Image source @ Visual China
Wen | Arterial Orange Fruit Bureau
"Medical projects are getting more and more expensive", which is the sentiment of many investors today. While the ongoing pandemic has made it difficult to finance and raise capital, the valuation of healthcare projects has increased.
Taking overseas early financing in the first quarter of 2022 as an example, 196 companies have raised a total of 21.7 billion yuan, with an average financing amount of more than 100 million yuan for each enterprise – which was unimaginable a few years ago.
Overseas financing in the first quarter of 2022
The reason for the emergence of this phenomenon is on the one hand to remove the false and the true, on the other hand, it is also because in the context of the global epidemic, the status of medical health is prominent. Judging from the overseas early financing in the first quarter, biomedicine is in an absolute leading position in terms of financing amount, financing events, and average financing amount.
Figure 1: Overseas early medical project financing, data from arterial orange
Judging from these projects, most of the projects have improved their internal strength. From the initial concept investment to the big waves of capital winter, capital pays more attention to the practical problems that the project can solve, as well as the team and R&D strength when making decisions – this requirement, startups are forced to "roll in".
This requires that entrepreneurs must correct their mentality before entering the market - "who you want to be, what problems you solve, and where are your strengths". Find the right positioning, think clearly and re-enter, entrepreneurs are more rational.
For example, cellino, the company with the highest financing in the first quarter, was founded in 2017 by three young harvard scientists. Cellino combines IT and optics to address cost and efficiency issues in cell therapy manufacturing processes. The company's next-generation manufacturing platform automates cell therapy manufacturing through artificial intelligence (AI) and laser technologies to reduce expenses and overcome scale constraints. This pioneering approach has the potential to reduce production costs by an order of magnitude and expand patient access to cell therapies.
01 Founding team volume: scientists, serial entrepreneurs, investors are coming
From the background of these early project teams that received financing, we found that investors are also increasingly demanding of the entrepreneur's background.
Of the 196 companies that received financing, more than 50 percent of the founding team had an industrial background, and most of them were executives of large companies with at least 10 years of background and management experience in the healthcare industry. Of these people, another 36 percent are serial entrepreneurs, and some have even had successful exits and go public.
In addition, clinicians have also begun to enter the entrepreneurial circle, and these people are more common in specialty fields such as mental health and dental. Most of them have more than ten years of experience as clinicians, nurses and occupational pharmacists, and based on these experiences, they solve problems in front-line medical scenarios through digitalization, artificial intelligence, medical informatization and other means.
Figure 2: Obtain the background of the financing project team, and the data comes from Arterial Orange
In addition, some investors have also started their own businesses, accounting for 10% of the founding team with industrial background. They prefer technology-driven industries such as biomedicine and medical devices.
On the one hand, it is affected by its own investment logic, on the other hand, it is based on the observation of the medical industry, they are more inclined to target the "hardcore" track of unmet medical needs, and the relatively hot cell therapy, immunotherapy, high-value consumables and mRNA vaccines in recent years are their more choices.
Figure 3: The team has the background of the project team with the background of the investor, and the data comes from the arterial orange
On the other hand, scientist entrepreneurship has also become a trend. Among the 196 companies, 32 of them have core teams from scientific research institutes. Like investor entrepreneurs, scientists prefer technology-driven tracks.
For example, 64-x and Gameto, co-founded by Professor George Church, the "godfather of genetics", NextRNA Therapeutics, founded by Robert Langer, known as the "most profitable scientist", and Quris, an artificial intelligence drug research and development company co-founded by Langer and Nobel laureate Aaron Ciechanover.
Among them, Harvard University, Massachusetts Institute of Technology, and Stanford University are the main forces. Scientists at MIT and Harvard University are more focused on biomedicine and devices, artificial intelligence. There are 6 projects from Harvard University and 5 projects from MIT. Scientists at these two top universities are also keen to join forces, and the companies they co-found will surely receive the attention of capital.
Stanford's programs are all focused on biomedicine. Coincidentally, the scientists of all three projects chose to start a business with serial entrepreneurs in the industry.
Figure 4: A company co-founded by scientists, data from arterial oranges
Of course, there are also a small number of companies that have gathered the "three elements of the inner volume", and the team not only includes practitioners with many years of industry experience, but also its serial entrepreneurs, investors and scientists.
This type of startup can be described as the "king of the roll", they are still concentrated in the field of biomedicine and high-value medical devices, and high financing and star investor blessings are standard. Among them, RNAimmune, founded by Chinese scientist Dr. Shen Dong, announced in March that it had obtained financing of about 170.1 million yuan, which was the highest financing enterprise in the "king of volumes".
Figure 5: A startup that collects the three elements of the "inner volume", and the data comes from arterial orange
02 Cross-border and integration of technology, medical service projects are also "volume" technology
Cross-border, from one attribute of things, into the operation of another attribute. Fusion, like a physical sense of melting or melting into one like melting.
When a type of instrumental technology appears, the industry is bound to trigger a large-scale cross-border and integration. For example, the Internet to Internet medical treatment, information technology to biological information analysis, artificial intelligence to auxiliary imaging diagnosis and artificial intelligence drug research and development, digital technology to digital medical treatment. The cross-border and integration of new technologies and medical treatment will also set off a new round of medical financing boom.
In today's early investments, the advantages of AI drug discovery and digital health are highlighted. In the first quarter of overseas early financing, a total of 10 AI concept companies were funded, focusing on drug research and development, insurance payment and care.
Among them, 4 artificial intelligence drug research and development enterprises have raised nearly 700 million yuan. Among them, 3 companies were established in 2017 and 2018, which was the peak of the formal integration of artificial intelligence and medical treatment. Protai, which was founded in 2021, has also quickly received financing with the huge advantages of proteomics and end-to-end AI platform in drug discovery.
On the other hand, the cross-border integration of artificial intelligence is also reflected in the empowerment of the field of medical services. Powerful computing power brings new solutions to some that involve tedious and trivial calculations.
For example, tint, an artificial intelligence insurance payment company. Matheus Riolfi, the company's co-founder, believes insurance is essential to drive economic innovation. With the blessing of artificial intelligence, they hope to reconstruct insurance by embedding diversified products and services into insurance. The company raised $25 million in Series A funding in February 2022 with investors including QED Investors, Nyca, Deciens, Y Combinator and Webb Investment Network.
Also empowering healthcare is digital technology. In the first quarter of 2022, a total of 50 digital health companies received financing. The presence of these companies is highly concentrated, and most of them are concentrated in the fields of mental health, health management, and wearables.
At the time of the COVID-19 pandemic, various forms of telemedicine are on the rise, and the reality is undoubtedly forcing patients to demand digital technology. Since the U.S. Food and Drug Administration (FDA) approved the first prescription digital therapy in 2017, it finally ushered in an outbreak in 2020, with 7 products approved by the FDA in half a year.
The exploration of physical health has given birth to a number of 100 billion markets such as medical devices, gene therapy, and antibody research and development.
However, mental health is equally noteworthy. The National Mental Illness Alliance (NAMI) calls depression "the world's first cause of disability" and "a major contributor to the burden of disease." In April 2016, the WHO released a report that depression and anxiety cost the global economy about $1 trillion a year, while NAMI data shows that the number is as high as $193 billion in the United States alone.
Since entering 2000, there have been two climaxes in the establishment of digital mental health companies, in 2012 and 2015, and the climax of the first financing in 2015.
In fact, some companies that later became industry benchmarks often received their first round of financing within a year of their establishment. For example, Lyra Health was founded in 2015 and completed its first round of funding that year; Quartet was founded in 2014 and raised the following year; Talkspace was founded in 2012 and raised the following year; Calm was founded in 2012 and raised the following year.
Of course, there are no shortage of exceptions, such as Akili Interactive Labs, which was founded in 2011 and only received financing in 2015.
Another reason for the popularity of mental health digital health is also related to the social environment. The timing of suicide by active public figures due to mental health problems has aroused public attention, and it has also exposed the lack of mental health solutions. Most of these mental health digital medical companies are in areas with high incidence of mental disorders such as the United States and the United Kingdom, and professional medical resources are very tight.
In the United States, for example, patients seeking help from a CBT therapist must first make an appointment, and the fastest time to visit the doctor often waits until after 3 weeks. Digital CBT can make good use of the fragmented time of doctors and patients to achieve real-time visits.
The choice of application scenarios reflects the high degree of specialization of overseas digital mental health companies, especially digital mental health companies in the United States, and some products can even replace psychologists, not just auxiliary diagnosis and treatment. At its core, digital behavioral health companies offer models such as expert opinions, value-added services, and ancillary networks.
Among them, value-added services reflect the subversion of innovative technology to medical care, and some digital mental health companies in the United States are currently practicing subversion. Pear Therapeutics' digital therapy, for example, has been approved by the FDA; Akili Interactive Labs' video game is preparing to apply for FDA approval. None of these products require the advice of experts in use.
Secondly, health management is also a key application scenario of digital health. Here can be mainly divided into two categories, one is for patients such as diabetes, kidney disease, cancer and other out-of-hospital interventions; the other is for healthy groups of active health management, including disease prevention, nutrition, sports and fitness.
Among them, the first category requires strong out-of-hospital interventions, a process that relies heavily on the patient's level of compliance and self-management. In this scenario, the role of digital therapy is to replace manual intervention, on the one hand, to control the patient's postoperative rehabilitation and side effects, on the other hand, to support the doctor's subsequent treatment decisions.
According to the Eggshell Research Institute's "China Digital Therapy White Paper 2.0", digital therapy has no limitations on the types of diseases, but has certain limitations on the diagnosis and treatment process and intervention methods of diseases, which can only digitize some services and replace artificial intervention with digital therapy.
Therefore, indications for long-term management, more interventions, clear clinical guidelines, lower patient compliance, and lower levels of self-management are more appropriate.
03 Giants participate, and industrial investment goes hand in hand with early investment
In addition to startups, industry giants are also "rolling". On the one hand, they innovate through their own research and development; on the other hand, industrial investment is also a common means. Not only venture capital institutions, but also industry giants are witnessing the growth of innovative companies as industry investors.
For giant companies, when faced with declining innovation capabilities and the need to obtain new information and ideas from the outside, launching venture capital is a good choice. This type of investment is often linked to the company's existing business, or is closely integrated with the current strategy, or complements the current company strategy, or explores potential business models.
At the same time, there are also a number of investment institutions in the investment circle that focus on early discovery, and they are good at cutting in at the initial stage of technological achievements, planning and seizing opportunities. To some extent, these institutions are leaders in investment trends.
When these two types of institutions come together, it means that the project has gained both recognition from the investment field and the industry. In the first quarter of the financing incidents, there were 4 cases involving giant companies and early-stage venture capital institutions, which were also highly concentrated in the biomedical field.
Figure 6: A project jointly participated by a giant pharmaceutical company and a well-known early-stage venture capital, and the data came from Arterial Orange
Of course, the "inner volume" of medical venture capital is actually a long-term state, and giants are scrambling in BD, investment, and product declaration; investment institutions often follow up quickly after discovering investment trends. After experiencing the big waves of capital winter, entrepreneurs have also "rolled up".
We often lament the destruction of mentality and self-consumption of the inner volume, but from the perspective of entrepreneurship and venture capital, the positive inner volume is actually not impossible. For the market and patients, it indicates innovation and product performance.
For investors, in addition to the improvement of the quality of entrepreneurs and the degree of technological innovation, what is more valuable is the in-depth thinking of entrepreneurs before entering the market.
For entrepreneurs, the appearance of "rolling up" is a pressure, but from the inside, it is to make entrepreneurs more cautious and rational, think about the bottom, and think about the goal. Planning and then moving may not be a bad thing.