HealthTech in Hong Kong: The Winds in Our Sails

IoT and insurtech core to Hong Kong’s competitive edge in the healthtech space.

Author’s note: First published on Galen Growth Asia at https://www.galengrowth.asia/2017/04/12/healthtech-in-hong-kong-the-winds-in-our-sails/

In startup hubs across the world, some sectors feature more than others. For example, in London’s startup scene, fintech has won the lion’s share of the attention (and funding), thanks to London’s position as Europe’s most active financial hub. In Boston, HealthTech has gained the upper hand in an ecosystem supported by MassGen and a host of other major healthcare players. Tel Aviv produces cohort after cohort of cybersecurity startups, a natural corollary of their national defense circumstances.

In Asia, fintech, e-commerce and O2O startups garner a disproportionate measure of attention. Banking the unbanked, and tapping into the massive spending power of rising affluent consumers, present limitless, quick-win opportunities for entrepreneurs and investors.

In Hong Kong, arguably the leading Asian financial hub thanks to its ties with China, fintech has incontestably taken the lead. E-commerce and business SaaS (e.g. HR, retail tech) startups follow closely.

Healthcare, on the other hand, is the ugly sister. Highly regulated and hyper-local, it defies the modern zeitgeist of tech startups — to scale, and rapidly so.

Where is HealthTech in Hong Kong? What are the major drivers? Which angles can entrepreneurs take to successfully capitalize on Hong Kong’s inherent strengths? I try to answer these in this commentary.

Hong Kong HealthTech 101

The Hong Kong HealthTech scene is a battleground littered with the corpses of startups fortified with dreams of changing health in Hong Kong and beyond.

Here I profile the most prominent players today:

  • Prenetics is a technology-driven digital health and DNA testing company. In 2016, they launched a nationwide campaign with Prudential, and closed a US$10mn funding round led by Ping An Insurance and Lippo Group, making it the most high profile and well-funded HealthTech start up in Hong Kong in recent history (disclaimer: the author works at Prenetics)
  • Heartisans started off as a portable ECG watch, providing advanced warnings for heart attack patients. Today, it has generalized its appeal, marketing itself as a portable blood pressure watch, with ECG recording capability. It seems to be making a heroic gamble into the ultra-competitive world of consumer health wearables, up against behemoths like FitBit, Garmin and Apple
  • Simple Wearables is a fall prediction and detection wearable for the elderly, allowing the elderly to live independently for longer. They have been in pre-release mode since they were established in 2014, but I understand they have been going through trials with hospitals
  • Finddoc has been a mainstay in the Hong Kong tech scene since their launch in December 2011. Finddoc is a doctor search and booking platform, a local version of ZocDoc in the US. However, it is unclear how they are doing in terms of traction and monetization. TopDoc, another doctor search and booking site, is also in the market, with unclear traction. Of note here is that Bookdoc, a Malaysia-based doctor booking site, has made in-roads into the Hong Kong market (side quip: I wonder what doctors think of getting wooed by a series of doctor booking platforms, year after year)
  • Gather Health, a digital diabetes management tool for clinicians and patients, was based in Hong Kong and India, but seems to have shuttered operations, according to a cursory search online
  • A brave new entrant to the HealthTech space is Evercare, a marketplace to match qualified nurses to post-discharge patients, with a particular focus on elderly patients. They are the local version of the much-heralded Honor and HomeHero in the US

While I wish there were more startups on this list, these are the bona fide Hong Kong-grown health technology companies that I believe have a credible presence in the market.

Drivers of HealthTech in Hong Kong

HealthTech enjoys several tailwinds in Hong Kong, including:

  • An aging population, high per capital income, and a government keen to alleviate the burden of rapidly rising healthcare costs
  • One of the world’s highest mobile penetration rates, at 234% mobile subscriber penetration and 86% mobile broadband penetration as of end-2016 [i]. This tech savviness lends itself to greater openness towards new technologies — including when managing their health
  • For IOT / wearable HealthTech entrepreneurs, proximity to the world’s manufacturing base in Shenzhen is a clear advantage against any other location outside of South China
  • Relative market homogeneity, meaning that one solution will work for the whole city — no disparate sets of regulations, languages, or rural-vs-city differences to design and develop for
  • Consumers are less squeamish about data sharing than their Western counterparts, leading to greater opportunities for monetization and business collaborations that add value to both consumers and businesses. In the advent of big data and population health innovations, liberating data for multi-purpose applications hold the promise of hitherto untapped value
  • As a regional financial powerhouse, there is an abundance of angel, seed and venture capital

Despite the favorable factors above, HealthTech has still not gained significant, widespread traction in Hong Kong. Why is that?

I believe the biggest impediments to HealthTech in Hong Kong are market size, cultural dynamics, and the tech talent pool.

With a population of just 7 million, the Hong Kong market is eclipsed by China, Japan, Korea, and even the (combined) Southeast Asia market. Starting a business is hard — according to Elon Musk, it is like “eating glass and staring into the abyss”. Why start something in a market of only 7 million inhabitants, many of whom (truth be told) prefer inconveniences over paying for services?

In addition to the small market size, local cultural factors affect the importance that people place on health care — unlike retail products, health products/services cannot be worn with pride on your arm or displayed in your home — this limits its appeal to a population that is well known to favor displays of materialism. This also explains why e-commerce and retail/lifestyle businesses have attracted (and retained) many more entrepreneurs.

Finally, the tech talent pool is distressingly thin in Hong Kong. The best local talent is lured into lucrative, stable jobs in the financial juggernauts that dominate the local economy. Hiring quality developers is either a game of roulette, or a very expensive bidding process. Often, particularly at the early stages, founders resort to overseas contractors. Without the benefit of in-person interaction and rapid iteration, many of these contractor relationships fail.

Hong Kong’s Twin Opportunities

In my opinion, two angles present the best opportunities for HealthTech entrepreneurs.

First, the IOT / wearable space is obvious, given proximity to the manufacturing base in Shenzhen. Brinc, the Hong Kong based hardware accelerator, has guided US-based HealthTech companies such as PillDrill (medication management) and Kello (sleep trainer) through the classically gut-wrenching manufacturing process.

Second, the insurance-driven value proposition is the less obvious winner. This brand of HealthTech is sometimes called “insurtech”.

Located in a colossal financial hub with insurance penetration rates second only to Taiwan in Asia, HealthTech entrepreneurs can leverage on insurers’ desire to differentiate and on their imperative to innovate in the face of rising healthcare costs.

In fact, several multinational insurers, such as AXA and Swiss Re, have set up innovation teams in Hong Kong with the explicit purpose of working with startups to innovate and protect their long-term competitiveness.

As economic integration progresses in Asia, Hong Kong’s headwinds of being a small market and lacking tech talent will likely weaken. While that process unfolds, Hong Kong’s first world problems of rapidly rising chronic disease rates and healthcare costs will intensify the need for new innovations that can change the equation.

In subsequent posts, I will write about how I expect regional economic integration to lead to a small explosion in HealthTech startups. I will also write about when and how I predict US-based HealthTech companies will make in-roads into Asia, the way Uber and Airbnb have done in the transportation and rental industries.