Why We Invested in Optimize Health


Jim Andelman


June 22, 2020

In retrospect in the era of COVID-19, investing in a startup that offers a software platform for remote patient monitoring to physician practices seems like a no-brainer.

However, even though we’re just now announcing this investment, Bonfire initially invested in Optimize Health well before this novel coronavirus secured a material position in our collective consciousness.  In fact, we were introduced to founders Jeff LeBrun and Chuks Onwuneme in November of 2019, signed a term sheet with them in December, and closed our investment in January of this year.

What is Remote Patient Monitoring (“RPM”)?  It’s quite simple really.  A person uses an Internet-connected device like a scale (or a BP cuff or a blood glucose monitor or a pulse oximeter) to take a reading at home, and that reading is delivered to their doctor’s office.  The office can then act on that reading if it’s outside the proper range, in order to help that person avoid worsening health issues.

COVID-19 has certainly provided a “tailwind” for RPM, as people seek to avoid doctors’ offices where the coronavirus might be present, and doctors themselves seek to provide excellent care while keeping themselves and their patients as safe and distanced as possible.

But the timing was right for this business even before COVID.  There have been numerous peer-reviewed studies that show how beneficial RPM is, by organizations including the Kaiser Foundation and the Mayo Clinic. Medical cost savings average $2,300 per patient per year, through the avoidance of complications and costly hospital admissions.  Multiply that by the (staggering) 150 million Americans who have conditions for which RPM is appropriate (obesity, diabetes, hypertension, COPD, behavioral health, etc.), and one sees the potential to save a staggering $345 BILLION in medical costs.  And even more importantly, consider the potential to help all of those people avoid the pain and suffering associated with those complications and hospital admissions.

So why is RPM not already a big thing?  In part because of our third party payer system here in the US.  Preventative care has a cost today in exchange for savings tomorrow.  But in many cases, by “tomorrow” that patient will have changed jobs or by some other mechanism will be covered by some other insurance plan.  So prevention gets the short end of the stick.

That changed with respect to RPM in the beginning of 2019 when Medicare, for the first time, established reimbursement for RPM.  And when Medicare decides to cover something, other health insurance companies (Cigna, UnitedHealth, Anthem, Humana, etc.) usually follow suit.  Thus, we have a great answer to the “Why Now?” question that is fundamental to seed stage startup investing.  This is a brand new market with massive potential for positive impact.

But just because doctors can get paid for something doesn’t mean it automatically happens at scale.  RPM is complicated:  you need a device that connects to a cloud software solution, you need it to be easy for patients to utilize (especially this demographic), you need it to be easy for busy physician practices to fit into their daily routines, you need to drive adherence, and you need track time and actions and jump through a bunch of other regulatory hoops to ensure that you actually get paid for your effort. It’s just too complex for practices to do manually.

Enter Optimize Health, with their complete and elegant solution for RPM, tailor-made for the outpatient setting (think of your local primary care physician).

The next question that a startup founder usually gets hit with is “Why You?”  Jeff, Chuks and team found themselves in the right place at the right time, with the right set of capabilities, to pivot into this market early last year.  The Company started as “Pillsy”, with a proprietary Internet-connected medication adherence device, that paired with a software platform that doctors could use to monitor whether their patients were taking their meds.  They had basically spent the prior two years building the exact system that one needed to enable physicians to provide RPM.  And they were canny enough to recognize the opportunity to shift focus, and brave enough to “burn the boats” and execute on that transition.

In addition, Jeff has two prior startup exits under his belt, Chuks had 20 years of software development and management experience, and the two of them had been working together for over five years.  During our evaluation period, we found them to be incredibly thoughtful, strong both tactically and strategically, unwaveringly customer-focused, super responsive, and earnest and humble. They most certainly checked the all-important “Great Founding Team” box on our Startup Scorecard (yes, we have our own Scorecard:  perhaps for another post).

After Team, the thing we tend to care about most is Customer Value Proposition.  While clearly of great benefit to patients and payers as described above, the Optimize Health solution is very importantly quite compelling to the decision-maker, which in this case is the doctor’s office.  For those who haven’t been paying attention, the traditional model for a primary care physician is becoming increasingly untenable.  In the face of declining reimbursement for typical office visits as well as increased administrative burden, general practitioners have to work longer hours than ever before, and still end up earning less.  Under pressure to see more patients every day, doctors feel stymied in their attempts to provide the attentiveness and quality of care to which they aspire.  By adding a remote patient monitoring program powered by Optimize Health to their practice, doctors can double their annual take-home pay.  Because this software solution handles the innumerable complexities that would otherwise keep a practice from providing RPM, doctors can accrue this financial benefit without significant incremental effort on their part. And they get to provide better care to their patients, and help keep their patients healthier.

Along with that potential to save hundreds of billions in medical expenses comes a pretty staggering Addressable Market for the Company. RPM alone for the indications that Optimize Health currently supports provides for a total addressable market for their software platform of $45 billion annually.  It will take time for adoption to grow, but Optimize Health has some interesting ideas on how to facilitate.

While we at Bonfire Ventures are not healthcare technology experts, we very frequently invest in Vertical SaaS solutions and are unapologetic SaaS nerds. We are not sure we’ve seen a more compelling set of Core Business Metrics in a long time.  Optimize Health’s lifetime logo churn is zero.  Its annualized net dollar retention in Q1 of 2020 was over 200%.  And its new customer acquisition model effectively shows an SMB sales motion with an Enterprise ACV, suggesting an LTV:CAC that seems too good to believe.  For these reasons, we believe that Optimize Health has the potential for extraordinary growth.

Finally, while we are not specifically chartered as an “Impact” or “Double bottom line” VC firm, we have found over the years that mission-driven businesses have some inherent advantages.  When a startup’s business aligns with people’s values, talented folks are more likely to choose to work at that startup, and once there they are more likely to go the extra mile, work that much harder to solve some vexing issue, and feel better about the way they spend the majority of their waking hours.  And those dynamics correlate with business success.  Of course it makes us too feel good to know that supporting the growth of a business also supports bettering people’s lives.

We’d like to thank Jeff and Chuks for inviting us to join them in their mission.  They agreed to pretty significantly alter their financing plans to enable us to partner with them.  Thanks also to Steve Siegel, previously of healthcare software portfolio Company Silversheet (acquired by AMN), for taking the time and tapping his network to help us evaluate.  And finally a huge thanks to Marc Austin, friend from college, who referred this investment opportunity to us.  Marc was a member of the leadership team at Jasper Technologies (IoT platform provider acquired by Cisco for $1.4bn), and angel invests in IoT startups.  We are nothing without the extended network that supports us.

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