Oscar, a New York health insurance startup, has raised a large new round of funding that values it at $1.5 billion. Led by Founders Fund, the investment firm run by Peter Thiel, as well as Horizon Ventures, Wellington Management Company and Goldman Sachs, the round brings $145 million in new capital to Oscar. The company had previously raised $150 million in funding.
The deal comes as venture capital investors are pouring money into healthcare. According to TechCrunch, the venture capitalists invested 250% more money into health insurance in 2014 than they did the year prior.
Oscar is among the largest startups in health insurance. (The company also leads the trend of startups named after humans.)
Started in 2013 by Josh Kushner, a venture investor at Thrive Capital, alongside Kevin Nazemi and Mario Schlosser, Oscar provides health insurance to individuals in the states of New York and New Jersey. The company tripled enrollments this year from 17,000 to 40,000 members (representing approximately $200 million in annual premiums), and calculates that it represents roughly 12 %to 15% of the marketplace for individual health insurance in New York. In the last year, Oscar expanded from 90 employees to 185. The company has announced plans to expand into Texas and California but “conversations with regulators are ongoing,” says Schlosser, who is CEO of Oscar.
Oscar’s biggest challenge, according to Kushner, is winning the trust of its customers. The company’s quirky name and cute cartoon branding, which can be seen all over New York City subway trains during annual enrollment periods, appeals to a young, Web-savvy audience. The casual, personal tone of Oscar’s messaging stands in stark contrast to faceless, corporate sensibility of traditional health insurance companies.
But that can also raise questions around the company’s level of seriousness. “As a new company inserting itself into an industry full of incumbents with household names we are working hard to gain the trust of the people in New York and New Jersey,” Schlosser says.
Earlier this year, Oscar partnered with Misfit Wearables to give its members free wearable devices and pay them $1 for every day they walk a targeted number of steps. Two thirds of the company’s customers have engaged with the program, walking 2.5 billion steps since December, Schlosser says.