Qiu Ciguan
At the end of November last year, actor Gao Yixiang suddenly collapsed while running on the set of a TV program and died of cardiac arrest. But before that, in March, a man in his fifties suffered a cardiac arrest on the basketball court at the Dongdan Stadium in Beijing. Fortunately, doctors from the Union Hospital were playing badminton on the next court. Six doctors immediately rushed to the scene and performed chest compressions and AED external defibrillation on the man. Then the man was sent to Tongren Hospital to receive follow-up treatment, with the death of the brush.
The same cardiac arrest, a person regrettably died, a successful survival. In addition to the doctor's timely action, it is also indispensable to the Dongdan Sports Pavilion equipped with an AED (automated external defibrillator), which can instantly stimulate the heart in the form of an electric shock to restore its normal beating state. For cardiac arrest, there is a "golden four minutes" in first aid, beyond which irreversible damage to the brain occurs. Meanwhile, the success rate of survival for simple cardiopulmonary resuscitation (CPR) is only 10%, but if an AED is involved at an early stage, the success rate will reach 74%. The role of the AED is even more indispensable.
The AED provider at the Dongdan Stadium is a Shanghai-based company called Horn Medical. Horn Medical entered the public first aid field in 2015. For Horn Medical, this could be a market with huge potential. How big is the market potential?
The above is just a difference in the number of AEDs put in, we also have to consider the popularization of first aid knowledge and skills, the construction of public first aid system and personnel, and the improvement of relevant laws and regulations. We can say that the development of this field in China is still in the primary stage.
Since the market potential is huge, why don't we see explosive growth in this area? According to public information, Hone Medical completed an angel round of financing in 2015, and has since received a Pre-A round of financing from YUMA Capital in 2019. First Response is another domestic company in the field of first aid, which did a round of financing in 2015 by Yuyue Science Investment and Tencent Investment. There is also a company called Cinnabon First Aid, which was founded in 2015 and has no financing information. The scale of financing in this area is relatively small, only in the tens of millions of dollars.
What are the difficulties?
In fact, companies and investors can see the potential of this market, but the market is just starting out and there are many difficulties.
Before companies can effectively deliver products and services related to first aid, it is important to build the market infrastructure.
The Chinese saying, "If you want to get rich, you have to build a road first," reflects the importance of infrastructure, and the infrastructure of the first aid field includes the cultivation of consumer awareness, the construction of a public first aid system, and the introduction of supporting laws and regulations.
For Hone Health, the beneficiaries of first aid products and services are different from the payers. In a marathon, the beneficiary is the runner who participates in the race, while the payer is the race organizer or local government. In the Beijing Dongdan rescue incident mentioned above, the beneficiary was the man who suffered a sudden cardiac arrest, while the payer, who was also the donor, was a Beijing first aid volunteer. The beneficiaries are wide-ranging and basically open to the public, while the payers are usually governments, corporations, donor organizations and individuals.
This is different from ordinary commodities. For example, while the smartphone market is huge, the payers and beneficiaries overlap.
The lack of overlap in the public first aid space leaves companies with two things to do: on the one hand, find organizations and individuals willing to pay; and on the other hand, raise the level of public awareness of first aid to facilitate the growth of the space.
The capital invested by a company that has completed the development of consumer awareness will ultimately have a positive spillover effect, which will help lower the barrier to entry and the cost of entry for those who come after them.
Consumer awareness is also a public good. Ultimately, the costs are borne by the initial entrants, and the benefits are enjoyed by the entire market.
Because of this phenomenon, companies and investors who enter the field at the outset are the ones who get the short end of the stick. Some people may ask: can't the public first aid be handed over to government agencies, or charitable organizations?
In fact, government agencies themselves play an important role in the formulation of industry policy and the construction of industry ecology. For example, the Singapore Civil Defense Force (SCDF) not only leads the placement of AEDs in public **** places, but also launched a mobile app to mark the geographical location of AEDs and announce sudden cardiac arrests. The SCDF also trains community first responders through its Save a Life program.
Of course, private organizations can also lead the field. For example, the Japan Emergency Medical Foundation, a first aid-related foundation established in 1991, funds research and provides education and training in the field of first aid. It has also launched the AED Map, which compiles information on the location and maintenance of AEDs from various AED manufacturers and distributors in Japan. In terms of the development cycle, it took about seven years from the beginning of AED deployment in Japan to reach 100 units "per 100,000 people". In terms of the development model, Japan relied on private participation and effective mobilization of the whole society to achieve the current result of more than 500 units per 100,000 people.
Who can break the mold?
According to the target of 100 AEDs per 100,000 people, the demand for AEDs in China is around 1.4 million units.
The difference between the reality and the goal can't be solved by relying only on the government or charitable organizations. This requires the participation of private capital . Public emergency medical care is a fairly unique industry, the development of enterprises in this field can bring more social benefits, but the enterprise is also in the early stages of development, uncertainty, relatively high risk, the current stage of the financial returns may not be able to reach the average market level. Ordinary investors who are purely concerned about the rate of return may not necessarily be willing to participate in the project because there is the problem of "return offsetting". This means that in the process of opening up a new market segment, the investor needs to make some concessions in terms of financial returns in order to achieve the expected social benefits of the market tier.
Impact investors are more likely to enter the space than traditional investors. Impact investors have a proactive intent to create positive, measurable social impact while balancing financial returns. Under certain conditions, such as advancing the public sector and laying the groundwork, impact investors are willing to sacrifice a portion of their financial return in exchange for market-level social benefits, and are therefore willing to accept lower-than-average financial rates of return.
Meng Zi said, "In today's world, who else can do it?"
For the corresponding enterprises of public first aid, it is difficult to scale up without the capital of impact investment; for impact investors, their positive intention to promote the forward movement of society in the investment on the formation of the essence of the "I am who I am". From another perspective, impact capital has an "additionality" in order to mirror the spirit of "give and take": if I don't invest, who else will? This additivity reflects the fact that impact capital has a huge role to play in new markets, and that while other types of capital are hesitant to take on more responsibility, it is going where there is a lack of capital in order to create the greatest social impact.
In many cases, when commercial capital is reluctant to enter the market because it is too risky and has too long a payback period, charitable organizations fill the gap by bringing public service giving into the market. But here the general public will ask whether impact investing is a more efficient use of capital compared to philanthropy. That is to say, for the same dollar, can the investment generate greater social benefits than the donation? In other words, how do you measure the efficiency of impact investing when both government and public interest organizations are involved in the development of the public first aid sector?
To address this, the Acumen Fund, a pioneer in impact investing, offers a program called BACO, which highlights the differences between impact investing and traditional philanthropy, using the best available charitable option as a benchmark. Impact investing has the advantage of financial leverage, corporate efficiency, and technological innovation over BACO. We can determine the "efficiency multiplier" of impact investing through the BACO ratio, which is the ratio of social benefits per unit of impact investing to BACO. For example, the Smart People Fund used the example of anti-malaria nets in Africa, where a dollar invested by its fund generated 52 times the social benefit of a BACO, i.e., a BACO ratio of 52, which demonstrates the power of the impact investor.
Overall, in the pioneering phase of the market, companies are involved in the development of infrastructure that has a public ****ancial nature, which in turn constrains the entry and development of early-stage companies. This is where the impact investor with a "can-do" spirit can be a game-changer.
(Qiu Ciguan is a professor at the Shanghai Advanced Institute of Finance at Shanghai Jiao Tong University and a renowned impact investor, and Zhang Xuhua is a researcher at the Shanghai Advanced Institute of Finance's Specialized Fund for Socially Responsible Investment)
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