Despite the booming economy of Singapore and nascent ecosystems in countries like Thailand and Indonesia, the region is still home to around 40 % of the world’s poorest. This means that many people from the region are not able to afford a basic need such as healthcare. So how did the team behind HD manage to create and scale a successful healthcare business which doesn’t rely on the popular telehealth model?

HD is a direct-pay healthcare marketplace connecting patients to hospitals and healthcare SMEs, with the mission to bring affordable healthcare to the ‘99%’. Before co-founding HD, Sheji was a co-founder at aCommerce, the region’s largest eCommerce enabler. While at aCommerce, Sheji dabbled into bringing hospitals online through eCommerce. That’s when he got a first-hand look at the challenges and opportunities in the healthcare vertical in the region.

“Hospitals and healthcare SMEs in emerging SEA are 10 years behind multinational, Fortune 500 brands in terms of ‘digital readiness’, yet there’s a rapidly growing need for the former to shift their customer acquisition efforts online. Pre-pandemic a lot of healthcare providers would acquire their patients through a combination of walk-ins, agent and provincial hospital referrals, and medical tourism. Obviously, a lot of this has been disrupted due to COVID-19.” explained Sheji.

Diversification to combat recession and built-in churn

What challenges are entrepreneurs in health tech facing in SEA? Here are a couple the team behind HD had to consider:

• Low health insurance penetration, and conversely high direct-pay / out-of-pocket pay. According to the World Health Organization (WHO), the South East Asia Region has the highest health out-of-pocket share of total health expenditure amongst all regions, with 38% of health care being paid directly by households.
• No private family physician practices common in more ‘Western’ markets like the US, Europe, and Singapore. Therefore, no general physician layer to guide patients in terms of healthcare product discovery.
• Not enough doctors. There are 0.59 doctors per 1,000 people in emerging SEA versus 2.61 and 3.75 per 1,000 people in the US and Europe, respectively. This makes it harder to scale the more popular telehealth business models.

Having these challenges in mind and seeing several successful products in similar, albeit more advanced markets like China, HD modeled their product as “JD Health for SEA + Shopify for Healthcare”. They are the only digital health player in SEA to offer a range of services from consumer healthcare, online pharmacy, telehealth, and healthcare marketing solutions. Diversification means they can more easily tackle issues typical for the industry such as built-in churn (when a user gets treated and recovers, they are less likely to return) and the demographic specifics of the region, such as having 71% of the population younger than 44 and therefore them visiting doctors much less frequently.

Sheji thinks that the case for telehealth in the region isn’t as strong as in Western markets, where most use it for chronic disease and mental health treatment, according to a report by Rock Health and the Stanford Center for Digital Health.

“While telehealth players got an initial boost during the early days of the pandemic, a lot of that demand has tapered down just as quickly as lockdowns have eased and vaccines have been rolled out. Meanwhile, our growth has been more consistent and sustainable. Our sales have grown 8 times since the beginning of the pandemic and are still increasing month-on-month at the current rate of 15-20%. As of today, we have 1,000+ healthcare providers offering 30,000+ SKUs on our platform and are looking to accelerate the pace of onboarding more providers in 2022.” says Sheji Ho.

Direct-pay and healthcare financing make a difference

The HD business model focuses fully on the direct-pay market. This market is estimated to be $24 billion, with the potential to grow over $100 billion in the upcoming year. However, the potential is not enough to have a successful business in countries where the average consumer has difficulties affording a $250 annual health checkup product let alone a $2,000 c-section procedure out-of-pocket.

To empower their direct-pay customers to afford more expensive healthcare products, they now offer healthcare financing. Currently, 25% of their total sales is paid through healthcare financing, whether it’s through credit card installment payments or buy-now-pay-later. These are people that are generally uninsured or under-insured and would otherwise have had to borrow money through informal channels just to pay for a timely treatment or surgery, or even worse, delay critical care until they have saved enough money to pay for it.

By having multiple revenue streams HD is able to get the user to come back more frequently. This resulted in their LTV/CAC cohorts breakeven on the first transaction ever since June 2020, with 20% of monthly sales coming from repeat buyers.

So what is in store for the future of HD? With a looming recession and inflation, what will they be focussing on to continue the success of the previous years?

“Over the last 6 months, we started getting more of our healthcare providers referring their walk-in patients to us. We were initially baffled by this because why would they send us their patients just for us to charge a commission? Turns out that the majority of people in SEA are affected by this pandemic-induced recession which has impacted their spending power.” explains Sheji.

Consequently, hospitals and healthcare SMEs are having difficulties converting their walk-in patients. This is where HD’s healthcare financing solutions come in. They have developed a solution that healthcare providers can use to generate payment QR codes on-premise and get the user to scan it to pay through installments. So far, traction has been great and they are planning to scale this across all healthcare providers on their platform.

HD became part of the Seedstars portfolio in 2021 and has since then worked with the Seedstars International Ventures team and mentors to achieve growth and work on future steps in becoming the leader in their sector.

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Seedstars International Ventures is a seed-stage venture capital fund dedicated to emerging and frontier markets. We are working with companies to run growth by transferring knowledge, tools and processes. In this series, we are showcasing our portfolio companies and their local and global impact.