By Andre Romani
SAO PAULO (Reuters) – DNA Capital still sees many opportunities in the Brazilian healthcare technology startup market, although it is in no rush to raise new funding at a time when its current fund is nearing completion of its investment cycle.
The manager, exclusively focused on the health sector and founded in 2013 by Pedro Bueno, current president of the Dasa health group, has already invested 6.5 billion reais. Investments include private equity (more advanced stage companies), such as Dasa itself and the hospital supply distributor Viveo, or venture capital (early stage startups), such as Memed, of digital prescriptions.
“Between a large scale business and a craft business, we are much closer to the craft business. It is about building health companies in the long term,” said Luiz Noronha, a partner in the manager, in an interview with Reuters, along with José Guinle, also a venture capital partner at DNA.
Among the recent theses explored by the manager is the application of technology, especially software, for health services.
“The industry is 20 years behind in the software and infrastructure aspect of technology,” said Guinle, who sees slower changes compared to other areas.
“Other than in the healthcare industry, software’s main competitor is other software. In health, we say that the main competitor is paper. That’s where the market is. There’s a lot of opportunity, a lot of opportunity to come,” he said.
One of the investments that exemplify this thesis is that of the Brazilian CM Tecnologia, which integrates main health tools –from telemedicine platforms to chatbots and medical reports– for companies in the sector. The executives did not inform the amount contributed in the business.
UNHURRIED
DNA Capital has 16 employees in offices in São Paulo and San Francisco, in the United States, and, in addition to the two countries, it has investments in the United Kingdom. In startups alone, DNA has already raised 150 million dollars for investments and invested in 21 companies so far, having already left three, such as Feegow, which digitizes medical records.
“The fund is nearing the end, but we still have gas, even to follow-up on the investments and one or two new investments are about to be announced as well”, said Guinle, without elaborating. “We will capture it at some point, but no rush,” he added.
Noronha stated that the funding condition is more to find a favorable market moment. “The scenario as a whole has a lot of volatility”. Faced with the divestments, DNA expects to continue working with about 15 venture capital investment theses at a time, they said.
In addition to the focus on software startups in health, another recent thesis, especially in investments in the US, given the greater volume of public-private partnerships, is from companies that apply technology to serve the most demanding publics, such as the elderly. “Delivering real value to the patient, not just a specific service at a specific time,” said Guinle.
In the North American market, the manager has investments including Cortex Health, which offers software for companies that provide medical follow-up services, such as post-hospitalization.
GLASS BARRIERS
One of the points that make investments in health more difficult, according to Noronha, is that the markets are smaller than they usually seem, reducing the potential for creating large companies.
Data from the market intelligence firm CB Insights show that among the 16 Brazilian unicorns – startups that have reached a valuation of 1 billion dollars – none are in the health sector. Six are fintechs, while sectors such as logistics, e-commerce and real estate are also among those represented in the group.
Another factor of difficulty, according to him, are market dynamics, such as negotiations for price formation between sector agents and regulatory issues. “You start bumping into glass barriers, you don’t see them, but they make it very difficult to build a business in this segment,” said Noronha.
Asked if recent political and regulatory changes in the Brazilian market, such as the comings and goings of the taxation of the National Supplementary Health Agency (ANS) list of procedures or the minimum wage for nursing, could be included in these barriers, they stated that for the DNA this is not a key point.
“We know the environment in which we live. The fundamental thing is that we are always investing in companies that are able to deliver what they propose in a way that is far above the market. When you have that, I think those issues, in general, end up adjusting,” said Guinle.
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