Fund focus: India’s HealthQuad bulks up for Fund II
Indian health-tech VC firm HealthQuad has achieved a quantum leap in capacity to invest with its second vintage as foreign capital discovers the local opportunity set and thinks globally about impact
When HealthQuad, an India health-tech specialist backed by Quadria Capital, set out to raise its first fund in 2016, it pitched an impact-style double bottom line of improving quality of life for lower and middle-income Indians while generating a 30% return. Only about USD 9.9m was raised despite estimates the target market was on track to be worth USD 6bn in the coming years.
“A lot of investors were sceptical. They thought the two [impact and returns] were totally incompatible and if we were going to generate returns, it would take a very long time,” said Charles-Antoine Janssen, co-founder and CIO of HealthQuad.
The fund has gone on to deploy USD 35m to date and it is currently marked at a 4.5x multiple and a 37% IRR. Distributions to paid-in (DPI) are 1.1x and Janssen hopes to reach 5x once the vehicle is fully realised.
The performance set the stage for Fund II, which has now closed at USD 162m, beating a target of USD 68m that was achieved as of the first close in mid-2020. Ackermans & van Haaren, a listed Belgian holding company that invested USD 4m in Fund I, returned as the anchor, contributing USD 18m this time.
Ackermans also co-invested in Fund I’s standout portfolio company, Medikabazaar, often referred to as the Amazon of B2B medical equipment supply. Janssen said the company was on the cusp of unicorn status with a funding round expected to close in the next few days that would be much larger than the USD 75m Series C raised last year.
Fund II will support larger investments of up to USD 15m, backing 10-15 companies in total. Areas of interest encompass doctor discovery platforms, point-of-care diagnostics, mobile clinics, telemedicine, digital therapeutics, online healthcare financing, e-pharmacies, and smart disease screening. More than USD 60m has already been deployed.
“Previously, the only sectors that were investable by scalable private equity were secondary care, tertiary and quaternary care hospitals, branded generics, and diagnostics. Everything that was preventative healthcare, community care, and primary care was basically not considered scalable,” Janssen said.
“Now with interest in new tech models, we have wellbeing, self-management, dietary, community health, and nutrition apps, wearables, and online health content that have appeared and are scaling profitably at very low cost.”
Pandemic push
To some extent, confidence in Indian health-tech is a pandemic story. COVID-19 exposed the infrastructural inadequacies of the sector and demonstrated that digital services were the way forward. The willingness of both doctors and patients to engage online jumped two years ahead of HealthQuad’s forecasts.
But perhaps more importantly, a renaissance in India’s broader technology sector has attracted international capital to the market that has helped coronate health-tech unicorns such as PharmEasy, Innovaccer, and Pristyn Care. There are now around 8,000 health-tech start-ups in the country, about 1,000 of which have received some form of funding.
International capital likewise played a major role in HealthQuad’s latest fundraise. In addition to Ackermans, Luxembourg’s Quilvest, Sweden’s Swedfund, UK-based CDC Group, and Teachers Insurance & Annuity Association of America (TIAA) also came in as LPs.
Commercial scalability was not the only attraction, however. Nuveen, the impact unit of TIAA, and MSD, the impact unit of US pharma giant Merck also participated, as did Belgian-based impact investor Kios. One of the top-five global biopharma companies is said to have contributed with an impact lens.
“There’s a realisation that what is going on in India in terms of healthcare access is really a solution for not only the 700m poorest Indians but the globe’s 3b poor who are all raving about improved services and improved affordability of modern healthcare,” Janssen said.
“And there’s no place globally to find better solutions for that than India because of the overabundance of coders, reverse engineers, and entrepreneurs, and the fact that prices in India are approximately half of what they are in Africa for a similar healthcare product or service.”
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