Value creation by companies has reached unprecedented speed in recent times. Those reaching “unicorn” status, i.e. start-ups with valuation above USD 1 billion, are emerging in ever shorter time.
Never before have we seen such speed of value creation until the emergence of startups in the technology space. The likes of Uber, with a valuation close to USD 70 billion, is worth more than GM and Ford combined. Airbnb, with a valuation of USD 30 billion, less than a decade-old and owning no properties, is worth more than established hotel chains like Hyatt and Hilton, which took over a century to build.
Now, there are over 150 unicorns globally. But how many are from Asia, and in particular - how many are in the healthcare space? There are only a handful, with examples like Ping An Good Doctor and Gua Hao in China among the few to choose from.
Why does it seem like there's such a shortage of unicorns in Asia's healthcare as compared to the e-commerce, food, or fashion industries? Especially when healthcare is something that people would never ever sacrifice nor compromise? Looking at the big data, annual healthcare spending in the U.S. continues to increase, and amounts to 17.8% of its GDP at USD 3.2 trillion in 2015, while in Asia billions are spent yearly with no cutbacks in sight. Amidst such reliable increases in spending, isn’t it puzzling that healthcare technology companies are not riding the wave in Asia?
To me, the answer lies in who is paying for the services rendered. For developed countries like the U.S. and those in Europe, there are national insurances and strong penetration of corporate & private insurances, which is in sharp contrast to developing countries where the public service shoulders the bulk of the spending. Government spending in these countries accounts for 50-90% of total healthcare spend, with the remaining contributed by individual out-of-pocket expenses and private insurance typically only in high single digit to low double digits penetration. Hence in developing countries, no matter how "sexy" the health technologies are, it will not be easy for the startups to scale quickly unless they are working with the government on groundbreaking technologies that both improve efficiency and reduce cost with sufficient impact. Unfortunately this has not been straightforward because efficiency gain typically comes with a corresponding cost increase.
You may have come across technology startups which offer home care service or pharmacy delivery in Asia. The innovations are great and offer a lot of convenience. However, back to the fundamental question - who are the paying customers? If the target customer pool is only limited to expatriates, senior executives and those concerned with privacy issues, then the real addressable market will be fairly small for the time being.
In my opinion, cracking this riddle will be key for unicorns to emerge in Asia where healthcare spending is on the rise.
