Supply constraints to funding woes: Health start-ups in the age of Covid-19

Several have been hit by a large-scale migration of workers which has caused labour shortage. So while demand is high, supply is the pain point

The coronavirus has emerged as a new adversary for countries, the likes of which has not been seen for decades. The outbreak has triggered a 21-day nationwide lockdown, putting enormous pressure on the Indian economy as it grapples to maintain the supply of essential commodities, and the industry struggles to keep the show going.

The outbreak has created new challenges across sectors, with start-ups, particularly those in the health space, bearing the brunt of the disruption caused by the 21-day lockdown.

Shutdown: A logistical nightmare

Healthcare start-ups, which were building their foundation on the back of the booming market, suddenly found themselves entangled in a logistical nightmare as the government announced the mandatory shutdown to counter the rapidly increasing infection.  Vivek Tiwari, Founder, and CEO, Medikabazaar, which delivers essential medical supplies to healthcare facilities, said, “There is a huge gap in demand and timely supply and we are putting up a robust and large scale supply chain infrastructure to address this issue.”

Several start-ups have been hit by a lack of labour force in warehouses as the lockdown set off migrations of workers.

Several start-ups have been hit by a lack of labour force in warehouses as the lockdown set off migrations of workers. Meanwhile, the timely delivery of goods has been a challenge owing to discrepancies between government directives and its local implementation. PharmEasy, an online pharmacy, said that while demand is high, supply is a major issue and if the lockdown continues, manufacturing units will also be affected which will further lead to supply constraints.

International collaborations, procurement hit

While the pharmaceutical companies are witnessing a spike in demand for sanitisers, hand wash, and masks, another growing demand is that of ventilators. Gautam Khanna, CEO, P D Hinduja hospital said that there has been a spurt in the demand for ventilators, since additional machines are required for the isolation ICUs for Covid-19 patients, over and above the existing ventilators. “Several Indian start-ups are coming up with Indigenous cost-effective ventilators, which looks promising but their quality and efficacy needs to be validated,” he added.

Despite the growing demand, the production and supply of the ventilator, required for artificial respiration of critical patients, has been hit due to international shutdowns. “We have been partially successful on the international front. With the present situation in Italy, Spain and the US, it is extremely difficult to source them from overseas. Ventilators, Test Kits are crucial in the next phase, so we are constantly exerting ourselves for it,” the Medikabazaar CEO said.

The pandemic is going to put back focus on the healthcare system neglected by governments across the world. PTI

Virus to cast a shadow on fundings

A major source of growth for start-ups is the various levels of funding they receive from investors domestic and overseas. The virus has now cast a shadow on fundings as most of Europe and the US have been badly hit, prohibiting movement and foreign travel. This has choked the potential investment, which was being expected in the sector.  Speaking to Business Standard, Dhaval Shah, Founder, PharmEasy said, “The fundraising environment will be bad and it will take at least 10-12 months to normalise for the healthcare sector before new investments pour in. Early-stage investments are already taking a beating and survival will be a key challenge for start-ups across the board.”

Speaking on similar lines, Vikram  Vuppala , Founder & CEO, NephroPlus said that the startup ecosystem in Healthcare will see very tough time in next 6 - 12 months as Investors would be holding back on new investments while focusing on existing portfolio companies and that he expects 25 - 30% of healthcare startups to shut down in the coming months. He added, " we have seen a 10 per cent decrease on a daily basis due to lockdown impacting travel arrangements of our patients across the Country. Hopefully this will become better in next few weeks once travel restrictions become manageable."

A medical worker wearing PPE attends to a patient in the intensive care unit in Wuhan | AP

Changing strategies in times of outbreak

The coronavirus is going to shape the future of the sector in the long term affecting the very nature of start-up operation as remote access becomes the new norm. The lockdown has forced companies to shift operation on work from home mode, which has emerged as a major lesson for start-ups, likely to push them on a path of operating from remote locations with the available resources. Shah said that daily operations on work from home basis were unheard about three months back but it is a new reality. “We are at peak productivity and companies have figured out a way to work remotely, these are tough times and we have figured out a way to move forward. So, innovation is happening and it is going to change the way in which start-ups work,” he added.

An unpredictable future

The pandemic is going to put back focus on the healthcare system neglected by governments across the world. It is testing the strength of the Indian healthcare system, which is combatting the pandemic on an Epidemics Act framed way back in 1897. Healthcare professions hope that once the dust settles the pandemic will bring about a long-awaited revamp in the sector.

A Sri Lankan fire brigade person disinfects his colleagues after they assisted transporting the coffin of a person who died not because of the new virus during a curfew in Colombo, Sri Lanka. Photo: PTI

The infection has wreaked havoc on six continents nearly four months after it was first detected in a Chinese province. More than 65,000 people have died from the deadly respiratory illness and over a million have tested positive worldwide as global economy reels under its impact.