SUMMARY
Only ~200 healthcare startups were launched in 2023 – so there’s a much smaller top of the funnel for investors to choose from and invest in early-stage bets.
PE investments in Indian hospitals will now look for tech levers to bring operating leverage to improve the bottom line.
Tech-giants will continue to invest in creating better and more powerful foundational models and infrastructure globally
A war-torn world of swinging allegiances, an election year for the fastest-growing economy, and a once-in-a-lifetime AI revolution – these ingredients make 2024 a concoction to watch out for.
We try to connect the dots from last year to project what 2024 could mean for India and its healthcare entrepreneurship ecosystem.
Here’s what we think will move (or not) in the next 12 months:
Quantum Of Investments In Healthcare Will Remain Stagnant
Startups bridging healthcare gaps, will themselves need more bridge rounds. Healthcare startups in India will continue to see cautious investor sentiment as a result of:
- Only ~200 healthcare startups were launched in 2023 – so there’s a much smaller top of the funnel for investors to choose from and invest in early-stage bets.
- The number of scaled startup assets for large Series C+ rounds is limited – there are only ~40 Series A/B healthcare startups in India. So, we will hear fewer large round announcements in 2024.
We anticipate the startup investments to be limited to the $1 Bn mark this year. Many scaled startups will stitch together bridge rounds at lower valuations to match the new market reality.
GLP1s Will Become More Common Place In India
The “miracle” GLP1 weight loss drugs are a scientific breakthrough that tackles diabetes and delivers ~8-20% weight loss in six months through its injectable and oral formulations.
GLP1s were already an INR 300 Cr market last year in India, growing at ~100% YoY (global market is $12 Bn+, making Novo Nordisk EU’s most valuable company overtaking luxury brand LMVH).
We foresee two strong factors that will bring the action to India this year:
- Increasing awareness (given its media and word-of-mouth publicity)
- Glenmark launching the first Liraglutide biosimilar at INR 100/pen!
This will resolve some of the current supply side constraints. This modality will become commonplace with all existing weight-loss players and with the more enterprising endocrinologists in 2024.
B2B Startups Selling To Hospitals Will See More Adoption In India
Historically, India has been a bad market for B2B healthcare startups (focused on India sales – with the exception of MedikaBazaar).
Why do we think this will start changing?
Well, because PE investments in Indian hospitals will now look for tech levers to bring operating leverage to improve the bottom line.
Last year saw $4 Bn+ of private equity capital flow into Indian hospitals and specialty chains. We see market signals that the PE portfolio companies will now look to invest in technology solutions to improve their margin profile, standardise the technology stack, and integrate more cohesively.
If you are a B2B health-tech product (or services) founder – might be a good time to redo your pitch deck and demonstrate significant bottom line impact.
Successful D2C Stories From 2024 Will Become A Playbook
Mamaearth IPO (~8x subscribed, modest 5% listing gain) has now set a template for consumer brands to go omnichannel, hit profitability and enter public markets. The company reported ~40% of their FY23 sales coming from offline channels.
The D2C consumer thesis is updated now – build the brand online while the CAC is under control, then hire old wisdom from FMCG giants (or work with them) to place the products on shelves and aisles to be picked up on their merit.
We foresee that many of the remaining D2C/consumer brands will learn from this and move towards believable business models with viable unit economics. This builds both consumer and investor trust.
As we see large INR 1000 Cr+ healthcare brands with M&A/IPO exits, the early-stage funding for new undifferentiated D2C healthcare brands will continue to decline, and only good growth assets will receive capital to cross over to profitability.
Expect More Investor Diligence Within Healthcare AI
We have seen exponential growth of AI and its promise (field changes every few weeks now) last year. 2024 will see increased interest in AI-first startups which leverage:
- Global healthcare-specific LLMs (like MedPaLM2, Meditron, Hippocratic AI)
- Vernacular language models (Sarvam AI, Krutrim, and
- Newer models that can be trained using the government language repository Bhashini) for the Indian context.
Investors (coming from the hype waves of crypto, web3 and ed-tech) will invest with interest but caution.
Moreover, tech-giants will continue to invest in creating better and more powerful foundational models and infrastructure globally.
The rate of release of new models (Gemini, GPT-5 in the pipeline) will probably not match 2023 but on the positive side, this competition is already leading to a usage price drop (example, GPT slashed its price by ~50% in Jan ’24).
This creates an opportunity for less-funded but agile Indian start-ups to build use-case-specific healthcare innovation by leveraging this infrastructure and building with a focus on explainability, India contextualization and user experience.
Hospital Gold Rush Will Continue And Strengthen This Year
We will see more hospital consolidation, M&A and IPOs (on main and SME boards). The Indian hospital industry is at a 20-25x EBITDA multiple today and India added 2000+ beds last year, a sector growing at ~20% YoY.
The growth will be even higher in single-speciality chains. We will also see more roll-up and M&A openness from single-founder hospitals/clinics to work with corporate chains and established startups.
Soft Nudge Policies For ABDM Adoption Will Be Announced
50 Cr+ ABHA IDs (~30%+ of the population) have been created to date (33 Cr actively linked). The NHA stack has been one of the focus areas for the government and post the elections, we can expect some soft nudges in policy to re-emphasise this focus.
Jan Aushadhi Kendras (10K+ across India serving 2000 generic medicines) and ABHA launch (in 2018) have yet to be followed up by any big-scale overhaul. 2024 could be the year of inflexion.
Last year already saw the government testing waters with healthcare legislation (branded prescription, pharma-doctor relationships) but not going fully after it given the complexity and stakeholder dynamics. That could change soon.
Consolidation Of VCs And More Accountability For Syndicates And Angel Platforms
This one is for our own tribe. We’ve already seen some VCs exiting India, while some are in talks of M&A. The reality of the venture world is that only 15% of VCs deliver a 2x-3x return (benchmark for beating market growth rate), and thus raise a second fund.
We will see many VCs exit the market as “beta” investing (the India growth story) doesn’t work in the venture world and only differentiated, thesis-driven “alpha” chasers will continue to raise and deploy.
India has 120+ angel networks and syndicate platforms that have provided the first cheque and capital (~top 5 platforms invested in ~180 startups in 2023) in a tough macro environment where VC funding was slow.
On the flip side, this has resulted in an unchecked growth of syndicates and angel platforms luring retail investors into a risky asset class without know-how and risk appetite. We feel this year will see some guidelines that define the roles and regulations for this category of investors.
On a concluding note, we think the term “funding winter” will cease to exist in popular memory. This is the new reality of investments. The recent boom in investments was an aberration and we will all adjust to the evolving reality of healthcare, entrepreneurship and economics.
