Startups Will Have To Solidify Their Unit Economics, Consolidate Or Shut Shops

What should be the budget focus this year when allocating for healthcare? 

The FY23 Union Budget allocated INR 86,200 cr to healthcare across various schemes, a trivial increase from the revised estimate for the previous year.  For the coming budget, we believe stalwart programs like the National Health Mission and PMSSY should continue to receive high allocations as they form the backbone of public healthcare - improving infrastructure and providing care to the urban poor and rural population.  

The government has done a commendable job in building the Ayushman Bharat Digital Mission infrastructure. We look forward to greater adoption with the state encouraging citizens to create and use unique health IDs and digital lockers. This will require widespread awareness campaigns from the authorities and resultantly, a 5-6x higher budget allocation. They must also set utilization goals for ABDM in the Output and Outcome Framework to ensure accountability.  

How has the healthcare industry transformed in the last year?  

During the early phase of digital health in India, business models included teleconsultation platforms, e-pharmacies, and service aggregators. These offered little specialization and bore huge acquisition costs for one-time customers. In the last year, more platforms are expanding vertically to provide patients with an end-to-end, one-stop solution for their ailments. Not only do patients benefit from ease and convenience but also better outcomes. Ventures profit from healthier LTV/CAC ratios. There are over 200+ healthtech startups in the country today building vertically integrated platforms for diabetes, mental health, pregnancy, etc.  

The leading tech players, MAMAA (Meta, Alphabet, Microsoft, Amazon, and Apple), have made significant moves into healthtech. Alphabet’s Google Health has partnered with Apollo Hospitals to improve diagnosis workflows. It is also building solutions to detect heartbeats, murmurs, respiratory rates and heart rates conveniently and accurately through smartphone cameras. Whatsapp has launched a digital health incubator program and Microsoft has partnered with AIIMS Jodhpur  to promote digital health innovation.  

What are the aspects private players need to focus on in 2023?

Patient delight- Every healthtech startup should be obsessed with user delight and work towards substantially bettering their experiences and clinical outcomes. This would in turn help them drive higher lifetime values, retention, and referrals. For example, diagnostic firms must enable at-home collection or forgo their customer to competitors.  

Product Market Economic Fit – It is much easier to achieve product market fit with unlimited funds than to find it judiciously. Going forward, startups will have to balance between scale and burn, ensuring sound unit economics to gain investor confidence and capital. This is not only pertinent to scale but to survival.  

Omnichannel distribution – D2C is giving way to digital-first brands as increasingly startups are realizing that a mix of offline and online distribution is opening access to untapped markets, controlling customer acquisition costs, and strengthening their brands. For example, Max Healthcare is actively promoting its mobile application while Pristyn Care has set up 100+ offline centers.   

One healthcare area that needs a push from the Government? 

The government should proactively integrate digital health solutions built by startups into the public health system. From placing smart screening tools built by companies like Niramai at PHCs and CHCs for early diagnosis of breast cancer to purchasing low-cost glucometers and healthcare packages for chronic disease patients from ventures like BeatO, partnerships between healthtech innovators and the state will democratise access to quality care for the masses particularly in remote areas, while unburdening the heavily overwhelmed current public infrastructure. The potential for impact becomes even greater considering there are already over 930 M internet users in India of which 373 M are from rural areas. Startups will also gain from this collaboration as they will get easy in-roads into large untapped markets, vital for them to achieve scale.  

What healthcare trends we will see emerge in 2023? 

Startups will have to solidify their unit economics or look towards consolidation or shutting shop. The number of startups that closed in 2022 was more than 2x the number in 2021. While this trend is not singular to healthcare, it will impact the sector visibly.  

2022 was a year of massive layoffs with over 18,000 people laid off by tech companies and startups. At least, 2,000 of these were let go from healthtech startups. We believe this talent pool with tech, startup, and healthcare experience will choose to build in healthcare as founders or senior leaders and grow the space.  

Indian tech companies will build products and services to address the growing global demand for digital solutions from healthcare organizations. These could be non-clinical models or clinical provider assisting tools.