July 12, 2022
It's Tuesday, Health Tech enthusiasts.
Situational awareness: We recently saw the first and only health tech IPO of the year in Heart Test Laboratories (Nasdaq: HSCS), a Southlake, Texas-based medical device company using AI to boost ECGs. (There was also the Excelera SPAC.)
- Any we missed? Are any others coming? Tell us.
1 big thing: Fold Health tucks in $6M for primary care tech
As digital health enjoys its Shopify moment, primary care-focused tech developer Fold Health raises $6 million in seed funding from former athenahealth CEO Jonathan Bush and others, Fold CEO Abhi Gupta tells Erin exclusively.
Why it matters: Gone are the days when digital health entrepreneurs were forced to cobble together a series of tenuous point solutions to enable their tools — or at least that's the reality Gupta and a series of other founders hope to create.
- But for now, "the holes in health care are so huge you can see them from space," Gupta tells Erin.
Details: Other participants in Fold's seed round include Skyflow CEO Anshu Sharma, Saama Technologies CEO Vivek Sharma, and VC partners Anand Chandrasekaran of General Catalyst, Mohanjit Jolly of Iron Pillar and Gokul Rajaram of Firebolt Ventures.
- Gupta and co-founder Ram Sahasranam also put $1 million each into the company.
Context: The era of digital health enablement has begun — and several emerging startups are vying to be the technological infrastructure for health care companies offering primary and specialty care and health plan administration.
- Capable Health, developer of a software platform for virtual care startups, raised $6 million in seed funding in May.
- Flume Health, which helps organizations build personalized member health plans, raised $30 million in March.
- Tebra, a clinic-facing medical software provider whose tools are the most similar in nature to Fold's, raised $72 million earlier this month.
How it works: Fold charges primary care clinics a per-member per-month fee and offers tools for patient onboarding, marketing, messaging and billing.
- Its operating system can be layered atop existing medical record systems, member management tools and billing platforms.
- Current customers include Zócalo Health, a primary care startup for the Latino community founded by former Amazon Care leader Erik Cardenas.
Flashback: Years ago, Gupta and Bush had a fateful meeting at a health care conference in Bangalore that would set the stage for a series of future deals.
- At the time, Bush was leading medical IT giant athenahealth; Gupta was building electronic health record startup Praxify Technologies, which Bush's company would acquire in 2017 for $63 million.
- "He took my iPad, started showing it to other people, and said, 'This is what should be happening at athenahealth!'" Gupta recalls.
- Fast-forward to now, and Bush is developing his own digital health enablement startup called Zus Health, while Gupta builds Fold. (Each is an investor in the other's company.)
What they're saying: Investors and entrepreneurs tell Erin companies such as Fold and Capable have a chance to become the dominant enablers of their industry as health care catches up to more mature sectors like fintech.
- Such businesses "have the opportunity to become the Stripe, AWS, Shopify, etc. for digital health," Lux Capital partner Deena Shakir told Erin earlier this summer.
What's next: As the competition among infrastructure companies heats up, rivalries could begin to form. But for now, investors say there's plenty of white space for new and existing companies to build.
- "This is not a winner-take-all category," Jolly tells Erin. "The market is absolutely massive, and people are clamoring for these solutions."
💭 Our thought bubble: As more investor dollars funnel into digital health enablement, the sector could soon find itself consolidating. (Fold competitor Tebra told Erin last week it plans to use recently raised funding for deals.)