Investor excitement in AI exploded last year as funding to venture-backed startups broadly slumped. One healthcare startup is riding that wave in the new year with a fresh round of funding.
Cohere Health just landed $50 million in Series B extension funding, Business Insider has learned exclusively. Deerfield Management led the Series B extension, with participation from Define Ventures, Flare Capital Partners, Longitude Capital, and Polaris Partners.
The AI-powered startup contracts with health insurers to digitize and automate the pre-authorization process for medical treatments. The Series B extension brings Cohere’s total funding to date to $106 million.
Cohere CEO Siva Namasivayam said the startup hadn’t planned on raising so quickly. Although Cohere raised its initial $36 million Series B in April 2021, the startup originally hadn’t planned to raise a Series C until mid-2024, Axios reported in October.
But the Cohere’s deals with health plans have been accelerating faster than expected, Namasivayam said. Cohere had five health plan contracts in 2023, and is now on track to get 12 to 15 health plans on its platform by the end of the year, he said.
With that growth, Cohere is on track to hit $100 million in revenue this year, he said.
Cohere Health
A valuation boost
As more startups build AI into their healthcare solutions, the tech has taken off for its potential to improve the typically manual prior authorization process, which can cost health plans and providers lots of time and money.
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Cohere’s technology claims to reduce unnecessary prior authorization denials, which in turns cuts back on the time patients need to wait to see a doctor or have a procedure. It’s currently working with big health insurance companies like Humana and Geisinger.
Namasivayam said Cohere stands out to investors for its ability to quickly provide a return on investment to its clients — delivering up to three times the cost of Cohere’s software in savings associated with making administrative tasks more efficient, and up to seven times the investment on the clinical side to get patients to the right care faster.
While Namasivayam wouldn’t share Cohere’s valuation following the Series B extension, he said the funding did give the startup a valuation boost, a rare feat as up rounds have become few and far between in the venture funding slump.
Flare Capital Partners general partner Michael Greeley and Define Ventures founder and managing partner Lynne Chou O’Keefe, both investors in Cohere, nominated the startup to Business Insider’s annual list of the 25 healthcare startups set to take off in 2024. The two investors noted Cohere’s ability to drive savings for its clients and its impressive growth.
“It’s going to be a big enduring company,” Greeley told Business Insider in November.
Cohere Health
Cohere’s next move
Cohere was briefly profitable last year, but has gone back into the red as it invests in implementing new health plan contracts, Namasivayam said. He said the Series B extension will help Cohere get back to profitability.
The startup now plans to raise its Series C in 2025. Cohere may seek to acquire other companies alongside that raise, Namasivayam said.
This year, as it works to get more health plans to use its software, Cohere plans to grow its workforce. Namasivayam said the startup will seek to hire up to 75 engineers and up to 50 doctors and clinical analysts. Most of the $106 million Cohere has raised to date has gone to research and development for the improvement of Cohere’s technology, and the startup will continue to invest in those areas, he said.
In the second quarter of this year, Cohere plans to announce software that will apply AI to medical imaging. Namasivayam said Cohere will take a different approach from existing AI-powered imaging solutions on the market, many of which use AI to flag potential concerns in patient scans.
Namasivayam said Cohere is also working to expand its reach in value-based care, where providers get paid based on the quality of care provided rather than on the amount of services rendered. The startup has signed a deal to provide its software to a large value-based primary care provider, he said.
“That’s a big opportunity for us and an untapped market we’re going after this year,” he said.