Single Specialty: The Hotspot to Invest in Healthcare Date:   Wednesday , October 02, 2013 Matrix Partners India is a Mumbai based investment firm with rupees 3,000 crore under management. The firm invests in companies targeting the Indian consumer market at the seed, early and early growth stages. Healthcare has its nascence and will be a crucial element in India’s rapid growth. The area of my focus has always been healthcare and mainly domestic market. Within healthcare, I have zeroed-in on service and specifically single speciality vertical. Healthcare is becoming a big area of focus for most players across vintages and ticket sizes as other sectors are saturating or are seeing a slow down with the economy considerations in India. We can witness large deals happening in Healthcare as there are atleast fifteen players in India who are scaling up. Focusing More on Single Speciality Healthcare Single speciality is always valuable for its beneficiaries in terms of services they provide. Dedicated doctors, trained staff and technicians are unique to single speciality healthcare. The infrastructure attuned to the specialty, affordable care as the benefits of scale in consumables, faster discharge, lesser incidence of hospital acquired infections and the chance to enjoy the moment like in birthing give more specialized care for patients.This provides high patient satisfaction. Single speciality healthcare is more concentric on their functions and this will give an edge to the organisation like low risk surgery, lower capital expenditure, higher operating margins and thus the management becomes easy and more profitable and they can expect more ROI. When it comes to shareholders, this sector provides explosive growth, stemming from demand-supply gap and scalability of model. Business model is asset light, high return and cash generating will attract a lot of mid-sized fund investment in single specialty healthcare. More of the single specialty investment is going into specialties that affect quality of life rather than ones that are cosmetic or mortality causing. Healthy Innovations Fundamental innovation can happen on all three fronts in healthcare – process innovations, business model and product development. Process innovations in India are few when distinguish with other areas. On the business model side, a lot of work is happening on making models capital efficient. People are also developing patient aggregation models both online and offline, which offer significant benefit to the current infrastructure. On product development, a lot of interesting innovation within the healthcare domain is happening in the medical devices province. My personal belief is that in this area, the ones that will have rapid scale will be the medical products that are on the cusp of both healthcare and consumer. Segments of this kind are health foods and sexual health. In health food, people will look to proceed in paediatric and geriatric nutraceuticals, support nutrition for cancer, diabetes and gastro problems. One of the other preferred fields for innovations in medical device is therapeutic footwear for diabetes, ortho problems and geriatric problems. The key in such innovations is that not only does it have to address cost but also have a product edge in addressing other issues like convenience, compliance and therapeutic benefits. Indian players are gradually making this transition. On the services side, given the demand – supply gap, more and more business model innovations will happen as smart entrepreneurs try to build and scale businesses. A case in point is the Department in Hospital (DIH) model, wherein specialty chains are being built inside large hospitals. It solves for both capital intensity and efficiency. On the pharmacy side, I do not see any immediate technology innovation as manufacturers are grappling with the changing regulatory environment. Though in specific niches like lifestyle diseases and OTC, there is potential as India builds on its inherent strengths of traditional medicine which both these areas offer. Not be a Loan Warrior My biggest advice to entrepreneurs is to follow an integrated partnership approach and not be a loan warrior. Look for partners like investors, board members or even great employees within the enterprise and treat them with transparency and respect will make the journey less tough and more rewarding. Venture capitalist is not just a financial vehicle but a collection of individuals. The individuals add more value than pure finance can. Look out for individuals within VC and specifically look for capabilities like sector understanding, networks, willingness and availability of time to add value. If VC works well, it can fly but the onus is as much on you as on the private equity partner. Give value and get value in return.