Indian healthcare: Booster shots

Visiting a doctor in India can be an exercise in frustration. Between traffic jams and crowded waiting rooms, a 10-minute visit to check on a sore throat or fever can end up taking several hours - a burden many cannot afford.

Lybrate believes that technology can bring about dramatic improvements in patient-doctor relations. The company's platform allows patients to consult anonymously with medical professionals, reducing the need for clinic visits due to minor ailments. The app can also be used to search for nearby clinics and surgeries, manage appointments, and save patient records. It can even send alerts to a patient's family members in the event of an emergency.

"Lybrate's unique approach to healthcare has increased doctors' accessibility by multiplying their presence and letting them talk to patients from anywhere, anytime," says Saurabh Arora, founder and CEO of Lybrate. "With Lybrate, doctors can consult their patients online who come to them for follow-ups or to show lab and test reports. They can now also consult patients who are away from their place of practice, expanding their presence to different geographies. This leaves the doctors with more time for those patients who need physical consultation."

Expanding the effectiveness of doctors is a key objective in a country that, in 2012, had just 0.7 physicians - both general practitioners and specialists - per 1,000 people, according to the World Bank. That was better than neighboring Myanmar, with 0.6 doctors per 1,000 people, but far behind the UK (2.8) and Switzerland (4.0).

Lybrate is by no means alone in this project. Several start-ups in India have seen an opportunity for technological disruption in the country's dysfunctional healthcare system, and venture capital investors have shown considerable interest in pushing them on. But though many consider healthcare to be long overdue for disruption, making the ideas stick requires combining two disparate skill sets.

Tech-enabled lifestyles

The sudden growth of healthcare start-ups owes much to the technological explosion that India has experienced in recent years. With smart phones and mobile internet increasingly ubiquitous, people in rural areas or in tier-two and tier-three cities can connect with platforms that offer to streamline every aspect of their lives.

Those platforms are another reason that many industry players are optimistic about the new healthcare start-ups. With e-commerce booming, Indian consumers have been "trained," as one investment professional puts it, to accept the safety of online transactions and to expect new standards of convenience - for instance, being able to buy groceries without leaving the home.

This evolving demand drew the interest of Eight Roads Ventures India, which invested $10 million last year in Medwell Ventures, operator of specialty home healthcare service Nightingales. The GP, then called Fidelity Growth Partners India, expected demand for high-quality home healthcare to grow as consumers become accustomed to greater convenience and easier communication. It reasoned that Medwell was well-placed to take advantage of this trend.

"A lot of the technology leapfrogging and the mobile phone penetration that we're seeing in India has a real opportunity to disrupt the classical healthcare industry, which has traditionally suffered not only from a large supply-demand skew, but also from information opacity," says Dr. Prem Pavoor, head of healthcare investment at Eight Roads and a board member of Medwell. "Therefore, bridging the gap between the patient and the provider has been a theme of great interest for us."

Eight Roads is one of many VC players who spotted an opportunity to get involved early with potential disruptors. While AVCJ Research does not track tech-enabled start-ups specifically, investments in related areas, including health services, home healthcare services, and medical clinics at the seed, early, and growth capital stages have seen a marked rise in recent years.

In 2006-2010 no more than four deals were recorded in any year, and in only one did cumulative deal size exceed $23 million. After 2010 the rate of investment stepped up to a new level: since 2011 there have been at least six deals every year, and total capital deployed has topped $50 million in all but one year.

Lybrate's Arora believes that in a sense, the progress of technology and the growing internet awareness of India's consumers have combined to create a perfect storm for companies like his.

"Today, the Indian population, especially in metros and urban areas, is very responsive to technology-enabled solutions as they understand the ease they offer. The surge of smartphones and penetration of internet has helped adoption of such solutions in the last five years," he says. "Now that people have seen the convenience of online services to purchase groceries, gadgets and even doing their financial transactions, then there was no reason for us to believe that they will be apprehensive to talk to a doctor online."

Not all of the investee companies that have drawn VC interest are start-ups; Medwell was set up in 2014 by a team of industry veterans to acquire Nightingales, but Nightingales itself was founded in 1996. However, investors see even existing firms as platforms for introducing technological innovations. Industry players say the sector has hungered for new ideas.

"I honestly don't attribute it to either technology or healthcare. I attribute it to the fact that the whole entrepreneurial ecosystem has evolved massively," says Nupur Garg, regional head of South Asia at the International Finance Corporation (IFC). "Like retail, healthcare is a sector which in the traditional model requires a lot of capital expenditure, a long gestation period, and a lot of brick-and-mortar development, and therefore technology is used to hasten and speed up the whole outreach process."

Expansion challenges

While technology can enable the development of new healthcare approaches, their success will depend on meeting the unique needs of India's society, not just in general but in the various regions within the country.

Industry players describe stark geographic divides that healthcare providers have to take into account. In tier-one cities, for instance, the problem is convenience: patients face considerable burdens in time and frustration to get to a doctor's office. Other areas, from tier-two cities to rural areas, have the opposite problem of access and affordability. The country's 0.7:1,000 doctor-patient ratio is skewed even worse in these areas; moreover, the doctors that are available tend to be general practitioners, with specialists few and far between.

The doctor shortage also means that patients have little choice in how their care is planned and carried out. Consumers have few alternatives to accepting their doctors' diagnoses, since getting a second opinion means another lengthy trip and a meeting with a physician they are not familiar with. Investors see a chance for new technology to disrupt this cycle as well.

"What the technology is trying to do is basically short-circuit that circle of doctors, and put the choice back in the hands of the consumer or the patient, where you're independently evaluating the various providers, and then making the call on where to go, versus being completely guided and influenced by the healthcare community," says Kaustav Ganguli, head of healthcare at Alvarez & Marsal. "So it's a fundamental shift in how patients are making their choices."

The nature of India's healthcare needs has created opportunities for entrepreneurs who are not from a healthcare background, but do have other relevant skills. Medical skills and experience are not needed to create an online platform or a chat service, and companies built around these ventures may be dominated by founders with technological rather than medical expertise.

This holds true in the case of Lybrate; Arora was a data scientist at Facebook before he moved back to India to found the company. Practo, a developer of appointment booking software for consumers as well as clinic management software that helps doctors schedule appointments and handle patient records, is another example. Founder Shashank N.D.'s background is in software, which meant he could take a new perspective on a problem that his family's doctor took for granted.

"The company began because the founder couldn't get the doctor to email him his father's medical reports - not because the doctor didn't want to, but because the system he was using didn't have email. So in 2008, someone had written software that didn't have the functionality to email a report," says Tarun Davda, managing director at Matrix Partners, which participated in the company's Series B and C rounds. Practo now operates in India, the Philippines, and Singapore, with plans to enter other developing markets.

Never the twain shall meet?

However, while the introduction of technological solutions creates opportunities for entrepreneurs without medical training, industry participants warn that such individuals might be tempted to view the issue solely in terms of technology. This would be a mistake, in their view, because even though an online platform can be built without medical training, its intended users are still doctors, who may have needs that a pure software player may not have considered.

Medical professionals may also be reluctant to accept input from those outside their specialty. This too is a mistake, since they may not be aware of the ways that the tools they are used to are inefficient and could be improved.

"I think you need the healthcare founder to be open to technology, and to understand that technology is playing and will play a disruptive role in healthcare delivery going forward," says Eight Roads' Pavoor. "Similarly you need the technology side of the team to be cognizant of the fact that delivering the highest quality of care for the patient is primary, and the technology backbone needs to support getting to that outcome."

Integrating the two sides of a healthcare start-up is especially important in light of the challenges of operating in a difficult field like medicine. For understandable reasons, the industry is subject to a higher level of regulation and scrutiny than sectors such as retail. Healthcare professionals may also be reluctant to adopt new approaches that they fear will end up complicating rather than simplifying their lives.

"The issue in healthcare has always been so far that people have tried to segregate technology and healthcare and looked at each in isolation," says Matrix's Davda. "This is why the industry has been last in terms of tech disruption."

Even in start-ups where the management team wants to incorporate the views of medical professionals, they could be stymied by their size. For a small, struggling company, building up the necessary network of willing and knowledgeable contacts is a major challenge.

Customer acquisition can be a significant hurdle; in healthcare this applies on both supply and demand sides. Doctors must be convinced to add a new communication channel to their busy lives, and consumers, who may be willing to adopt the new platforms in general, still have to be enticed to choose one in particular. This becomes more difficult the more specific a start-up becomes; a company focused on lung cancer, for example, may not attract as many users as one focused on cancer patients in general.

"You are appealing to a particular section of the larger segment," says IFC's Garg. "Consumer internet can appeal to all segments of a population, but as you get more specialized and as you get deeper into a vertical, you do have the ability to do more targeted advertising, but it gets more expensive."

Venture capital investors can help in these areas. To address the issue of adding medical expertise, they can provide a broader platform for recruiting talent beyond the network of the start-up's founders; and for customer acquisition, they can draw on the expertise of their portfolio companies in other markets or other sectors.

Lybrate, which is backed by Tiger Global and Nexus Venture Partners, has benefited in this way, and Arora says that choosing the right backers was key. In the upcoming challenge of trying to overhaul India's health system, he believes the support of strong partners will be invaluable.

"It is important to first find people who believe in the vision of making healthcare accessible to all in India and are passionate to solve the core problem of healthcare delivery," he says. "Secondly, it is important they trust Lybrate and the way it is fixing the problem in a unique and innovative manner. We have an amazing team and have partners who support our vision of changing the face of healthcare delivery in India."

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• Topics
• South Asia
• Healthcare
• Technology
• Venture
• GPs
• India
• TMT
• Eight Roads
• International Finance Corporation
• Alvarez & Marsal
• Matrix Partners