Celesta Capital led the most recent financing round in 5C Network. Here's why we invested in the company.

India has a fragmented healthcare system. Lacking coordinated care continuums, patients zigzag between different stakeholders (general practitioners, specialists, diagnostics providers, point of care centers, etc.). The result is, often, poor quality of care. Patients must store and maintain their own clinical records like scans, doctors' notes, prescriptions and test reports. This lack of longitudinal clinical records exacerbates the quality-of-care issue. 

But, this fragmentation also presents opportunities to invest in companies focused on:

• Elevating quality of care
• Managing longitudinal health data
• Improving patient outcomes

These companies will capture a large share of health spending and be attractive investments going forward. Over the last 10 years, $7.6B VC invested in HealthTech in India  has laid the ground for innovative Healthtech companies to be far more capital efficient as well.  

Prior VC funding in HealthTech in India focused on customer aggregation and establishing new service delivery paradigms (using tech). Of the $7.6B invested in Healthtech between 2012 and 2022, $4.3B was in online booking platforms. Alongside, IT for the health ecosystem has had ~$2B in funding.

The first generation of HealthTech companies have established new paradigms. The patient experience–from provider discovery, booking, prescription and transactions–is increasingly digital.

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Yet, the reliance on hyperlocal providers (for care and diagnostics) is a challenge. Facilitating fully digital transactions for prescriptions, and bookings is relatively easy. But, India is far from facilitating similar experiences for diagnostics critical to patient outcomes.

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Consumer demand for diagnostic imaging is largely hyperlocal. At over 40K independent diagnostic imaging centers, 95% of scans are referrals by local physicians and 5% are walk-ins. There exists a diagnostic imaging center every 2.5 sq. km in Tier 1 cities and 1 every 8.6 sq. km in Tier 2+ cities.

For example, a patient must book a scan at a local diagnostic imaging center at a preferred time and date. To do this at scale, the booking platform would need to know availability, pricing and be able to transact digitally with the center. For a cohesive online experience, the reports must also be digitally delivered—to both the patient and the physician. Achieving this, requires integration into the clinical workflow at individual centers—none of which are on a unified system.

Partnering with the 40K+ hyperlocal centers is not viable for either booking platforms or insurers. Ensuring quality standards (given the nature of imaging) across thousands of such partners adds to their complexity. Yet, this line of business can unlock $5B in transaction value (with 300M+ scans per year in India) at favorable margins. Not only is the diagnostics business lucrative to "own customer data," but also from a margin/throughput standpoint.

In comparison, the domestic (at home) pharmaceutical market is ~$30B with a $5 AOV (i.e. 6B prescriptions!) and ~5% margins.

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From Tele-Radiology to Diagnostics-as-a-Service

We met Kalyan and his team at 5C Network in 2021. At that point, they had built India's largest tele-radiology player with <$2M in funding! They were working with 1K+ diagnostic imaging centers and processing ~5K scans per day (0.6% of scans in India). They had reported on 4.5M cumulative scans since inception.

5C's proprietary technology platform, Prodigi, enables this transaction velocity while emphasizing QoS & TAT. The diagnostic centers submit scans & other patient data on Prodigi for 5C's team of radiologists to report on. Raw data of scans is automatically captured via integration into the machines. Prodigi matches the scans to radiologists based on their individual speciality. The 500+ radiologists use Prodigi daily to access, analyze and report on these scans. The diagnostic centers receive the reports within 40 minutes on average.

5C's team, leveraging Prodigi, has handled 10K scans per day during Covid without compromising QoS or TAT.

Beyond the operational technology, Prodigi is a powerful AI platform for healthcare. It enables deploying disease-specific machine learning models to supplement radiologists' efforts. The velocity of diagnostic images on 5C make it a unique rapidly-growing database for such AI. The 4.5M+ radiologist reported scans on 5C are also a valuable dataset for building new AI for diagnostics.

The 5C team is now building on its market position and partnerships. Working with 2K+ hospitals and diagnostics centers, the team is targeting a $5B opportunity to fulfill diagnostic imaging for these patient hubs.

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Strong Demand and Endorsements

In our due diligence, patient aggregators (insurance companies, managed care providers and digital aggregators) were unanimous in their desire to partner with 5C. They sought to scale their diagnostic imaging booking business without Capex overhead. In fact, 5C has already commenced several such partnerships. Tata 1mg's investment is a strong endorsement for the company and underscores the thesis.

Alongside, diagnostic imaging centers have been appreciative of 5C's QoS and TAT. This is further evidenced by the company's revenue growth from existing customers. Recognizing the potential for increased Capex utilization, they are excited to expand their partnership with 5C.

Existing 5C investors Unitus and Axilor add further credence. They share the vision and have consistently contributed to 5C's growth.

5C can emerge as the leading diagnostic-as-a-service platform that large patient aggregators (insurance companies, managed care providers and digital aggregators) will partner with.

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Executing on the Vision

Over the last year, Kalyan and his team at 5C have continued to demonstrate their ability to execute. They have now partnered with 1600+ diagnostic centers. 40% of the new centers are aligned to hyperlocal demand from Tata 1mg and other patient aggregators.

In the first half of the year, 5C's scans per month grew at a CAGR of nearly 80%. A large quantum of growth has been from deepening engagements with existing partners—65% annual growth rate for scans per client per month. The team is setting up technology, operations, processes and standards for the new business.

We believe 5C is addressing a critical gap in healthcare. The company is well poised to become the leading diagnostic-as-a-service platform. This will, in turn, result in longitudinal health records, better quality of care, and improved patient outcomes.