The worst kept secret in Singapore ahead of yesterday’s Budget 2019 announcement was the plan to focus heavily on healthcare — specifically support for the Merdeka Generation, a term used to describe the people who lived through the island’s independence.
To highlight the priority, after a brief announcement of a bicentennial fund, Singapore Finance Minister Heng Swee Keat jumped into various initiatives aimed at helping the elderly better afford healthcare in their later years.
With aggressive government focus, it is reasonable to expect a bumper year for the medtech industry.
The difference between now and 2015, when people were pointing to the healthcare sector as a giant startup opportunity, are underlying statistics that suggest the medtech sector is gaining momentum.
According to e27 data, 13 health-tech companies raised funding in 2018, the fourth-highest amount of deals in the country.
If we consider the government priority, plus the natural momentum of the industry, it beg’s the question if medtech is set to enjoy a hype cycle similar to e-commerce years ago, fintech after that and, more recently, blockchain.
After speaking to investors and startups, the answer is, “yes, but…”
According to Albert Shyy, a Principal at Burda Principal Investments, most of the VCs he speaks with have put medtech on their watchlist because of the potential for mobile phones to disrupt the value chain.
However, there is a ‘but’.
“I think the main forces that could work against it are that healthcare may have a slower ramp-up due to higher regulatory concerns, so I am not sure if the acceleration will be as steep as e-commerce/fintech were (especially in moving from seed to Series A and beyond),” he said in an email.
When fintech was exploding in 2016, it was very common to walk into finance-industry events and listen to smart people argue vociferously for deregulation. In healthtech, nobody really makes that argument.
If deregulation in finance results in a few people getting burned financially, that is bad, but at the end of the day it is just money. If deregulation in medicine results in deaths, that is an entirely different conversation.
This is coupled with the fact that medtech companies are typically more expensive to run than an e-wallet, so startups are at further risk of running out of cash while their product navigates bureaucracy.
That being said, governments across the world are opening options for experimentation in medtech. Singapore has a medicine-focussed sandbox and the US Food and Drug Administration has launched a programme to help startups get approval from insurance companies.
But this being said, investors are still bullish on the industry’s future. No, it may not “pop” like blockchain, but it is widely anticipated to grow, and one reason is advancements in artificial intelligence.
According to Will Klippgen, a Managing Partner at Cocoon Capital, the growth of artificial intelligence has made starting a medtech company cheaper. This has helped entrepreneurs sidestep hospitals to get the MVP off the ground.
“More machine learning talent is available, both in Singapore and across the world along with better algorithms as well as better tools for scaling up AI software,” he said.
Today, the Cocoon announced a US$1 million investment into See-Mode, a startup that uses AI to help predict strokes.
The most important part of any business is its customers. It is easy to complain about regulations, or the ability to get financing, but it is irrelevant if nobody is buying the product.
For WhiteCoat, a company that allows people to perform check-ups via their phone and order medicine-for-delivery, a lot of the traditional barriers are starting to fall.
“I think Singaporeans are well educated and mobile phone penetration rate is high. Therefore they get a lot of information online. But they need a professional to help them. For older groups, [our product] is a big bonus because doctor consultations are a logistics exercise,” said Dr. Yii Heng Seng, the Chairman WhiteCoat Global.
People trust doing business on their phones and for some in Singapore the convenience of performing checkups at home outweighs the benefits of trekking to the doctor for a face-to-face consultation.
Dr. Yii acknowledged that WhiteCoat is entering uncharted territory without guidelines or protocols.
This means, and these are my words not his, it will be more useful to look at consumer adoption in a year or two.
There are a couple of other weights dragging down explosive growth in medtech. They are as follows:
Southeast Asia is not a medtech hub: There are two Southeast Asian countries that see significant innovation in medtech, Thailand and Singapore. After that, there is not a lot of interest in the industry. According to an Indonesian investor, the region’s largest country will not be seeing a medtech boom in the near future.
Data hacks are a real problem: If we focus on Singapore, two of the biggest controversies in the past year have involved personal medical data being hacked or leaked. Over the summer, the National University Hospital was hacked in an incident that affected 1.5 million people. Currently, the government is dealing with the fallout from a leak that revealed the HIV-positive status of over 14,000 people.
These incidents have severely harmed public trust in online security and the willingness to pass over sensitive information to the medtech industry.
After Singapore Budget 2019, it is clear that medtech will be a major theme for the remainder of the year. It may not experience a hype-cycle at the same level of blockchain, but the industry should experience solid and stable growth over the next 12 months.
So is medtech ready to explode?