India is in the midst of the world's largest experiment in democratic elections, with more than 800 million people eligible to vote in its current parliamentary elections.
Impact investors are monitoring what may be an even more interesting experiment. The efforts by India's new crop of health care entrepreneurs to sell medical services directly to the more than 1 billion medically underserved people at the base of the country's economic pyramid.
Already, paying customers -- individual patients and their families, rather than insurance companies or the government -- control about 80 percent of health care spending in India. A report in December estimated health care spending in India will reach $158 billion in 2017, an annual growth rate of 15 percent.
The health care startups are driving down costs for eye care, dental care, preventive screenings and all manner of basic procedures in order to bring private health services to smaller cities and towns, and to the five-sixths of Indians with household income below 200,000 Indian rupees (INR), or about $3,325 a year.
"There will be hundreds of these businesses growing up in India," says Will Poole, managing partner of Unitus Seed Fund, which has made three investments in early-stage Indian health care companies since last last year and plans to invest in three or four additional health care companies this year. "They are meeting the needs of low-income consumers who currently have no other option for getting health care, other than embarking on travel to a major city."
"Some of these businesses are going to be highly scalable, if they're designed right and executed well, in which case they will be highly valuable," Poole added.
Unitus's newest investment is Smile Merchants, which operates four dental clinics around Bhiwandi, a city near Mumbai. Unitus reached out after it determined Smile Merchants' hub-and-spoke system enabled it to deliver cost-effective services to so-called Tier 2 and Tier 3 cities, with populations of under 5 million and under 1 million, respectively, as well as to smaller towns and villages. Unitus invested 8 million INR, or about $133,000, in Smile Merchants, a brand of a brand of Free3 Healthcare, to help it expand to a dozen clinics in the state of Maharashtra and then to other parts of India.
Branded dental services are common in India, but "the majority of dental chains targeting metros are high-cost models," says Smile Merchants CEO, Rushi Trivedi, a dentist who co-founded the company in 2012. Trivedi said in an interview that Smile Train can cut costs by more than 50 percent by using technology to manage records and appointments and deploying dental students who are seeking field training. Real estate is cheaper in smaller cities as well.
Smile Merchants puts trained technicians into "spoke" clinics to handle the 90 percent of dental patients who need primary care including root canals, tooth extractions and fillings. Tougher cases are referred up to "hub" clinics in the larger cities.
Technology is also giving Indian health care consumers the ability to get price comparisons for their medical purchases. Earlier this year, Unitus invested 15 million INR, or $250,000, in MedyPal, an online marketplace in which medical providers quote prices on scheduled procedures for cancer treatments, urology and even organ transplants.
The founding team of MedyPal, a brand of Commerzpoint Networks, had earlier built and sold a business-to-business exchange for handling insurance claims, before seeking to cut costs for consumers through increased transparency. A Priceline-style reverse auction lets hospitals and other providers bid for customers' business, by location, scheduling and quality as well as price. Doctors, many of them trained abroad, are scrambling to find patients for their new hospitals and other facilities.
"We came with the idea we wanted to do the whole Indian society, not just the middle class or upper class," MedyPal founder P Rammohan said in an interview. Rammohan says the service which opened in January has already driven down prices by 25-30 percent by giving individual consumers clout equivalent to insurance companies. "The benefit should go to the consumer," he says.
In December, Unitus invested 6.5 million INR, or $108,000 in a third health care startup, WelCare, an affordable eye-screening service to prevent diabetes-related blindness. More mainstream venture capital funds have targeted opthamology as well. In January, Accel Partners, Asia Healthcare Fund and IDG Ventures closed an $8 million Series B investment in Forus Health, which has developed a portable eye screening device that screens patients for common eye problems in under five minutes.
In only its first year, Unitus Seed Fund, which has raised $11 million from U.S. and Indian investors, has become the most active seed-stage impact investor in India, with eight deals last year, according to a recent report from Unitus Capital (the two entitites have common roots but no formal affiliation).
Unitus Seed Fund is looking to make additional health care investments in the coming months. Its executives are embarking on a six-city "road show" to meet with entrepreneurs in Mumbai, Calcutta, Ahmedabad, Coimbatore, Pune and Delhi. Unitus also has enlisted Michael Free, a co-founder of PATH, a major health-care NGO based in Seattle, as an advisor on its health care deals.
"We're doubling down on health care," Poole said. "It's a giant opportunity."