Exclusive: Digital diabetes startup nets $16M

Digital diabetes startup 9am.health raised $16 million in Series A funding to start courting employers, co-CEO Frank Westermann tells Axios exclusively.

Why it matters: Showing that patients could manage their diabetes remotely served as a major test for the entire virtual care sector, and over the past decade a cadre of diabetes-focused startups has raised significant capital to address that.

Details: Venture firms 7WireVentures and Human Capital led the Series A.

• New investors StartUp Health and Leaps by Bayer also participated in the round, as did repeat backers Define Ventures and Founders Fund, bringing 9am's total capital raised to just under $20 million.

How it works: Based in San Diego, California, 9am.health launched last year and currently markets its products directly to consumers.

• It charges $25 a month for home delivery of prescription medications, treatment plans and round-the-clock access to a virtual care team that includes registered nutritionists and certified diabetes specialists.
• Users can pay an additional $15 a month to have a phlebotomist do blood draws at their home via its partnership with Scarlet Health.

Yes, but: 9am does not yet accept insurance or provide all of its users with connected blood pressure cuffs or weight scales, two things many of its competitors do.

• "There’s no doubt we’d get a better dataset if we did have these tools," says Westermann, who was diagnosed with Type 1 diabetes in 1997. "But we don’t currently see quality devices that are affordable for the populations we serve."

Flashback: Virtual care providers Livongo (now part of Teladoc Health) and Omada Health were some of the sector's early pioneers, debuting in 2008 and 2011 respectively.

• Since then, Omada, Vida Health, Virta Health and Onduo have rolled out offerings for diabetes and related conditions.

What's next: The company plans to use the funds to begin pitching its services to employers, a business strategy that's become increasingly popular among health tech companies.

• "We want to expand and we see the employer market as an interesting one," Westermann tells Axios.

Between the lines: In recent months, several digital health companies that started as direct-to-consumer businesses have expressed plans to go business-to-business, including Everly Health and Thirty Madison.

• Investors and industry observers say the B2B approach makes sense given the difficulties the DTC model presents with developing name recognition and maintaining customer loyalty.
• The employer budget is "the best budget in digital health right now," says Steven Wardell, a growth consultant to health care companies.

One fun thing: Before co-founding 9am, Westermann started another diabetes company called mySugr, which Roche acquired in 2017.

• Before that, mySugr had another potential buyer: Livongo.
• "We were outbid," says Glen Tullman, one of Livongo's founders and a partner with 7WireVentures, one of the firms leading 9am's Series A.