Impact funds feel the healthcare pulse after a lull in investments

Impact-focused venture funds are once again turning to the healthcare sector, which saw a lull in investments last year.
Ankur Capital, Aspada Investments and Unitus Seed Fund are among a clutch of funds that have identified profitable business models in the sector — spanning artificial intelligence (AI)- based solutions, diagnostics, medical technology and healthcare delivery — for investment.
“We are exploring deals in startups with disruptive technologies in the diagnostics market and also single-speciality areas with heavy reliance on technologies that can optimise time and geographic reach of doctors,” said Rema Subramanian, managing partner at Ankur Capital. Ankur Capital, which is evaluating two fresh deals in healthcare, expects to allocate 30-40% of the current fund to such investments.
Experts attribute this slowdown to fewer deals in the segment within the affordable bracket, some models not working as expected, and also because of high gestation period involved in brick-and-mortar models.
“A couple of years ago, there was lot of interest in speciality healthcare services. Speciality services were regarded as good to dig deep and figure out a business model, but the gestation periods are high,” said Richa Natarajan, vice-president at Unitus Capital, a boutique investment bank focused on the impact sector. “What will work in the future will be financially sound, technology-enabled businesses that can bring down the cost of healthcare. Also, investors need to realise that this segment needs deeper pockets and a more patient approach, since upfront costs and capex remain high in this sector.”
Aspada Investments, which has so far invested about $7 million in healthcare, plans to invest at least $200 million more in the segment over the next three to four years. “Besides businesses that can deliver services profitably to the lower middle class, we will also be investing in companies providing insurance and financing services to patients,” said Anoop Polavaram, operating partner at Aspada Investments. The fund has three-four deals in the pipeline, Polavaram said.