Startups in the elderly care industry in developed countries have gone through the starting stage into another stage for rapid growth towards pluralistic development

Over 2,000 elderly technology businesses have been reported to start up in the past 3 years worldwide. Particularly as the Baby Boomers (referring to those people who were born during the period from 1946 to 1964 and the population of whom is up to 76 million) are entering into their old ages and the aging problem becomes more and more serious in Europe, a large number of asset-light startups are emerging in western developed countries in recent years, which provide the elderly people with services ranging from social engagement, health management, rehabilitation nursing, financial service, intelligent technology, cultural and entertainment service, etc. Also, many investors, incubators and other profitable and non-profitable organizations are coming to stage and their main focus is making investment into these entrepreneurial projects in the silver industry.

In order to clearly understand the status quo of the foreign asset-light startups in the elderly care industry, VCBeat Research has collected information about more than 200 foreign asset-light startups in the elderly care industry and conducted statistical analysis on these companies from different dimensions.

 

The above chart shows the changing number of foreign asset-light startups in the elderly care industry during 2011-2016. From the chart, it can be seen that the wave of foreign elderly care startups begins in 2012 and surges during 2013-2015. The changes are caused due to many reasons. One reason is that a large number of the Baby Boomers in Europe and the U.S. begin to enter into their old ages. Another reason is that a large number of startup companies aiming to satisfy the needs of the elderly population are emerging with the development of the new intelligences and technologies such as the internet and the Internet of Things, and some of these companies mainly focus on the elderly care related sectors such as elderly nursing, remote medical service, chronic disease management, intelligent hardware, etc.

Allocation of funds for financing foreign elderly care projects during 2011-2016 (Q1) (%)

Over USD 10 million: 5%

Between USD 1 million and 10 million: 27%

Between USD 0.1 million and 1 million: 32%

Under USD 0.1 million: 36%

On the list of the startup companies with the amount of investment that is already published, it can be seen that Q Bioscience, a medical technology company, has received the highest amount of investment of USD 111.4 million, while the company at the bottom of the list has received only USD 20,000. The average amount of funds into these projects is USD 688,000. The distribution of funds for financing the elderly care projects is shown on the above chart, from which we can see the percentage of those projects receiving an investment fund of over USD 10 million is 5%, the percentage of those projects of between USD 1 million and 10 million is 27%, and the percentage of those projects with a fund of under USD 0.1 million is 36%, which is the highest. Overall speaking, the investment into the elderly care startup projects is still of a small amount.

 

Sectors covered by foreign elderly care entrepreneurial projects during 2011-2016 (Q1) (%)

Elderly nursing: 42

Medical & health: 33

Leisure & entertainment: 26

Intelligent hardware: 24

Social engagement: 15

Traveling: 12

Beauty care: 12

Physical fitness: 9

Smart elderly care: 9

Online retail: 7

Education: 5

Finance: 4

Balanced nutrition: 3

Furniture: 3

Tourism: 3

Automobile: 1

The above chart shows the sectors covered by foreign elderly care entrepreneurial projects during 2011-2016 (Q1). In the foreign elderly care industry, most startup companies are found in the elderly nursing sector. During the above period, there are total 42 projects in the elderly nursing sector (20.2%), and 33 projects in .medical and health sector (15.9%), adding up to more than 1/3 of the total number of projects in that period, indicating that the elderly population have heavy demand for medical and nursing services. There are 26 leisure & entertainment projects (12.5%), 24 intelligent hardware projects (11.5%), and 15 social engagement projects (7.2%), ranking 3 to 5 on the list. Other sectors covered by the elderly care entrepreneurial projects also include traveling, beauty care, physical fitness, smart elderly care, online retail, education, finance, balanced nutrition, furniture, tourism and automobile.

Key sector for elderly care startups: online medical & health (for the population aged above 50)

The elderly people’s physical functions are declining naturally as they are getting older. There is rapidly increasing demand for medical services and products against geriatric diseases globally. Many geriatric diseases such as hypertension and heart disease are characterized as long-duration, controllable and incurable. Hence, the demand for online medical and health services against the diseases found on the middle-aged and elderly people is growing fast.

 

Key sector: Online health

AARP Statistics: Number and percentage of the deals done by the population aged above 50 in the 9 opportunity sectors

Care navigation: 201 deals

Physical fitness: 189 deals

Social engagement: 169 deals

Behavioral and emotional health: 114 deals

Medical management: 111 deals

Aging with vitality: 90 deals

Vital sign monitoring: 85 deals

Diet and nutrition: 74 deals

First aid: 48 deals

 

Nursing service: 19%

Physical fitness: 17%

Social engagement: 16%

Emotion management: 11%

Medical management: 10%

Physical fitness: 8%

Vital sign monitoring: 8%

Nutrition and health care: 7%

First aid: 4%

The above chart shows the percentage of the amount of investment in foreign online medical sector for the population aged above 50 in the total investment in online medical industry. During 2010-2015, nearly 50% of the investment funds and deals in the online medical and health sector go to the startups serving the population aged above 50. The trend of investment into this sector in foreign countries is of reference and directional guiding significance to the Chinese venture capital market for online medical sector in the future. Investment institutions should work out their strategic plans earlier for adapting to the trend.

Elderly care industry is growing healthily after the theory and knowledge education stage.

 

There are total 6,698,000 beds for elderly care nationwide

According to the data published by National Development and Reform Commission on March 11th:

During 12th Five-year Plan period, there are total 6,698,000 beds for elderly care nationwide By the end of 2015,

222 million

Population aged above 60

16.1% of the total population

144 million

Population aged above 65

30.3 beds for every 1,000 elderly persons

70.2% higher than the number in the 11th Five-year Plan period

By 2015, the opinions on accelerating the development of regional elderly care service industry have been issued by cities and regions in 31 provinces.  

Already in the old age and going to be in the old age

The 1st generation of post-war baby boomers born during 1953-1957 The 2nd generation of baby boomers born during 1962-1973 (When we say "baby boomers in China", we usually refer to this generation)

Parents and children relationship

Birth rate Post-80s baby boomers (born during 1985-1991), children of earlier baby boomers

Implementation of one-child policy         Year of birth

Top chart: According to the data published by National Development and Reform Commission on March 11th, 2016, by the end of 2015, 222 million people are aged above 60, representing 16.1% of the total population in China and 10 million higher than the previous year; there are total 6,698,000 beds for elderly care nationwide, growing by 21.5% over 2014.

Bottom chart: The baby boomers of the 1st generation are already in their old ages, and the baby boomers of the 2nd generation are going to be in the old age soon. The baby boomers born during 1965-1973, the period when the birth rate is the highest in the Chinese history, are the baby boomers who have the greatest impact on the economy. During this period, the national economy is turning better and the compensatory birth is rising sharply, with a birth rate of 3% to 4% (3.3% on average).

When we look at the year of birth of the top 100 riches people on Hurun Rich List, we can see nearly 60% of them were born during 1960-1970, who belong to the baby boomers of the 2nd generation in China. During these 10 years, nearly 260 million people were born in China, accounting for around 20% of the total population. Now they have grown up and become the backbone of the society, and currently most of the money is in the hands of these people. We believe the spring of the elderly care industry in China will come as these people are aging.

The above chart clearly shows that the number of private elderly care establishments began to grow fast since 2005 and soared from 2007 on. During 2005-2013, most state-run elderly care establishments ceased to grow, and private elderly care establishments founded by individuals and small-to-medium-sized enterprises (“SMEs”), such as Huichen and Qinheyuan, began to take the leading role and thrive. In 2013, the elderly care industry began a new era. In the following 2 years, thanks to the promotion by the insurance companies, real estate developers, state-owned companies as well as public-owned, private-run elderly care establishments, the establishments in the elderly care industry began to compete for market shares and resources. Starting from 2015, a considerably large number of state-owned enterprises, financial enterprises, real estate companies, insurance companies and multinational companies begin to acquire existing elderly care projects, indicating that the industry steps into the times of capital competition.

Large-scale asset-heavy construction provides a foundation for asset-light startups and drives the internet+ entrepreneurs to start their business journey in China.

Thanks to the continuous efforts of the experts, scholars and practitioners, the elderly care industry in china is now stepping out of the extensive growth period and begins to enter into a professional and rational growth period. The large-scale asset-heavy construction in the past years provides a good foundation for building the asset-light elderly care entrepreneurial business.

As the asset-light elderly care entrepreneurial business in China is still at the starting stage, there are only a limited number of startup projects. In order to provide a clearer picture of the status quo of the development of asset-light elderly care industry in China, we have collected the information about 88 asset-light elderly care startup companies through open channels and conducted statistical analysis on these projects from various dimensions. Our findings are shown in the chart below.

It can be seen from the above chart that 66 (75%) out of these 88 asset-light startup companies are established during 2013-2015, so the year of 2013 is considered as the first year of the era of elderly care industry in China, and also the year when the number of asset-light startup companies soars. Based on our front-line experience in the offline market, a large number of startup companies are founded but not exposed to the public. As the market is getting more and more mature, many of these companies will come to the front stage in the future years, and a new batch of entrepreneurial projects are expected to come into existence.

 

Sectors covered by Chinese asset-light elderly care startup companies

Health management

Tourism

Beauty care

Leisure & entertainment

Mobile phone

Social engagement

Medical & health services

Smart elderly care (at establishment)

Smart elderly care (at home)

Online retail

App

Intelligent hardware

Nursing

The above chart shows the sectors covered by Chinse asset-light startup companies. At present, most asset-light elderly care startup projects (18.1%) in China are found in the elderly nursing sector. Ranking No.2, the number of intelligent hardware for elderly projects accounts for 15.7%. In the 3rd place is the number of smart elderly projects, which can be divided into two types, smart elderly care at home (14.5%) and smart elderly care at establishments (6%). The projects for developing apps for elderly use and online retail projects also rank high, 14.5% and 12%, respectively

The above chart reveals the time when 15 elderly nursing projects are established. The peak occurs in 2015, when 9 startups are set up in the same year, representing 60% of the total number of the new companies in this sector. The occurrence of the peak is related to the elderly care market policy and the market awareness of the biggest rigid demand of the elderly for rehabilitation and nursing at the present stage. Compared to other demand, this demand is discovered earlier.  

At present, most of investments into the elderly care startup projects in China are in the angel investment round or in the first round. This is because most investors still do not know much about the asset-light elderly care projects, as these projects are just kicked off and there is no major successful case in China, so the investors are holding a wait-and-see attitude towards these companies. We believe that, with the emergence of more startup projects in this industry and the occurrence of one to two major successful cases, more investors will be keen on the asset-light elderly care projects.