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BFD Expert Voices - Health Tech Deals

BFD Expert Voices

Virtual medical training startup Stepful raised $7.5 million in seed funding, CEO Carl Madi tells Erin exclusively.

Why it matters: Pandemic-era layoffs in other industries and a current health care worker shortage create a perfect storm for a company like Stepful to thrive.

Details: Reach Capital led the round and Y Combinator, EO Ventures and Company Ventures joined.

Funds will be used to launch new programs for pharmacy and ultrasound technicians and to hone its use of AI to support students with resume building and content generation.

"This explosion of digital health companies comes with more of a focus on clinicians operating at the top of their license," Reach Capital partner Chian Gong tells Axios. "That means we’re going to have much greater demand for this type of talent going forward."

Madi, formerly a general manager at cleaning startup Handy, expects Stepful to raise a Series A sometime in 2024.

How it works: New York City-based Stepful offers programs targeted at people in underserved communities that last on average four months and lead to an average income boost of 25%, says Madi.

The company's mobile-first approach involves short videos, group projects, simulations, and community learning modules.

Most programs are one-quarter to one-third the cost of traditional in-person educational offerings, per Madi.

Stepful has also begun partnering with health systems to help them fill critical roles and offers them what it calls "employability scores" on each candidate based on attendance, communication and assignment completion.

By the numbers: Of the 1,000 students Stepful has graduated so far, 93% are women, 90% are Black or Latinx, and 88% are from low-income backgrounds.

"Our teachers are people of color as well as the people creating the content," Madi says.

Flashback: As a general manager at a cleaning service startup, Madi had a front-row seat to the impact of pandemic-era layoffs.

He founded Stepful to train those very workers to help fill gaps in the booming health care market.

1 big thing: Stepful raises $8M to train new health care workers

Health care staffing shortages have drawn venture capitalists' attention to a number of companies offering to fill the gaps. 

Tech-enabled health care staffing company ShiftKey in January raised $300 million at a $2 billion valuation.

Iris Telehealth, a telepsychiatry staffing company that matches providers with clinics, last spring collected $40 million in Series B capital.

Health care career marketplace Incredible Health last summer pulled in $80 million in Series B funding at a $1.65 billion valuation.

2. State of play: Health care staffing 

Illustration of a person retrieving a newspaper titled "State of Play" from a mailbox.

Patient intake and tracking startup Florence is acquiring asynchronous telehealth company Zipnosis from Bright Health (BHG: NYSE) in an all-cash deal, CEO Aniq Rahman tells Axios' Claire Rychlewski exclusively.

Why it's the BFD: Corporate divestitures continue to provide fruitful acquisition opportunities for strategic buyers in a strained deal market.

What's next: After Florence digests this acquisition, Rahman says he sees a potential opportunity to acquire similar companies serving other sites of care.

"I think there are going to be opportunities to strengthen what we're doing, especially as it relates to reaching patients before or after their emergency medicine journey," says Rahman.

At just 70 employees, Florence doesn't necessarily have the corporate development resources that a larger tech player might, he says.

But it's a good time to be a well-capitalized buyer, particularly as startups struggle for funding and public players prune their business lines, he adds.

Catch up fast: Florence debuted this year with a whopping $20 million seed led by Thrive Capital, GV and Salesforce Ventures, Axios reported in March.

What they're saying: "We actually had an initiative internally to build something that was very similar to Zipnosis," Rahman says.

"When we got further down the path, we realized, 'Hey, this is a really interesting asset. We should see if we could bring some of it in-house,'" he adds.

Florence reached out directly to insurtech Bright Health to pursue Zipnosis, Rahman says, declining to disclose additional details about the transaction.

How it works: Florence offers health systems digital intake and tracking tools that help patients update their clinical information, fill prescriptions, initiate self-discharge, and book follow-up visits.

Florence charges health systems for its subscription-based service, which is tiered based on patient volume.

Zipnosis offers its white-labeled asynchronous telemedicine, and the combined entity serves more than 50 health systems.

Between the lines: Bright Health only owned Zipnosis for two years, acquiring the business from its venture backers for about $50 million in March 2021, per an SEC filing.

Tiger Global-backed Bright Health went public shortly thereafter at a dizzying $11.2 billion valuation — but like other high-flyers of the 2021 funding frenzy, the company struggled to chart a path to profitability.

Bright Health was staring down bankruptcy as of March, and this week finalized a reverse stock split to raise its share price in order to meet NYSE's threshold.

The intrigue: Last month, Bright Health announced plans to sell its Medicare Advantage health plan in California, spelling the end of Bright Health's tenure as an insurer.

💭 Claire's thought bubble: Bright Health is rebranding itself as a "consumer care delivery" company, which is somewhat incongruent with the decision to sell one of its care delivery assets.

The big picture: For its part, Florence is growing but focused on maintaining longevity in the markets it serves, Rahman says, pointing to its recruiting efforts as a differentiator.

"When we're selling to enterprise health systems, they want to make sure that if they're doing a deal with an early-stage company that that company is going to be around — especially if that's mission-critical software that's being deployed in their emergency room," he says.

Florence debuted this year with a whopping $20 million seed

3. The BFD: Florence acquires Zipnosis from Bright Health

Illustration of a hundred dollar bill puzzle with pieces missing out of the center in the shape of a red cross

• Thrive Health Tech, a Nashville-based health care tech startup raised a $7m round of funding, led by Frist Cressey Ventures, CVS Health Ventures, 25m Health, Shields Health Innovations and Winter Street Ventures. https://axios.link/3WA39Zs

4. Deals o' the day

• Thyme Care named former SVP of business development at U.S. Renal Care Julia Ivanova SVP of growth and value-based partnerships.

• Pager named former president of diagnostics at DispatchHealth Dave Dookeeram chief operating officer.

• Jet Health named former CEO at Providence Care, Larry Nabb, CEO.

• OneMedNet named former VP of cloud solutions at Change Health Aaron Green president.

5. It's Personnel

🏥 Some states encourage hospital mergers, while feds cast wary eye — Axios

🚑 As deadlines loom, SPACs strike pacts with health firms — Bloomberg                                  

6. Your daily dose

Illustration of a prescription with a handwritten note saying "daily dose."

It's the halfway point of the week, Health Techies!

Situational awareness: First Citizens Bancshares laid off just under 500 Silicon Valley Bank employees, two months after buying the failed lender, Axios' Dan Primack scoops.

🇮🇹 Aaron is heading to Florence, the northern countryside of Tuscany and Bologna, to drink all the wine and eat all the pasta and gelato. 

🫶 Thanks for reading, and thanks to newsletter editor Claire Rychlewski and copy editor Mickey Meece. Please ask your colleagues, friends and family to sign up.

May 24, 2023

1 big thing: Stepful raises $8M to train new health care workers