China’s medical & healthcare industry is like a fresh apple just ready to be eaten by startups and investors. Zhang Suyang, previously a well-known investor at IDG Ventures, China’s top venture capital, founded Volcanics Ventures (火山石资本) last year, to focus on the medical industry. At TechCrunch 2017 Shanghai, he said China’s medical & healthcare industry has two characteristics: information asymmetry and more demand than supply, making the sector ready to be tackled.
He also mentions that genetic testing can help China’s medical industry, with startups including consumer genetics testing company Prenetics, allowing people to take a preventative approach to healthcare.
Volcanic Ventures invests in the Series A and B mostly in the medical sector, AI, and cultural entertainment. The fresh born venture capital has invested in four medical startups, three AI startups, and one cultural entertainment startup since last year.
Their medical investments include:
- Gene+ (吉因加): invested RMB 200 million in series A round of Beijing-based Gene+
- Origimed (至本医疗): invested $10 million in angel round of Shanghai-based Origimed
- Jianke (健客网): invested $50 million in Series A+ funding of a 10-year-old, Dongguan-based B2C medicine e-commerce platform Jianke
- Ruisunshengwu (锐讯生物): invested in a few million dollars in angel round of Suzhou-based Ruisunshengwu
Here are some highlights from this fireside chat (edited for length and readability).
China’s medical & healthcare industry
We are investing in the traditional medical & healthcare sector, which includes traditional equipment, traditional treatments, hospitals, and nursing homes. Medical treatment was based on evidence-based medicine, which is generally based on experience and diagnosis. However, for the past five years, with the development of genetic medicine and development of molecular medicine, it may break some of the evidence-based medicine streams. Its final diagnosis is a clinical diagnosis [as opposed to genetic] and clinical diagnosis may be wrong.
For example, suppose you have a respiratory infection, and you go to the doctor and get an examination, then it takes at least a week to get the result. Now, from a genomics point of view, if you get a diagnosis, you may know the result the next day. So the company that made the original evidence-based approach based on their newer technologies, is our interest. In the field of medical treatment, it is divided into two types: one is mainly based on the traditional way and the other is the new fields (genetic medicine, molecular medicine).
Our company is, relatively speaking, focusing on the latter one. Most of our investments made are those technology-driven companies that have played a part in the medical development over the last five years.
Two characteristics in the medical and health field in China
China’s mobile internet medicine has two characteristics. I feel that any internet or mobile internet company has met these two insurmountable problems in the medical field.
First is information asymmetry. When internet companies get into any one of the 2C areas, they are easily copied. But the medical industry is not like this at all. You buy a thing onsite, even if you buy a fake, you know you bought a fake. If a Louis Vuitton bag was sold at RMB 500, we must know that it is a fake. This is a strict information symmetry. But the medical industry is not the same, no one has so much medical knowledge to figure out if it’s real or fake.
Second is that supply is less than demand. A good doctor is a very scarce resource at the evidence-based medical stage.
Because of internet companies, and the rapid development in the last 15-20 years, there’s a tremendous amount of information out there, and this can improve the efficiency a lot. Although all the change happened with the development of the internet, as an independent third-party company, you still encounter the same difficulties in medical & healthcare sector as before. Unless the healthcare organization itself has done some internet + smart technology, the industry will still be the same.