In the labyrinth of India's rapidly growing healthcare sector, projected to reach $610 billion by 2026, a critical challenge lurks in the shadows - the financial strain on hospitals, particularly the smaller and mid-sized ones that form the backbone of the nation's healthcare infrastructure.
Amidst this landscape, we believe our latest portfolio company, HealthCRED can be a beacon of innovation. Founded by serial entrepreneur Shrey Jain, HealthCRED is aiming to revolutionize financing for the backbone of India’s healthcare sector. Here’s their story.
The Genesis of HealthCRED
Shrey's journey to found HealthCRED is a testament to the unpredictable nature of entrepreneurial journeys. Despite starting with aspirations in academia, a scholarship for an entrepreneurship program at Babson College altered his trajectory. This experience coincided with the burgeoning Indian startup ecosystem in 2015-2016, leading Shrey to try his hand at entrepreneurship.
His first venture into healthcare, NirogStreet, raised over $20 million from reputed Indian and foreign institutions and angels. His next venture, HempStreet, aimed to develop cannabis-based solutions for chronic pain management. Forbes recognised his work and achievements with HempStreet by including Shrey in its 2022, 30 under 30 list. However, HempStreet faced challenges in scaling due to the lack of institutional capital for cannabis companies in India.
These experiences, both triumphs and trials, helped deepen Shrey's understanding of the healthcare landscape. A chance conversation about car leasing sparked the idea of addressing the critical gap in receivable financing for hospitals.
HealthCRED’s journey at Antler Residency
Shrey initially approached Antler seeking funding, but he found himself drawn into the Antler Residency. The program provided Shrey with his first mental break in seven years of back-to-back startups and offered a space to thoroughly evaluate and refine his ideas.
As Shrey recounts, “The Antler experience proved transformative for HealthCRED. It allowed me to poke holes in my theories, connect with like-minded entrepreneurs, and receive crucial support from key Antler team members. Through programs like Forward and Spotlight, HealthCRED gained valuable connections, including an industry expert who later became an investor.”
The HealthCRED Approach
The Indian insurance market has shown significant growth, collecting over $20 billion for Health Insurance in FY-23 with 50 million new policies sold annually driven by digital distribution. However, the rising use of cashless health insurance is straining hospital finances due to delayed revenue realization, presenting an $8 billion market opportunity according to Shrey. More importantly, this misaligns incentives between insurers and hospitals where insurers want to delay disbursals and hospitals seek payments to operate efficiently.
HealthCRED's approach aims to transform this often adversarial relationship between insurers and hospitals into a collaborative model. By providing financing to hospitals on behalf of insurers, HealthCRED allows insurers to maintain their cash flow advantages while ensuring hospitals have the working capital they need to operate effectively.
The solution is particularly crucial for small to mid-sized hospitals, which make up the majority of India's healthcare infrastructure. Out of all the 69,000 registered hospitals recorded in 2019, about 2/3rd of them are private, and a majority of those have less than 100 beds.
Investing in HealthCRED: Bridging the $8B Healthcare Financing Gap
Our's decision to invest in HealthCRED was driven by several key factors:
- HealthCRED targets the multi-billion dollar working capital gap in healthcare, expected to triple by 2030, amplified by increasing health insurance penetration.
- The access to claims data positions HealthCRED to create a robust, data-driven underwriting engine, giving them an edge in risk assessment.
- Starting with working capital financing, HealthCRED has the potential to expand into adjacent areas like equipment and inventory financing.
- The push towards increasing cashless treatments creates a favorable environment for this solution, likely accelerating the need for working capital solutions in healthcare.
Commenting on the investment, Nitin Sharma, Partner at Antler, added,"The healthcare ecosystem faces a significant working capital gap, particularly impacting small to mid-sized hospitals with limited capital access and claims management capabilities. This gap is expected to widen with increasing health insurance penetration and delayed insurer payments. Banks and NBFCs typically focus on large hospital infrastructural loans, leaving small hospitals underserved. HealthCRED aims to address this by offering working capital finance against cashless insurance receivables, targeting a multi-billion dollar gap. The team's long-term vision is audacious - to become India's first healthcare-focused small finance bank and we’re excited to be the first partners in this journey."
The Road Ahead For HealthCRED
HealthCRED's ambitions are bold and far-reaching. In the short term, they aim to partner with 400 healthcare entities and expand the team, focusing primarily on business development and on-ground relationship managers.
HealthCRED aims to pioneer the use of alternate data for underwriting healthcare entities, moving beyond traditional financial metrics to include healthcare-specific data points. This approach could revolutionize how financial institutions assess and support healthcare providers, potentially unlocking new avenues of growth and stability for the sector.
As India strives towards universal health coverage, facing challenges such as the SDG target 3.8 for patient financial inclusivity and the government's push for 100% cashless facilities, solutions like HealthCRED offer a crucial lifeline. By addressing the critical financing needs of hospitals, HealthCRED isn't just building a business - it's strengthening the very foundation of India's healthcare system, potentially impacting millions of lives and shaping the future of healthcare delivery in the world's most populous nation.
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