Pankaj Jethwani On W Health Ventures’ India Investment Playbook

Despite being underinvested, the 2023 healthtech trends are giving growth signals across omnichannel and vertically integrated tech-focussed healthcare models – the two areas W Health Ventures, a healthcare-focussed thematic fund, has been focused on since its inception in 2019.

According to a NITI Aayog report, India’s healthcare sector was projected to grow to $372 Bn in 2022, piggybacking on a compounded annual growth rate (CAGR) of around 22%. Banking on the same growth rate, Inc42 estimates that the sector has the potential to touch $676 Bn by 2025.

Launched in 2019, W Health Ventures is catching up fast on this opportunity. According to Pankaj Jethwani, executive VP and Partner at W Health Ventures, the healthcare industry lacks innovation and the growth in the space has been slow primarily because of the skewed doctor-to-patient count and the country’s complex healthcare processes.

“But we’ve seen that it is changing rapidly. So, we’re very excited about doubling down on our bets and building futuristic healthcare companies and investing in them,” Jethwani told Inc42.

Healthcare is an industry that fosters trust and human touch at its core, and the strategy of pursuing everything online or virtually may not prove sustainable in the long term. Jethwani is excited about omnichannel startups and looks for models where both online and offline can be combined depending on the needs of the patients.

“We’re excited about using technology and creating tech-enabled healthcare companies with focus on patient experience and clinical outcomes,” said Jethwani.

Further, the fund helps Indian companies build for global markets. It typically invests in startups that have found their product-market fit. The 40 people team at W Health Ventures then supports startups in building the right clinical model, conducting research trials, connecting to a large network of healthcare stakeholders both in India and the US, and with go-to-market support, among others.

“This gives us a timeframe of around five to six years to help companies scale, grow, increase their revenues multifold, and then look for an exit.  We have long-term patient capital backing us and healthcare needs time, especially any industry that is nascent and is innovating now needs time and we are happy to spend that time,” said Jethwani.

The early-stage focussed VC firm, which typically makes three to four investments a year in India, has so far backed mental health-focussed Wysa; personalised chronic disease management platform BeatO; full-stack virtual clinic for sexual wellness mars by GHC; and community-based parenting startup MYLO, just to name a few.

W Health Ventures’ Investment Thesis

While investing in startups, W Health Ventures particularly looks at four key metrics, which are as follows:

Is The Startup Solving The Supply And Demand Challenge?

India has approximately 1 Mn doctors for a population of 1.4 Bn people. Of these, there is an even less number of doctors with specialisation in specific fields, leading to a demand-supply gap in the industry. This inflates healthcare prices, impacting a larger section of the society.

“On the bright side, such gaps make way for innovation and technology plays a key role in solving such challenges. And that’s what we’re excited about. We’re excited about using technology and creating tech-enabled companies that can solve challenges of demand and supply,” he added.

Now, let’s understand this via an example. At a time when diabetes cases are increasing rapidly in India, with an estimated 8.7% diabetic population in the age group of 20 and 70 years, according to the World Health Organization, W Health Ventures has its bet on New Delhi-based BeatO.

Launched in 2015, BeatO provides smartphone-connected glucometer kits and helps diabetic patients in an array of areas, which could range from keeping a check on blood sugar levels, getting consultation from doctors, nutritionists and health coaches to booking lab tests and ordering medications from the comfort of their homes.

Is The Startup Focussed On Patient Care?

While we do not have any dearth of examples of the platforms catering to even the smallest need and demand of their customers in the digitally connected world, stakeholders of the healthcare space need to up the ante in making patient care processes not only effective and efficient but also experiential.

“The patient experience is probably lost, you wait for hours in a waiting room, you go meet the doctor, and are still very thankful for the interaction. Or you have diabetes… And, you spent five minutes with the doctor, five minutes with the health coach, and you’re thankful for that. But the reality is, it doesn’t have to be this way,” Jethwani said.

Is The Startup Obsessed With Clinical Outcomes?

According to W Health Ventures’ executive VP, in India, people often talk about the treatment and not about its outcome. And this is what needs to be changed. “In India, patients seldom talk about the impact of the treatment.

For example: You can find many saying that they are being treated for diabetes, but only a few will talk about how much better they feel after the treatment. And this is the shift that we’re trying to make. We’re trying to invest in companies that are obsessed with patient outcomes,” he added.

Does It Have The Potential To Create An Impact And Give Returns?

Although the VC firm is excited about any company that solves large urban-rural problems, it majorly looks at backing startups that are impactful and are on the path to achieving profitability in the next three to four years.

Innovations The Indian Healthtech Sector Needs

Technology adoption has massively changed the healthcare scenario in India in the last few years. Also, people have become more aware and cautious about their health, leading to a spurt in fitness and wellness platforms in the country.

Across core subsectors, fitness & wellness, healthcare SaaS, telemedicine and medtech together garnered 66% of the total funding deals in the Indian healthtech space between 2014 and Q1 2023.

However, these sub-sectors are marred by several ‘me-too’ models and many startups are struggling to find their niche and core value proposition. In this context, vertically integrated, disease-specific companies are the next wave of healthcare that founders and investors are aiming to explore.

Vertically integrated healthcare includes single-specialty companies that are focussed on competently managing a particular disease or a particular group of diseases for patients.

“Because you’re looking at three or four or five different verticals, you are absorbing revenue from those different verticals. In a startup environment, it’s very important to be focussed on profitability and unit economics. I think that vertical integration makes some of that possible,” Jethwani said.

However, ascertaining which disease is an area large enough for future investment potential is also an arduous task.

Therefore, the key questions W Health Ventures asks before investing in any disease area are:

• Is the problem large?
• Is there a clear patient-side problem?
• Is there an opportunity to work with existing healthcare providers?
• Do we have a 10x better solution?

“So, vertically integrated care models or single-specialty care models are something we’re going after. We’ve made a few investments there, we’re looking for more areas. We’re interested in paediatrics, pain management, oncology, and geriatrics, among others. These are the four or five areas that we are constantly looking at, and I think there’ll be large companies built on these in the future,” said Jethwani.

Some other key companies in the Indian healthtech space working with a focus on a specific vertical are DiabetOmics (diabetes), Niramai (breast cancer/breast examination), Fitterfly (obesity and diabetes), Cureskin (derma care), and TerraBlue XT (epilepsy), among others.

India’s Solutions For The World

Healthcare is a fairly local business. While an Indian doctor cannot see patients in the UK or the US due to many regulations and licensing reasons, there are a lot of interesting companies from India in the AI, technology products and services space that are building from India for the UK, the US, Southeast Asian, and Middle Eastern markets.

These are the kind of companies that Jethwani sees building from India for the rest of the world.

Take, for example, Wysa, a mental health wellness platform, which is building solutions in India for the rest of the world. They have around 5 Mn patients in 65 different countries.

Another example is Innovaccer, which is building population health tools for the US market from India.

“How do we spot promising companies from India that are trying to go to market in different geographies? And how do we help them, institutionalise and go to market in the US, the UK, or other markets? That’s what we are interested in finding,” said Jethwani.

Although W Health Ventures is also interested in the insurance space, they have not made any investment yet. However, Jethwani expects that there will be several new-age insurance companies that will be present in the future, five or six years from now, that don’t exist today.

The reason for this is clear. Most outpatient care is still being paid completely out of pocket by the patient. From government schemes to private insurance, there’s a 30-70 split, where 30% of patients have some sort of government coverage or private coverage, and 70% are paying out of pocket.

“But for managing diabetes, blood pressure, and cholesterol, you mainly rely on out-of-pocket spending. That’s where the right government schemes and insurance models for the middle-class Indian are the need of the hour,” he added.

However, there are areas where W Health Ventures is not bullish on investing. “We’re not bullish on investing in areas like e-pharmacies and telemedicine solutions. Those are wave one innovations, and those solutions have already reached a plateau. Also, we don’t invest in pharma biotech and we don’t have the capability of doing medical devices,” he said.

Are Thematic Funds The Future Of Healthcare Investments?

Startup investment is primarily about value creation for investors. Lately, startups in sectors such as energy, climate, sustainability, agritech, cybersecurity, and blockchain, among others, have displayed their potential to contribute to the national GDP.

These sectors are fairly new and there are no foolproof playbooks for success, thereby requiring a lot of support from investors and mentors. This has led to the rise of thematic funds in the ecosystem and W Health Ventures is banking on the same approach.

Jethwani believes that whether anyone should go with a micro VC, sector agnostic, early-stage, or thematic fund, it’s all about the decision framework of the founder and could differ from business to business.

“If an Indian startup is building healthcare products for the US, then they should ideally be looking for a healthcare-specific fund. Because if they need help setting up in the US, it helps to have a cross-border VC, who has a lot of experience in healthcare. If a healthcare company is going to market using a consumer model, then a generalist consumer fund can be as helpful as a healthcare-specific fund,” he added.

From W Health Ventures’ perspective, Jethani believes that the VC firm’s focus on healthcare as well as the quality team has attracted LPs. This is because people resonate with the mission of being able to create meaningful sustainable change for the country.

“So, I think nation-building is important for a lot of LPs. And part of that nation-building is healthcare. When I talk to LPs, that’s one of their motivations to invest. They want to invest in areas that actually matter over a long period of time,” the executive said.

Despite the funding slowdown, Jethwani is looking at continued investments in India in 2023. One of the things he is bullish about is the way how the country’s founders have matured over the years.

“If you think about it, five years ago there were no founders who had worked in the healthcare ecosystem. Today, thousands of people are now building healthtech companies of their own, after gaining experience from startups like PharmEasy, 1 MG, Apollo 24X7, etc. The second generation of founders has just started to come out. So, that’s a sign of an ecosystem slightly maturing, and it will lead to more tailwinds,” he concluded.

Finally, even though the VC firm is bullish on the Indian market, it plans to stick to its existing investment thesis, i.e, three to four startup investments a year.

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