Q. How do you forsee the growth of the health care market in India? What role do you see Singularity Ventures play in it?
I believe the health care market in India is going to continue to grow at a significant pace. There is a service gap that needs to be met and a number of companies such as Max, Fortis are looking at this. However, while each of these companies will look to grow significantly in the coming years I do believe that there will still be a significant portion of the population in rural / semi urban / tier III towns that will remain underserved.
Given this we see opportunities in two areas. The first is in companies that would benefit from the growth in organized health care this includes companies like medical supplies distributors, nursing training and other ancillary services. The second is in companies that can leverage technology to improve the scale of current facilities. As we mentioned before, no matter how many hospital rooms are put up by organized players there will still be a significant service gap. Technology companies involved in remote diagnostics, telemedicine, low cost device manufacturers and so on can help bridge this gap.
Singularity ventures focuses on opportunities in these two areas. We are an early stage fund and look to invest between INR 1 INR 6 Cr in each opportunity. We are indeed very excited by the deals we are seeing and by how the market is evolving.
Q. What are the key challenges in the current health care scenario that hold back venture capitalists from investing more heavily in India?
We believe there are different challenges being faced by investors, based on which part of the health care sector they are focused on. On the one hand you have the large investors that are looking at financing hospitals and healthcare infrastructure. They face two major challenges. The first is a reduction in margins / returns. This is primarily being driven by rising costs on one side (real estate, equipment etc.) and a constraint on how much can be charged by hospitals. We have seen returns in this sector fall from IRRs in the mid 30’s to mid 20’s. The second challenge is in gestation time. Most funds look at an average duration of 5 years for their investment this would allow them time to exit and return the money to their investors. Most hospitals take about 3-4 years just to start running at capacity so funds are often faced with the prospect of exiting an investment before it has fully matured. The larger organized health care players are focused on driving down this time to profitability with some of them trying to be cash flow positive within 24 months. This is still a challenge that larger hospitals face.
On the innovation / support side of the healthcare business where we primarily focus the challenge is on having a team that can understanding the technical aspects / needs of the industry. In India most of the venture capital players have emerged from technology backgrounds. There is a lack of understanding of the nuances of the healthcare market. In India we do not have specialist healthcare firms unlike the US / Europe where you had specialist healthcare VC firms which are often run by Doctors with MBAs. At Singularity Ventures we have addressed this by building a panel of doctors, professors, medical professionals who can advise and support us as we look at deals. This we have found, helps us significantly understand and uate healthcare opportunities that we otherwise would not have been able to focus on.
Q. How do you see the health care IT market emerge in the face of increased investments in health care in India? Do you think the health care market is ripe for increased automation and interoperability?
Yes, we are very excited about the role technology will play in healthcare. The world over you are seeing technology play a big role in healthcare delivery. That will continue within India as well. In addition, in India we believe technology will be key in providing scale to our limited resources that we have to deploy. We are currently looking at a number of very innovative healthcare companies especially in the remote diagnostics and telemedicine field.
Q. Please elaborate on your future investment plans in health care in India.
We have finalized our board of advisors in healthcare and are in the process of uating business opportunities which are in the early stages of their development. We are not looking at infrastructure / hospital investments but at companies that will benefit from the growth in the number of such hospitals. We are mainly looking at healthcare technology and healthcare services.
Q. What has been your key focus and strategy for investments in health care? Have you looked at a more hands on approach, such as buyouts?
We are not looking at buy outs we believe the founders should be the ones to run the business. However, through our advisors and our extended network we would look to provide significant support to any company we invest in. We are very hands on and collaborative investors and look to work closely with each investment. We have found that many times what we can bring is additional capability support (e.g. management, finance, HR etc) that would allow our investments to scale significantly.