correction, with the possibility of down-rounds for startups in later financing stages. Investors are demanding compelling justifications for high valuations. Startups must shift their focus from valuation as the sole metric for success to building tangible value, differentiation, and sustainable growth.
These factors combined have created a perfect storm of change in healthcare venture funding. While the challenges are evident, so are the opportunities for those who can adapt and respond strategically. The evolving landscape requires a keen understanding of these factors, enabling businesses to navigate the complexities of healthcare investment successfully.
Changing Investment Areas
What areas are now in focus?
The landscape of healthcare investment is in constant flux, and the first half of 2023 has witnessed significant shifts in the areas that are capturing investor attention. Understanding these changing investment areas is pivotal for both established players and newcomers to the healthcare venture arena.
1. Neurology Takes the Lead
Neurology has surprisingly risen to become the top area of healthcare investment. This shift is driven by the growing emphasis on nervous system-related conditions, especially neurodegenerative diseases like Alzheimer's and Parkinson's. The aging global population plays a substantial role in driving investment in this field. Recent drug approvals for Alzheimer's have also reignited interest in neurology, solidifying its position as a prominent investment area.
Startup Highlight: Neurophet
Selected for Startup Creasphere Batch 3 by Roche, Neurophet pioneers advanced neuroscience and AI technologies through crafting solutions for diagnosing and treatment devices targeting brain diseases like Alzheimer’s. This enables clinicians to deliver more precise care and elevate brain disease treatment standards.
2. Diabetes and Cardiovascular Conditions in the Mix
Diabetes and cardiovascular diseases remain in focus, with these two sectors interchangeably holding the second and third positions. The enduring significance of these areas stems from their prevalence and the potential for preventive and management interventions. These conditions affect a substantial portion of the population, making them attractive for investment.
Startup Highlight: Health2Sync
Health2Sync provides a comprehensive health management platform, enabling patients with diabetes to easily track their blood sugar along with factors such as daily activities that influence it.
3. The Rise of Mental Health
Mental health has emerged as a key focus area in healthcare investment, driven by increasing awareness and recent developments. The stigma associated with mental health is diminishing, and the COVID-19 pandemic has amplified the importance of addressing mental health issues.
Investment in mental health extends beyond traditional solutions like employee wellness programs, encompassing a broader spectrum of innovative startups addressing various aspects of mental health, from diagnosis and treatment to mental well-being platforms. The growth of mental health startups and unicorns has established a robust foundation for further industry expansion.
Startup Highlight: Mobio Interactive
Mobio Interactive’s unique platform offers clinically validated psychotherapy while objectively tracking a patient's mental health in real-time without the need for wearables, enabling highly personalized therapy at scale.
4. Oncology Slides Down
In a surprising turn, oncology, historically the largest area of healthcare funding due to the urgency of combating cancer, has slid to the fifth position in 2023. This shift may be attributed to the slower pace of innovation in oncology compared to other healthcare sectors. Investors are now seeking new frontiers and more promising areas for groundbreaking advances.
Startup Highlight: Guardant Health
Guardant Health, one of the unicorns in Plug and Play’s Portfolio, is leading the charge in precision oncology. Dedicated to combat cancer worldwide, their comprehensive oncdology platform spans from cancer screening to personalized care for early and late-stage cancer patients.
As we move towards a more preventive and predictive healthcare model, investors are reallocating their capital to areas where they see the most potential for improving patient outcomes and addressing emerging health challenges. Understanding these shifts can help stakeholders align their strategies with the evolving landscape of healthcare investment.
The Rise of B2B Partnerships
Why are B2B partnerships on the rise?
While the first half of 2023 may have presented a downturn in healthcare venture funding, it has also ushered in a notable surge in Business-to-Business (B2B) partnerships within the healthcare sector, not only with multinational corporations but also encompassing collaborations between startups, insurance providers, academia, hospitals, and more.
This development signifies a significant shift in the way healthcare stakeholders collaborate and do business. Let's delve deeper into the reasons behind the rise of these strategic partnerships.
1. Changes in Consumer Behavior
Economic downturns and rising inflation have made consumers more budget-conscious, especially in healthcare. B2B partnerships offer a solution by allowing healthcare organizations to collaborate, pool resources, and offer more cost-effective solutions to consumers in a challenging economic climate.
2. Recognizing B2B’s Advantages
Startups are increasingly adopting B2B business models, recognizing the advantages they offer, such as lower customer acquisition costs, higher profit margins, and scalability. These partnerships enable startups to tap into corporate resources, expand their market reach, and access established distribution channels.
3. The Search of Alternative Exit Paths
B2B partnerships provide startups with alternative exit paths beyond traditional Initial Public Offerings (IPOs), which have become less appealing due to market uncertainties. Many startups see these partnerships as a gateway to potential future acquisitions. Established healthcare organizations, including hospitals, also see the value in collaborating with startups, leading to various partnership models.
4. The Drive for Growth
The surge in B2B partnerships is not uniform across the Asia-Pacific (APAC) region, with countries like Japan, Korea, China, and India at the forefront of this trend. Roche, a pharmaceutical giant, stands out as a prominent player actively seeking partnerships with innovative startups to drive growth and innovation.
The rise of B2B partnerships signifies a fundamental shift in the healthcare venture landscape. As economic realities and consumer behaviors evolve, healthcare stakeholders are increasingly turning to collaboration as a means of survival and growth. For both startups and established players, understanding the dynamics of these partnerships and their potential benefits is crucial in navigating the changing healthcare venture ecosystem successfully.
To showcase the potential for impactful B2B partnerships in healthcare innovation, let’s have a look at one example of a collaboration between the world’s largest biotech company and a rising healthcare startup.
The Success Story of Roche and Fitterfly
Roche Diabetes Care India joined forces with startup Fitterfly, a participant in Plug and Play's Startup Creasphere APAC program, to create an impactful 90-day diabetes management program. As an Anchor Partner in the program, Roche sought to enhance therapy adherence for diabetes patients. Through rigorous selection, Fitterfly was selected to collaborate on this pioneering project.
The partnership resulted in a 3-month pilot program designed to provide real-time insights on blood sugar levels, comprehensive nutrition and wellness guidance, fitness assessments, personalization, and detailed reports for healthcare professionals. This innovative program targeted newly diagnosed Type 2 diabetes patients, those with evolving insulin prescriptions, and individuals showing early signs of diabetes-related complications.
The Recipe for Success in the New Era of Healthcare
1. Embrace Collaborations as a Growth Engine
The rise of B2B partnerships signifies that collaborations between startups and established healthcare companies are on the upswing. Embrace this trend as it's becoming one of the most effective ways to accelerate innovation, expand your core business, and acquire new customers.
2. Neurology: The New Frontier for Investment
Neurology has emerged as a promising focus area for investment. As ageing populations contribute to the prevalence of neurodegenerative conditions, consider shifting your innovation focus to align with emerging trends, developing new product pipelines, and leveraging new resources.
3. Exploring Emerging Markets
While the regional outlook for healthcare investment may appear lackluster, emerging markets like Vietnam, Thailand, and Indonesia have exhibited strong growth. Consider exploring innovation opportunities in these markets, where untapped potential may lie.
1. Diversify Your Financing Sources
The funding landscape in healthcare is evolving, with a 49% decline in investment. Recognize that fundraising is just one of many ways to finance your business and extend your lifecycle. Explore alternative funding avenues, including cost-cutting measures and grants.
2. Prioritize Differentiation and Defensibility
In a competitive environment with more startups vying for fewer opportunities, the ability to differentiate yourself is paramount. Focus on building defensibility through unique offerings, partnerships, and value propositions to stand out.
3. Strategic Partnerships Over Valuation
Given the correction in valuation and increased investor scrutiny, place less emphasis on valuation and prioritize onboarding strategic partners and investors. These partnerships can drive your growth and expansion, ultimately justifying higher valuations in the long run.
The healthcare industry in Asia-Pacific is at a crossroads in the first half of 2023, experiencing a whirlwind of transformation and challenges that no doubt offer an array of opportunities.
In this ever-evolving healthcare venture ecosystem, adaptability and agility are key to survival. The changes we've witnessed in recent healthcare investment trends, the factors underpinning these shifts, the emergence of new investment areas, and the rise of B2B partnerships all point to a landscape that demands proactive engagement, both in the remaining months of this year until 2024.
As healthcare stakeholders, you are positioned to make a profound impact on the industry's future. Whether you're a corporation seeking new avenues of growth or a startup striving to revolutionize healthcare, we want to introduce you to an opportunity to explore the endless possibilities within Asia Pacific's thriving healthcare scene.
Plug and Play APAC's healthcare accelerator program, Startup Creasphere, launched in August 2020 in collaboration with Roche and Sanofi, has been instrumental in catalyzing healthcare innovation in the Asia Pacific region. By facilitating partnerships between forward-thinking corporations and disruptive startups, it offers a structured co-creation framework, driving digital health advancements and transformative healthcare solutions.
Startup Creasphere's unique pilot-driven approach fosters meaningful engagements, creating a dynamic ecosystem for healthcare transformation. Learn more about the program here!
ARTICLE WRITTEN BY: TRICIA GEOERGE & ALVIN TAY
Alvin Tay is a Ventures Associate (Health) at Plug and Play APAC. As an in-house venture capital, our goal is to fund the teams that are building the defensible businesses of the future. By leveraging our capital, our network of VCs, and our corporate partners, we give our portfolio companies an added advantage. Find out more here!
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As an in-house venture capital, our goal is to fund the teams that are building the defensible businesses of the future. By leveraging our capital, our network of VCs, and our corporate partners, we give our portfolio companies an unfair advantage.