WSJ: Investors Bankroll Virtual-Care Startup 98point6 With $118 Million
Investors are bankrolling virtual primary-care startup 98point6 Inc. with $118 million, betting on a company whose business has surged this year along with rising demand for telehealth services.
The novel coronavirus pandemic has accelerated the adoption of digital health services, including telehealth. A September survey of 1,500 consumers in Chicago, Minneapolis, and Seattle by Chicago-based consulting firm West Monroe Partners LLC found that respondents’ use of telehealth in the past six months had nearly doubled, rising to 49% from 27% before the pandemic.
Nathan Ray, head of West Monroe’s health-care mergers and acquisitions practice, said the telehealth trend is sustainable because patients are growing more accustomed to having medical care that can be easily accessed through digital technology.
Telehealth also can help lower costs by making it easier for patients to engage in preventive care, said Vignesh Ravikumar, a principal with Sierra Ventures. Sierra backed LMND Medical Group Inc., a telehealth company doing business as Lemonaid Health.
In addition to Lemonaid, several other telehealth companies deliver a variety of medical services, including startups such as Hims Inc., which recently struck a deal to go public through a special-purpose acquisition company, and larger companies such as publicly-traded Teladoc Health Inc.
Seattle-based 98point6’s business was growing before the pandemic. The company, which provides text-based primary-care services through memberships, had 824,000 members coming into this year, with most of them signing on in the last two months of 2019, Chief Executive Robbie Cape said. Now the company has three million members, he said.
Mr. Cape gained consumer-technology experience at Microsoft Corp., which he joined right out of college, and later as founder and CEO of Cozi Group Inc., whose app is designed to help families handle matters such as shopping, meal planning, and to-do lists.
He co-founded 98point6 in 2015 to use his consumer-technology experience to make primary care more affordable and accessible, he said.
“I wanted to apply those skills to something that was going to have a global, meaningful impact, and the No. 1 place to direct that was health care,” Mr. Cape said.
98point6 provides services through a team of doctors and uses tools such as artificial intelligence. Patients describe their symptoms to its automated assistant, which deciphers the complaint. That information equips its physicians with the information they can use to start their assessment, according to Mr. Cape.
Part of 98point6’s appeal is the efficiency gained for its doctors because of the company’s technology, said Michael J. Farello, a managing partner with L Catterton’s Growth Fund, which led this financing along with Activant Capital.
Physicians and patients can escalate encounters to audio or video conversations, and 98point6 doctors urge people to seek in-person care when needed, such as for a physical or for procedures such as a colonoscopy, Mr. Cape said.
Although many health-care executives and investors speak of a need to decrease the utilization of health services as a means of lowering health-care costs, 98point6 encourages members to use its service as much as they need, believing that increased engagement with primary-care doctors will ultimately take costs out of the system as patients deal with health concerns earlier and more actively, according to Mr. Cape.
“We hope utilization is high,” said Activant founder and Partner Steven Sarracino. “If utilization is high, then it’s lowering the general cost and strain on our entire system. It is a contrarian.”
Half of 98point6’s three million members are from self-insured companies, Mr. Cape said. Most of the rest get 98point6 services through their health insurer. 98point6 in September also disclosed a deal with warehouse retailer Sam’s Club to offer subscriptions to its services. The company also has a small direct-to-consumer business, Mr. Cape said.
This financing, which brings 98point6’s total equity funding to $247 million, will go primarily toward research and development, Mr. Cape said. The company, for example, seeks ways to deepen its engagement with patients so it can build long-term relationships with them, he said.
In addition to new investors L Catterton and Activant, 98point6 raised this funding from investors such as return backer Goldman Sachs Group Inc.
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