Why this health care startup felt launching early during a pandemic was the best business strategy
This is an installment of Startup Year One, a special series of interviews with founders about the major lessons they have learned in the immediate aftermath of their businesses’ first year of operation.
Launching a startup during a pandemic sounds unfortunate. Launching a health care startup during a pandemic sounds unfathomable—but the founders of medical supplies seller Tomorrow Health suggest it was the best strategy possible.
Cofounded by Vijay Kedar (an Oscar Health veteran) and Gabriel Flateman (a cofounder and previously chief technology officer at Casper), and backed by Silicon Valley venture capital powerhouse Andreessen Horowitz, the company wants to upend at-home health care—a market worth $60 billion today, and the second–fastest-growing area of health care spending—by making it easier to purchase at-home health care products, such as orthopedic and respiratory aides.
Although the company formed in 2019, the official kickoff was scheduled for later in 2020. But the cofounders moved up the launch date to mid-May to address a need that is deeply personal but affects millions of people nationwide. Kedar says he experienced cracks in the U.S. health care system firsthand when his family was in need of dependable at-home care following his mother’s months-long span spent on a ventilator in the ICU for stage 4 cancer.
Total home health spending in the U.S. rose to $108 billion in 2018. And now, the COVID-19 pandemic has given many patients no choice but to stay home, even as they deal with ongoing, non–COVID-related health care needs. This current public health crisis has put home health care squarely in the spotlight, and illuminated gaps in the ability of the nation’s infrastructure to fully support patients where they live.
Fortune recently spoke with Kedar and Flateman to learn more about the startup’s first year in business, the lessons learned, the hurdles overcome, and plans for the next year.
The following interview has been condensed and lightly edited for clarity.
Fortune: Could you tell me a bit about your backgrounds? How did you two connect?
Kedar: Growing up in a family of physicians, I often say that was I premed coming out of the womb. I spent hundreds of hours volunteering in hospitals in middle school and writing medical research papers in high school. It was ingrained in me at a young age the impact that solving health care problems could have on the lives of patients and their families.
After a few years of investing in health care and technology companies, I joined Oscar Health as an early employee and wore a number of hats as we grew from a few dozen to more than 1,200 employees and $1 billion in revenue. I launched the company’s Texas division as general manager, building a business that covered over 50,000 Texans for health insurance and drove care management efforts at the national level. As senior director of care innovation, I worked alongside my colleagues to enable patients to manage health care at home and to better coordinate the care of our sickest members. At Oscar, I learned what it took to drive real change within the health care ecosystem, marrying a detailed understanding of the realities and complexity of U.S. health care with technology, data, and design to yield better outcomes for patients.
Flateman: I’m a repeat founder and self-taught engineer, focused on using technology to drive consumer change in areas that need it most. At Tomorrow Health, I lead engineering, product, design, and analytics across the company. Before that, I spent over five years as cofounder and chief technology officer of Casper, where I built and scaled the business to drive over $1 billion in cumulative sales. Leading a team of over 100 across technology, digital product, and customer experience, I developed the technology to power Casper’s expansive logistics infrastructure across multiple channels, geographies, and product lines. I also focused on building and growing Casper’s award-winning consumer experience on our website and in retail stores. I’m a lifelong musician and initially graduated with a degree in music from Brown University.
Kedar: Gabe and I had been friends for years. As I began to develop the business model for Tomorrow Health, I initially approached him for advice. We spent hours whiteboarding the technical architecture and mapping out the components of the business. Before too long, it was clear that his experience designing tech-enabled operations and creating a seamless consumer experience in an industry sorely lacking one was critically relevant. Combining our experiences, we’ve built a team that similarly reflects the marriage of deep health care services and operations tenure with some of the brightest technology, logistics, and member experience minds.
Health care is a byzantine industry by nature, but in the United States, especially. What inspired the launch of Tomorrow Health? What kinds of gaps do you think your company can fill, and what can it fix in a system that many critics would argue is broken—made only more apparent by the current public health crisis?
Kedar: During my time at Oscar, my mother was diagnosed with Stage 3 rectal cancer. After a few months in the hospital, she required a year of intensive home-based care. Coordinating her care at home opened my eyes to the stark challenges faced by so many patients and families as they make the transition to home-based health care. From working with nearly a dozen different providers to spending hours faxing documents to utilize her insurance benefits [to witnessing] the pervasive lack of patient education or guidance, I knew there had to be a better solution. We’ve built Tomorrow Health to be that solution to support millions of patients in managing their health care in the place they want to be most: home.
Some of the biggest problems in U.S. health care include misaligned incentives between key stakeholders, tremendous fragmentation of care (with care providers only fulfilling very siloed roles), and a lack of commitment to the patient experience. Against that backdrop, we provide our patients a seamless and connected care experience, coordinating with their physicians to identify the products and services best suited for their needs; navigating their insurance benefits; providing the home-based care resources they need; and guiding them through every step of the journey. We combine a full-stack health care provider with a tech-enabled logistics platform, driving a cost and quality value proposition to patients, their care providers and insurers, and tying it together with personalized service. The result is a health care experience that feels a lot more like what we would all expect for our loved ones in a time of need.
Launching a new health care business in the middle of a pandemic is daunting, to say the least. And you moved your launch timeline up. What prompted you to take this action, and how did it turn out?
Kedar: As the COVID-19 pandemic spread, we saw its impact on the patients we served. Hundreds of millions of Americans were suddenly homebound, including seniors and at-risk individuals. As the need for home-based care increased dramatically, we heard of many patients facing access issues as many local retail providers closed their doors or were unable to serve patients at home. We knew we could help. We had a nationwide distribution network, the ability to deliver virtual care, and a team that adapted quickly to the realities of remote work. And so we acted.
Since our launch, we’ve served both the COVID-infected and the COVID-affected. We’ve provided critical respiratory equipment and support to elderly patients managing step-down care after weeks on a ventilator battling COVID-19, and medical supplies and guidance to some of the millions of Americans currently managing chronic conditions without traditional access to their health care providers. We are partnered with over 100 regional and national health plans and have launched a dedicated program with the New York City Health and Human Services department to provide medical equipment, supplies, and support to the city’s seniors. We have been grateful to be able to serve those in need during these deeply challenging times, and I was continually inspired by the way in which our team stepped up to heed the call.
Looking back a little farther, what were some of the biggest hurdles you faced in the past year before launch? What surprised you the most?
Kedar: As mentioned, innovating within health care requires an understanding and recognition of the industry’s complexity. You cannot just build better technology on top of broken health care infrastructure and expect materially better outcomes. You must rebuild the infrastructure, and that takes time. For us, that meant building a full-stack home-based care provider, entailing dozens of regulatory licensing applications, identifying where to build and where to partner, and continuous learning on the best ways to serve our patients and our partners.
We were grateful to have deeply aligned investors at Andreessen Horowitz, BoxGroup, and Rainfall Ventures and advisers who have supported our journey at every stage. Our advisers Trent Haywood, former chief medical officer at the Blue Cross Blue Shield Association, and Beth Bierbower, former segment president at Humana, helped to inform our insurer partnerships and the ways to drive the most value to our partners. Trevor Fetter, former CEO of Tenet Healthcare, provided invaluable advice on leading during a time of great uncertainty, as the COVID-19 pandemic began.
Given the current economic climate, how does the pandemic and the downturn affect the future of your business, from product development to raising capital?
Kedar: The transition of care to the home was inevitable far before the pandemic, with 90% of senior citizens choosing to age in place and the systemic shift to value-based care. But there is no doubt that this trend has been meaningfully accelerated by COVID-19. We have found that across our base of customers—patients, insurers, and providers—there is increased demand and need for the resources that enable home-based care. We have partnered closely with insurers and integrated health systems aiming to retool their care-delivery networks toward the home and have received inbound inquiries from dozens of potential channel partners.
As we grow our team, we’ve been fortunate to see strong interest from candidates from a range of backgrounds eager to work on solving problems that impact the health and well-being of many during this crisis. Additionally, we’ve received meaningful inbound [queries] from investors, interested in broader themes around home-based and virtual care.
Looking beyond the post-pandemic era, which could be anywhere from a year to a few years from now, how do you plan to grow Tomorrow Health, and what do you want the business to look like five years from now?
Kedar: Our vision for Tomorrow Health is to be America’s trusted platform to deliver and coordinate health care at home. Over the coming years, we will expand nationally, develop new partnerships with industry stakeholders and expand our capability set, enabling us to serve a wider base of patient needs. We will expand our team across technology, operations, business development, and care advocacy.
Ultimately, we aim to be a partner and advocate for millions of patients and families as they manage chronic conditions or recovery from surgery in the comfort of their homes. While our footprint, team, and capabilities will grow, we want to retain the same ethos and values that guide us today, striving to build the health care experience we believe patients deserve, always reporting to the mission, and treating every patient as we would our own family members.