One Healthinsurance Startup Is Bucking The Industrywide Funding Slowdown

Insurance startup Devoted Health managed to raise another $175 million last week, despite dropping venture capital.

While the increase is significantly less than Devoted's $1.2 billion increase two years ago, the company's post-funding valuation rose slightly to $12.9 billion from $12.7 billion, a person close to the company said. To date, Devoted has raised over $2 billion.

A small gain with relatively stable valuations "is a strong result in any market and exceptional in this environment," said Bill Evans, senior partner at RockHealth Capital.

Across the industry and beyond, deals are rare, and venture capital checks have dwindled since the boom of 2021, when megadeals were more common and startup valuations soared.

Digital health startups raised nearly $8.6 billion in the first three quarters of 2023, and $29.2 billion in all of 2021, according to Rock Health. Funds raised by Devoted and other health insurance startups are not included in those numbers.

With less funding, cash-strapped startups are turning to layoffs and other cost-cutting measures to avoid a downturn. Some businesses are forced to sell.

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Founded in 2017 and headquartered in Waltham, Massachusetts, Devoted provides health insurance and health care for seniors who participate in the profitable Medicare Advantage Marketplace.

The company stands out among other young insurers that have built strong valuations, but have seen their valuations decline since going public. Several young insurers set to go public in 2021, such as Bright Health, Clover Health and Oscar Health, are struggling with heavy losses and trying to transition from rapid growth to profitability. Ujjwal, who fared worse than the others, had to give up the insurance business altogether.

It's hard to say how Devoted is doing financially, as the private company doesn't release financial results, but government regulatory filings paint a partial picture. According to the report, it expects revenue to double to $1.1 billion in 2022 and losses to narrow. The company's 2023 annual reports are not yet available.

The new funding follows rapid growth

Devoted said the Series E funding round follows a year of rapid growth. The insurer had 140,000 Medicare Advantage members in December, up 70% from a year earlier, according to a press release last month.

According to Devoted, the round was led by a syndicate that includes The Space Between, Highbury Holdings, GIC, Stardust Equity, Maverick Ventures and Fearless Ventures.

Other investors participating in the round include Socieum Ventures, Emerson Collective, Andreessen Horowitz, private equity funds, F-Prime Capital Partners, General Catalyst and Greatpoint Ventures.

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