Demand is through the roof for Seattle telemedicine startup 98point6. The company, which helps facilitate virtual primary care appointments, has seen its membership base skyrocket 274% this year as people look for medical advice without going to a physical doctor’s office during the pandemic.
Now the startup is fueling up its tank to support that growth, raising a $118 million Series E round led by private equity giant L Catterton and late-stage investment firm Activant Capital. Existing backers including Goldman Sachs also participated.
The round is one of the largest for a Seattle-area startup this year and the latest in a string of recent $100 million-plus investments in companies such as Qumulo, Auth0, Sana Biotechnology, and others. Venture capitalists poured more than $1 billion into Pacific Northwest startups in the last quarter.
It also comes on the heels of a $43 million Series D round raised by 98point6 in April, reflecting strong investor interest in the company’s technology and broader digital health market. Global VC funding to digital health companies reached a record $10.3 billion through the first nine months of this year, up 43% year-over-year, according to Mercom Capital Group.
Founded in 2015, 98point6 provides primary care in all 50 states to more than 3 million patients, connecting them in real-time to its doctors alongside an AI-powered chatbot, texts, and digital images. Its customers include giant companies such as Boeing, as well as health plans and health systems. The company also offers a direct-to-consumer product.
98point6 CEO Robbie Cape said the company is seeing tailwinds from increased use by its existing members, as well as interest from new clients that didn’t have a virtual health offering or were unhappy with their existing software.
Healthcare is one of many industries that have adopted technology at a rapid pace over the past several months due to the pandemic. Other examples include work collaboration with video conferencing tools such as Zoom, or education with remote learning platforms.
98point6 is among a bevy of health-tech startups seeing increased usage during the coronavirus crisis. The FCC in April approved a $200 million program to fund telehealth services and devices.
98point6 added coronavirus screening questions to its app in late January. Delivering care through digital channels keeps people who are contagious, though not seriously sick, at home and isolated. The approach also allows non-coronavirus patients to get the care they need, including renewed prescriptions or other services outside of a clinic or hospital where they might risk infection.
Cape expects permanent changes in consumer behavior and the perception of remote care.
“People can conduct a visit with 98point6 from anywhere at anytime,” he said. “We fit into the microslices of time that people have in their day.”
98point6 makes money via a membership-based model. It charges consumers $120/year and $1 per visit. Those using a sponsored plan paid for by their employer, for example, can access doctors at low or no cost.
Cape said there are various use cases. Some people rely more heavily on 98point6 for primary care needs, while others use it on a more “episodic” basis.
The company has more than 50 core physicians on staff who help answer hundreds of inquiries per day.
“We are able to be incredibly efficient,” Cape said. “Through our technology investments, we are endeavouring to bend the cost curve down for delivery of care very dramatically, and at the same time bend the quality curve up. That’s what is unique about 98point6 — we are doing both of these.”
Many large insurance carriers have waived cost-sharing for virtual visits during the pandemic, but some are only doing it for a limited time. That means demand will rise for an external service such as 98point6 that is outside a health system or regular primary care practice and potentially cheaper, according to Cape.
Telehealth claim lines for privately insured people spiked more than 8,000% in April, Healthcare Dive reported. Telehealth volumes have dropped since then, but are still much higher than before the pandemic, according to research from Epic.
Accenture found that adoption of digital health tools had actually stalled since 2018 before the pandemic.
“Although consumers are interested in virtual services, a cumbersome digital experience turns them off,” Accenture said in its report. “Concerns over privacy, security and trust remain, along with difficulty integrating new tools and services into day-to-day clinical workflows.”
Still, recent deals show that companies and investors are betting big on more people using telehealth, such as Teladoc’s $18.5 billion acquisition of Livongo and Amwell’s $742 million IPO last month.
And people keep coming back to 98point6. More than half of its visits on a given month are from repeat customers, Cape said.
The vast majority of the new investment will go toward research and development, including hiring more employees. Total funding to date is now $247 million. The company declined to provide an updated valuation.
Other previous investors include BlackRock CEO Larry Fink; Costco co-founder Jim Sinegal; former Goldman Sachs CFO David Viniar; and Frazier Healthcare Partners Managing Partner Nader Naini.
Last month 98point6 inked a key deal with Sam’s Club, a division of Walmart, which will promote 98point6 as a telehealth service for its customers.
Cape sold his previous company, the family scheduling app Cozi, to Time Inc. in 2014 and spent 12 years at Microsoft. He founded 98point6 alongside Gordon Cohen, a professor at Arizona State University.
(Editor’s note: 98point6 Chief Medical Officer Dr. Brad Younggren will be one of the featured panelists today at 12:45 p.m. at the GeekWire Summit in a session titled: How COVID-19 is Sparking a Telehealth Wave. For more information and to register for the Summit, visit the event site here).
