How a startup with no VC funding landed $140 million in Chinese deals and partnered with Tencent
- British healthcare startup Medopad has done something that's notoriously difficult for a foreign startup and struck $140 million in deals with China and a partnership with local giant Tencent.
- The company tracks patients with long-term illnesses to help them manage their conditions.
- It has deals with London hospitals including the Royal Free, Guy's and St. Thomas', and St. Bartholomew's.
- CEO Dan Vahdat explained to Business Insider how a small startup without venture capital backing tackled China.
It isn't easy for foreign tech firms to establish themselves in China. Uber didn't manage to do it successfully, while Google and eBay have both struggled to expand into the market. The reasons vary from local competition, to cultural missteps, to having to deal with a pro-censorship government.
British startup Medopad has not only been striking deals in China for the last four years, it's just bagged a partnership deal with local internet giant Tencent, and $28 million (£20.2 million) in Series A funding from Hong Kong-listed NWS Holdings. It plans to raise $120 million (£86.4 million) in total for the round this year. A normal Series A cheque in the UK generally maxes out at £10 million.How did the firm do it?
Medopad is a healthcare startup that tracks patients with complex diseases
Medopad works with hospitals and pharmaceutical firms, using mobile software to track patients afflicted with long-term diseases, such as cancer, or pulmonary hypertension. Such a patient isn't in hospital permanently, but might be in and out for tests every six months, even if they aren't showing any symptoms.
Patients feed data into Medopad's software about their symptoms, and the app feeds that information back to the patient's care team, who might advise skipping the next checkup if they seem well enough for the time being. The software also can tell patients when to take their medication. CEO and cofounder Dan Vahdat described the service as a "satnav" for chronic illnesses.
Another aspect of Medopad's business, since it tracks large "cohorts" of patients suffering the same disease, is tracking and analytics, with patient consent.
The next phase of the company, Vahdat said, would involve using machine learning to try and predict some aspects of a patient's condition, such as when they may deteriorate. "When you get patients who have complications, that's already expensive. But if you can avoid those [complications], that's good news," he said.
Medopad's business might sound similar to Google-owned DeepMind, whose healthcare arm processes huge amounts of hospital data to train its artificial intelligence software to recognise diseases. But Vahdat said Medopad doesn't ever touch hospital data, but focuses on "real-time data, generated by the patient." The patient also gives their direct consent, he said.
Medopad struck into China earlyVahdat and his team expanded into China only two years after founding Medopad. It struck early partnerships with London hospitals the Royal Free and St Bartholomew's. Going through the NHS procurement process, he said, had made his company more competitive internationally.
"We are aiming for scale rather than making a big amount of money from few clients," he said. "We are lucky to be part of the NHS ecosystem. We had to be very flexible, in terms of [the illnesses we tracked], but also conscious of cost because it was the NHS. That gave us lots of leverage internationally, and put us in a unique position to be competitive."
Medopad has no venture capital funding. Its recent Series A round was led by NWS Holdings, a construction group and part of property giant New World Development. Earlier backing came from pharmaceutical firm Bayer, UBS and Intel, according to Bloomberg.
"That's intentional," said Vahdat. "We wanted to be very committed and build a patient-centric company. If we worked with VCs - though they are amazing - they have targets for returns to make to their LPs, they have five year or 10 year maximum. We didn't want to bound to doing an exit, we wanted to be more relaxed."
While the US was the obvious international market to target, with its cultural similarities to the UK, Vahdat and his team decided instead to explore China. "We thought the sooner we go there, the more mistakes we'll make, and the faster we will learn," he said. "If you want to be the major player in the world, you can't ignore China."
Medopad had lots of early help from the government's trade department, with officials brokering connections and partnerships. But the startup's early days in China were characterised by "a bunch of mistakes," Vahdat said. "A bunch of it was cultural stuff we didn't understand."
One example was getting used to offering freebies. "In one deal we signed, we ended up doing a demo account for the department of a hospital," he said. "We weren't getting paid. This isn't the normal way we would have operated, but if you don't do that, you don't get to the next phase. We were initially hesitant of being open - we had no commitment from them."
The freebie allowed the hospital to fully explore Medopad's technology, he added. "There were a couple of times we had the opportunity to do the same thing, and we didn't. That was a mistake."Another lesson was avoiding sketchy partners. In one instance, Medopad almost signed a deal through a local middleman where again it would be offering its services for free. Unbeknownst to Medopad, the middleman got paid, even though the deal was never finalised. "They told us it was a free thing! And then they got paid," he said. "I lost half my hair in China."
The early lessons culminated in Medopad accompanying Theresa May to China - and landing a deal with Tencent
Vahdat accompanied UK Prime Minister Theresa May on her trade trip to China at the end of January, alongside big firms such as HSBC and BT.
At the end of the trip, Medopad announced it had $140 million in deals in China, and a partnership with Tencent.
The deals comprise hospital partnerships, and a project with Johnson & Johnson China. After meeting investors from NWS Holdings at a conference, the company also secured the first tranche of its Series A round, which will initially be used for new hires. The full round of $120 million (£86.4 million) will go towards international expansion and, potentially, acquisitions.
Vahdat said the firm's continued push in China meant Medopad had been talking to Tencent for "a long time."
"Tencent is a quiet company, they like to make less fuss before they have something solid. Culturally we are quite a good fit," he said.
Neither firm is going into exact details of the partnership. But Vahdat said the Tencent partnership can help the firm lobby in China. Tencent also has a medical arm, and it sounds like Medopad will begin tracking Chinese patients for a chronic disease.
"As soon as you announce you're working on some disease, you create expectations," Vahdat said. "We've decided to stay quiet on the details of what we're doing together, because we feel responsible. The idea is that we're....detecting things earlier, helping conditions, and helping care team providers to come up with a better diagnosis."Artificial intelligence will form a major part of the venture too, Vahdat said.
Asked how Vahdat felt about the ethics of using artificial intelligence to track Chinese patients, given the possibilities of spying and surveillance, he said patients would still have to give their permission.
"We treat patients globally to the same standard, with the same consent," he said. "We want solutions that work everywhere."
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