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BFD Expert Voices - Health Tech Deals

BFD Expert Voices

Paraclete, maker of a virtual mental wellness offering for employers, raised $1.5 million in pre-seed funding from Sovereign's Capital and several individual investors, the company's founder, Vineet Rajan, tells Erin exclusively.

Why it matters: Behavioral health is a sizzling subsector of the digital health market, but Highland, Maryland-based Paraclete isn't designed for people with depression, ADHD or anxiety, the most common issues. 

Rather, the company's product is for people experiencing everyday life stresses and tumultuous life events, such as the death of a loved one or a divorce, Rajan tells Erin.

"This is for all those people in the middle — people who aren't necessarily experiencing major depressive disorder or an anxiety disorder but who just need support navigating life challenges," he says.

Details: Rajan, a Marine Corps veteran, and William Norvell, a former venture partner at Sovereign's Capital, founded Paraclete last September.

The pair are calling Paraclete's offering "SoulCare" because it links a company's employees with guides — including licensed professional counselors and personal coaches — who can speak confidentially with them about their needs.

How it works: Employees at member companies are matched with a guide based on the preferences they list in a brief, virtual onboarding process.

Individuals can meet virtually with their guide as many times as they'd like. Options include video chats and texts.

If and when users show symptoms consistent with a more acute condition like major depression, their guide is instructed to inform them about other resources better suited to their needs.

Paraclete recently inked a deal with its first public client, the Moreland School District, which operates five elementary schools and two middle schools in San Jose, California.

"The principal and the janitor have access to the same exact support, and that matters a lot to me," Rajan says.

What's next: Paraclete plans to sign more school districts as well as other employers.

1 big thing: $1.5M to support the middle

Illustration of a brain-shaped maze with the correct path highlighted.

After nearly a decade building the virtual care offering at Google life science spinout Verily, where he helped lead the company's work on a diabetes-focused platform, Stanis has raised $22.6 million in Series A funding for a new venture called Story Health, he tells Erin exclusively.

Why it matters: Saratoga, California-based Story Health is a virtual care startup focused on heart conditions, and its fresh round was co-led by B Capital Group and Northpond Ventures.

Between the lines: Story is among several remote patient monitoring (RPM) startups focused on extending care for severe conditions into the home.

This hot subsector of health tech is attracting ever higher amounts of investor interest on the premise that it will cut costs and boost quality.

Context: Currently focused on heart conditions, Story aims to expand into other issues that are treatable with virtual coaching and remote monitoring.

"Specialty care is facing capacity challenges, and any way to streamline efforts to get patients the care they need was interesting to us," B Capital general partner Karen Page tells Erin. "And going into cardiology as a wedge into that care area made a lot of sense."

The approach is similar to the one taken by several other other Silicon Valley-based digital health startups, including:

Athelas, which began with immunocompromised patients and earlier this month raised $132 million.

Livongo, which got its start in diabetes and was acquired by Teladoc in 2020 for $18.5 billion.

How it works: Like several other RPM companies, Story Health partners with health systems to help patients with severe illness return home without disrupting their care.

Integrating with electronic health records systems Epic and Cerner allows Story to crunch patient data, such as vital signs and medications, and help guide clinicians' decisions about their care.

Story's RPM tools include connected blood pressure cuffs, heart rate monitors and weight scales.

The startup plans to expand into other heart-related illnesses later this year, such as aortic aneurysm and dyslipidemia.

The company is currently enrolling patients in a clinical trial focused on studying its effectiveness in heart failure.

Details: New investor LRVHealth also joined Story's Series A round, alongside existing backers Define Ventures and General Catalyst.

Founded in 2020, Story has now raised a total of roughly $27 million.

The company was last valued at about $88 million, according to PitchBook.

Nikhil Roy, formerly a product manager at Verily, co-founded Story and is chief product officer; Sutter Health cardiologist Ashul Govil is chief medical officer.

What they're saying: The digital health consolidation wave that's seen mergers of employer-facing companies like Teladoc and Livongo hasn't come for startups that partner with health systems yet. But it will, experts tell Erin.

"Is a health system going to want to have contracts with company A for diabetes, company B for respiratory disease, and company C for something else?" Mintu Turakhia, a cardiac electrophysiologist and the director of Stanford's Center for Digital Health, tells Erin. 

"I think we’re in the first wave of disease management," he adds, suggesting that the second phase will see consolidation that allows for disease management across multiple conditions. 

One fun thing: Story's name comes from the idea that quality care requires an understanding of a patients' complete health (hi)story, beyond what happens in episodic visits to the hospital, clinic or emergency room.

"It's not just what [patients] tell you in one doctor's visit, but instead what’s happening in their lives day by day," Stanis tells Erin.

2. The BFD: Ex-Googler gets $23M for heart care

Illustration of a one hundred dollar bill with a portrait of a heart.

The shift towards value-based care might not be easy, but it will be worthwhile, at least according to the authors of a recent research report from Cowen, who write: "We firmly believe that the VBC train has 'left the station.'"

Why it matters: Amid the transition, digital health investors should seek out startups focused on quality not quantity, the report says.

Context: U.S. health care spending is a morass of misaligned incentives and waste, and VBC models can help correct the problem by shifting resources for better care coordination, boosting labor productivity and improving quality of life, the authors note.

"In this new epoch, the most significant investment opportunities will be found in companies that provide higher value to entitlement programs, employers and payers," the authors write.

Yes, but: Not everyone wins in a VBC model, according to the report, which spotlights the impact on hospitals.

"Over the long term, the hospital industry stands to become the largest loser, as most VBC strategies aim to reduce hospital admissions, emergency room visits and inpatient procedures in favor of outpatient procedures," the report says.

By the numbers: The report's authors expect VBC models to drive higher health care revenue growth rates as a result of acquisitions and the shift from fee-for-service (FFS) payment models to population health-based streams. They provide the following figures:

Expected EBITDA margins with scaled VBC models: 10-15%.

Details: Published Feb. 22, the report is titled "Value-Based Care: The World Turned Upside Down."

Its authors are Cowen analysts Gary Taylor, Eric Assaraf, Charles Rhyee and Rick Weissenstein. 

What's next: The authors foresee large payers, including CVS, Humana and UnitedHealth Group, boosting their VBC investments. Other payers would then follow in their footsteps.

"We believe the most successful VBC companies will be focused on true care-delivery redesign over coding arbitrage, acquisition roll-up or loose affiliation of physicians," they note.

3. Easy as V-B-C

Marking the latest such deal behind the world's transition to value-based care, Revelstoke Capital Partners has made a strategic investment in ClareMedica Health Partners.

Details: Revelstoke is joining BPOC as an investor in the south Florida-focused provider of value-based primary care for Medicare Advantage members. 

Chicago's BPOC has owned ClareMedica since 2019. 

SVB Leerink advised Revelstoke, while Houlihan Lokey worked with ClareMedica and BPOC.

Be smart: Revelstoke is knowledgable when it comes to Florida-based VBC, having previously invested in Tampa's DataLink Software. 

4. Revelstoke joins primary care's VBC deal flurry 

Somatus, a value-based kidney care company, raised $325m in a Series E round led by Wellington Management with support from RA Capital Management, Fidelity Management and others. Existing backers Anthem, Deerfield Management Company, Flare Capital Partners, Inova Health System Optum Ventures and others also supported the round, bringing Somatus' valuation to over $2.5 billion. https://somatus.com 

Scipher Medicine, a Waltham, Massachusetts-based precision immunology company, raised $110m. Cowen Healthcare Investments led the round, with participation from new investors Neuberger Berman, Hitachi Ventures, Laurion Capital and Monashee Investment Management. https://www.sciphermedicine.com/

Story Health, a California-based virtual specialty care program focused on cardiology, raised $22.6m in a Series A round co-led by B Capital and Northpond Ventures with support from LRVHealth and existing backers Define Ventures and General Catalyst. https://www.storyhealth.com/

Paraclete, a Maryland-based employer-facing wellness startup that virtually connects employees to guides, raised $1.5m in pre-seed funding from Sovereign's Capital and several individual investors. 

ClareMedica Health Partners, a provider of value-based primary care, received an investment from Revelstoke Capital Partners. https://www.claremedica.com/

Illumifin, an insurance third-party administration and software provider, agreed to acquire LTCG, a long-term care insurance company. Illumifin is backed by Abry Partners. https://www.ltcg.com/

Definitive Healthcare Corp. (Nasdaq: DH), a health care commercial intelligence company, acquired Analytical Wizards, a supplier of market analytics for life sciences companies. https://www.definitivehc.com 

WellSky, a health care technology company, bought TapCloud, a virtual patient engagement business. Leonard Green and TPG own WellSky. https://www.tapcloud.com/

Imprivata, a Lexington, Massachusetts-based health care IT security company, agreed to acquire SecureLink, a maker of networking, security and data center infrastructure software. https://www.imprivata.com

5. Deals o' the day

Maven Clinic named Dawn Godbolt director of health equity. Godbolt was previously policy director at the National Birth Equity Collaborative.

Jasper Health named Carrie Hatfield chief growth officer. Hatfield was previously the lead for strategic health plan partnerships at Fitbit within Google.

6. It's personnel

🚨 Situational awareness: Russian President Vladimir Putin launched attacks across Ukraine last night. Follow Axios' live updates.

🏖️ Sarah is back on the beat today after a few days off in Mexico, returning refreshed and a little bit bronzed (and a little bit burnt).

❤️ Thanks for reading Axios Pro Health Tech! Please ask your friends, colleagues, and family members to sign up.

February 24, 2022

1 big thing: $1.5M to support the middle