Governments across the world have to play an important role to fund innovation in healthcare. This is because funding access is inadequate during the ‘Seed to Series B’ phase. Therefore, it is the government not just in India but anywhere in the world that can chip in the required funds to fuel novel and viable healthcare technologies that would benefit its people, said Aditya Sharma, senior partner, Unitus Seed Fund.
Quoting the example of Israel, Sharma said that as the start-up capital of the world with highest number of early stage companies per capita, it received significant public sector funding for healthcare innovation.
“Clearly it is important that the government also provides the much-needed risk capital. The number of venture capitalists is limited in healthcare compared to other sectors. Most investments in healthcare are going into late-stage growth capital. The money generally invested in the pre-seed round is less than a Rs. 1 crore. In addition, there are angel investors, healthcare accelerators/incubators and foundation grants that tend to fund in Rs. 10 lakh to Rs. 25 lakh. While this being a good starting point, it is clearly inadequate for healthcare start-ups to fuel their ambitious growth plans,” Sharma told Pharmabiz.
The lack of funds from $200,000 to $10 million is a concern. VCs and PEs looking to invest in the ‘Seed and B series’ rounds are limited. Additionally, healthcare innovation has a high gestation phase with no return on investments for risky ventures. Typicality, VCs like to ensure returns on their investments within 5-6 years. This is generally not a sufficient window for healthcare start-ups to develop their IP, commercialise products/solutions and prove their financial attractiveness, he added.
“The government has a tremendous opportunity to provide the much-needed financial support to spur innovation in healthcare. Strategic value including capital could also come in from leading global corporate such as GE Healthcare which recently announced its healthcare accelerator ‘five.eight’. GE tends to be the earliest mover across industries in terms of such cutting edge initiatives. Over a period of time several global companies are expected to follow GE’s plan and launch similar accelerators too. This could be an important boon to healthcare innovation across developing countries,” said Sharma.
VCs focusing on risk capital need to create a vibrant environment and a high performance ecosystem with diverse cross-functional expertise spanning from IP creation to commercialisation, clinical trials, regulatory approval, manufacture and distribution, etc. “This is the core pillar of Unitus Seed Fund healthcare investment strategy and value creation,” he said.
The venture firm has about 50 per cent of its funds for healthcare specifically pre and post commercialisation of start-ups. “We are risk capital investors in India looking out for breakthrough innovations. We work to select the right company, identify products, spot and manage challenges. We are actively assessing over 50 start-ups within the healthcare system and expects to invest 6-8 promising companies in the next 12 months,” informed Sharma.
The investment in UE Life Sciences and Tricog amply prove that India can be an engine for innovation in healthcare products not just for its needs but also in the emerging markets. Hence, the government could play a strategic and critical role in accelerating healthcare and in making India the innovation capital of the emerging markets, pointed out Sharma.