Why VCs can’t find startups in preventive healthcare

The Indian healthcare system is a structure of contradictions. 70 per cent of the population spends from their own pocket when they are admitted to hospital. In addition, there can be a shortage of doctors. For example, there are only 1,500 MDs who can treat cancer in the country and the number of cancer patients is only increasing. Today nearly 2,50,000 cases of cancer have been reported in the country. According to the World Health Organisation more than 15 million people die each year, across the world, because of infectious diseases like Malaria and Tuberculosis.

The World Bank says that public health expenditure and insurance spends are only 1.3 per cent and 3 per cent of the country’s GDP, respectively. Unfortunately, in a country that offers so much opportunity for solutions, only a handful of startups are household names. These include Practo, PorteaMedical, DoctorC, Forus Health, Coeo Labs and Sattva Medtech. While the latter three make medical devices, only Forus Health has started marketing their ophthalmic devices. The other two are yet to commercialise their product.

Practo, which aims to provide care through analysing data gathered by its software product and is used by a growing network of patients, doctors and hospitals raised $124 million in funding, the largest amount raised by a healthcare startup.

However, venture capitalists, family offices and private equity firms are looking at startup ideas beyond just aggregation and price discovery. Sarath Naru, Managing Partner, Venture East says, “We need startups that can offer effective delivery of care, along with good data play, which is harder to find. There aren’t many startups cropping up with ideas in preventive healthcare, where technology can play a role.” He says that the root of the problem is the way Indian healthcare is structured – it has no data and there is very little innovation happening. “When we talk of innovation, it is not only about funding pure molecule-based research, we are talking about ideas that can improve access,” says Sarath.

Hospitals want to work with Startups

Manipal Health Enterprises also wants to open up its APIs to work with startups. They are implementing IBM Watson’s cognitive cloud platform, which is supposed to give an edge to a doctor’s predictive and prescriptive decisions. Manipal handles two million patients a year and it needs startups that can help them with preventive care. The project with Watson will use historical data of treated diseases and compare it to patient data, which will help surgeons make real-time decisions. Also, a doctor can look up medical databases and compare a drug’s impact on patients in a matter of seconds. So, how can startups help firms like Manipal?

“Startups should come to us, take small problems in our technology centre and crack it,” says Ajay Bakshi, MD and CEO Manipal Health Enterprises. He says that the group had already worked with a vendor to build a computational engine called the “natural language generation”, which offers insights on medical case files and creates outputs for doctors.

There are already a couple of accelerators working on a solution to these issues. InnAccel India and Axilor are out there looking for ideas that can scale up. InnAccel has focused on accelerating startups developing affordable medical device innovation. The medical electronic device market, according to a Deloitte and FKCCI report on medical electronics, says the market in India today is $2 billion and is likely to grow to $5 billion by 2020. All these devices, with user data sitting in the cloud, can predict incidents like hyperglycaemia three hours before its onset.

“Any technology building cognitive learning can help the healthcare ecosystem,” says Ginni Rometty, CEO of IBM, at a press conference organised by IBM.

What should be done about it?

“We have to actively build networks, through Universities and incubators, to encourage startups to find solutions in healthcare. It need not be about technology always,” says S D Shibulal, former CEO of Infosys. He adds that although there is a growing awareness about the importance of building solutions, healthcare is yet to become popular with startups.

According to the Indian Brand Equity Foundation, the size of the healthcare industry is going to reach $160 billion by 2017. It seems unlikely that startups will cater to even one per cent of this number. Perhaps it is time we had more competitions calling startups to build healthcare solutions. Axilor, the incubator, has just called for applications to solve problems in the treatment of diabetes.

“We want startups to improve four things in healthcare – access, effectiveness, affordability and preventive care – to change the behaviour of people in the segment,” says V Ganapathy, CEO of Axilor Ventures.

YourStory take

The problem is getting worse. However, venture capital firms insist that the glass is half full. There needs to be a full-blown policy to support healthcare startups. Karnataka’s startup policy, along with the Startup India policy, have been the first to recognise healthcare as a thrust area. There needs to be an overhaul in the way healthcare education is shaped in India. It is driven by high fees and lacks transparency. It kills innovation at the onset of the learning process itself. At least today there are enough young people who are ready to experiment with new businesses. Hopefully, preventive healthcare is one of them.