Welltok Raises $25M More, Takes Aim at $2.7T Healthcare Industry

You’ve got a fitness tracker on your wrist and a phone loaded with health apps in your pocket. You know all about the latest technology that can help you stay—or get—in shape, and you’re pretty sure you know all the names of the biggest startups (and giant companies like Nike) trying to sell you new apps or gadgets.

Well, think again. There’s a Denver-based company named Welltok that quietly has raised more than $75 million with the goal of changing how all those apps and devices connect to each other. But Welltok’s larger ambition is to connect consumers, healthcare providers, health insurance companies, and employers to one another to improve health outcomes—and save everyone huge amounts of money along the way.

That vision, along with a management team that has built and led billion-dollar healthcare and IT companies, has big-time VC firms like Bessemer Venture Partners and New Enterprise Associates betting on Welltok. They think it is a company poised to capitalize on the revolution taking place in healthcare as new technology empowers consumers and new regulations resulting from Obamacare change the rules for insurers and providers.

Welltok announced today it has raised an additional $25 million in a growth equity round led by Bessemer. The new funds bring the total amount the five-year-old company has raised to more than $75 million. That number is expected to grow soon, as Welltok plans to raise an additional $12 million before the round closes later this year.

Welltok is one of many health and wellness companies trying to shape and profit from “the industry’s seismic shift to get consumers more involved in optimizing their health,” chairman and CEO Jeff Margolis said. The company starts by focusing on generally healthy people, as opposed to individuals experiencing an acute illness or medical crisis, although Welltok’s software can be used to help manage chronic conditions.

Welltok is developing a product called CafeWell, which it describes as a health optimization platform-as-a-service. Unlike most so-called software platforms, it probably deserves the name. CafeWell is based in the cloud and collects and organizes data from popular health apps like MapMyFitness and wearable activity trackers like FitBit. It has been designed so it will be able to connect with additional apps, devices, and systems as they are developed, Margolis said.

CafeWell takes all that data to help users create a “personal health itinerary” with specific goals and recommendations that can maintain or improve their health. But it does more than just make recommendations: the current version has additional features like social networks, games and challenges, educational content, and access to coaches to help users stay on track. The program also can give users rewards like gift cards for actually going through with their plans and hitting their targets.

Listing CafeWell’s features makes Welltok sound like any number of startups developing yet more consumer-facing wellness apps. But it’s different, Margolis said, and when he explains Welltok’s business model, you realize he’s right.

That’s because CafeWell’s end users are not really Welltok’s customers. The company’s business model is to sell software to health insurance plans, providers, and what are known in the healthcare industry as population managers, Margolis said. They will pay for Welltok and make CafeWell and related products available for their clients.

Collectively, Welltok’s potential customers are responsible for administrating health plans, setting rates, and now monitoring the quality of care clients receive. They have a big financial stake in keeping costs low by keeping people healthy, especially now that Obamacare has changed the system so that providers are reimbursed based on results and lose money for negative outcomes like hospital readmittances.

Health providers, insurers, and managers are also the ones in charge of paying the bills for the $2.7 trillion U.S. healthcare industry. So instead of paying a couple hundred bucks a year like consumers could, they have many thousands or even millions to spend.

Stephen Kraus, the Bessemer partner who will join Welltok’s board, said that getting just a sliver of that market could yield … Next Page »

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