In 2011, HealthAmerica, an insurance provider in Pennsylvania, was trying to attract and retain customers when healthcare startup Welltok approached them. Together, on its platform CaféWell, they launched a walking program for its consumers called Race to the Moon. HealthAmerica provided free pedometers, incentives and weekly sweepstakes and CaféWell designed an outreach, communication, and a literal step-by-step engagement program. Six months later, the insurer got nearly ‘7,000 of its members to collectively walk the distance to the moon’.
CaféWell, today, is Welltok’s successful Health Optimization Platform for employers, health plans, and providers. The platform curates a steady stream of personalized health content for its consumer and connects them with coaches and health experts when they need help, and like in the case of HealthAmerica, encourages consumers and rewards them for achieving health goals.
For Race to the Moon, CaféWell reached out to 80 employer groups, sent SMS and emails, tracked responses and measured outcomes. Once it realized the race’s success, it recommended an extension. Very soon, a following program called Return to the Earth was planned where ‘people logged more than 450,000 miles’ and burned the calorie equivalent of 44,000 pounds of fat. CaféWell now claims that after this initiative, 68% of those who participated have started running or walking more every week.
This wasn’t Welltok’s one-off success, as that year alone, the two-year-old startup earned $2 million in revenue.
Since then, Welltok’s consumer enterprise platform has gained international recognition and an enviable client roster that includes the State of Colorado’s Department of Personnel & Administration, IBM and BlueCross BlueShield of Western New York. The infusion of engagement, so rare in the healthcare industry, is the Denver-based startup’s greatest strength. The company has identified that the popular adage prevention is better than cure has no application in the U.S. health policy, where the focus is on the sick, rather than on creating a preventive, optimized health system.
Welltok’s CEO, Jeff Margolis, believes that while the healthcare industry is increasingly adept at applying clinical data to improve care, it has largely ignored other data sources that provide the greatest opportunity to positively impact health at scale, something that Welltok aims to address. Margolis is a health care veteran credited with starting a $1 billion health care company, TriZetto (now Cognizant), whose employee, Jeff Cohen, co-founded Welltok.
In 2010, both Margolis and Trizetto invested in Welltok and Margolis, himself, joined the startup as the executive chairperson. His aim was to change the conversation around health care from patients receiving care to consumers making informed decisions.
Margolis invested $1 million and envisioned the company as a social health management solution where consumers could respond, participate, and create health-related challenges for themselves through gaming technology. Welltok first raised a Series A $5 million funding in 2011 but soon, the company was floundering to stay afloat. In late 2012, when Margolis approached other venture capitalists, they imposed a condition upon him. “The only way any of them would give us financing,” Margolis told Inc 5000 in an interview, “was if I ran the company”. Margolis then became Welltok’s CEO in 2013 and acquired a Series B funding of $18.7 million by Emergence Capital Partners.
In October 2016, Welltok closed a $33.7 million Series E funding and, according to CB Insights, became Colorado’s most-funded startup. According to Deloitte, Welltok has also seen a three-year growth of a staggering 1,576 percent and has posted $62.5 million in revenue in 2016. In April 2018, Welltok announced a Series E2 funding round to carry the company through its next phase of growth, bringing its funding to date around $250 million.
Welltok’s success lies in its identification that the customer is swamped under meaningless information and that s/he needs to be connected to the larger healthcare ecosystem at a personal level. Therefore, its business model is selling software to large employers, health insurance plans, hospitals, and not the end user. Welltok tries to meet its clients’ requirements – who unlike customers have big budgets and like them, a great need to save costs – using big data and analytics. It targets and engages customers, understands their individual needs, delivers personalized support, and most importantly – rewards them for staying healthy. Research shows that consumers are motivated to change behaviors with the right incentives, such as a reduction in their health premiums, contributions to health savings accounts, or gift cards.
Another factor for its success is one that is acknowledged by Margolis. He calls himself an “acquisition aficionado” and believes that “building companies through a careful combination of organic and inorganic growth is the best approach to scalable and systematic growth.” This reflects in the fact that in 2013, the company acquired IncentOne, a startup that creates incentive opportunities – in currency or prizes – meant to reward consumers for their participation in health and wellness programs.
Another acquisition came in October 2015 when Welltok realized that individual incentives were all well but the secret to get families involved was to start with the kids. It acquired The Zamzee platform which combines colorful clip-on activity trackers with a gamified, anonymous social network to encourage kids to be more active.
Most recently, it strategically acquired Tea Leaves Health in October 2017 to propel its own growth in the provider space via Tea Leaves Health’s impressive customer base that includes 30 percent of the nation’s top health systems and more than 400 hospitals.
Welltok’s rationale is that if by using technology, data, social networks, and incentives, they can motivate people into adopting healthier lifestyles and cut clients’ costs, it can make big money from the $3.4 trillion U.S. healthcare spending.
But perhaps the most news making partnership of Welltok has been with IBM Watson Health. It has created a chatbot in its premium CaféWell Concierge app using artificial intelligence and cognitive thinking to keep users engaged. The API can track information from other health devices, answer spoken questions, and keep track of users’ choices to help them improve their quality of life.
While the startup has taken an important step towards addressing healthcare woes in the U.S., it doesn’t solve many of its major problems. For example, The Commonwealth Fund report found that in 2016, nearly a quarter of working-age adults with job-based coverage had such high out-of-pocket costs and deductibles relative to their income that they were effectively “underinsured.”
Welltok may have Margolis, and his ideas on how, for example, ‘linking a pregnant Medicaid recipient with a prenatal app, a local healthy cooking class, and a digital diabetes prevention program provides social and economic returns’, as its iconoclast. But to change the picture of healthcare, it will have to work harder on transpiring these ideas.