Castlight steps up business with $100M in hand
Mission is to bring costs for healthcare services to light
SAN FRANCISCO – A company whose stated mission is embodied in its name – Castlight Health – last month landed $100 million in venture capital. Some analysts say it is the largest venture investment any startup has ever drawn, indicating the potential for growth for a five-year-old startup whose aim is to bring to light the oft-murky area of healthcare costs.
The San Francisco-based company provides employers and their employees easy access to typically hard-to-find cost and quality data on common medical procedures and services, such as mammograms, diabetes tests and colonoscopies, costs that can vary dramatically from provider to provider. The idea is to give healthcare buyers and consumers the ability to comparison shop.
As a result, Castlight asserts on its website, “Employers and health plans reduce costs – guaranteed. Consumers find better quality at a lower price.”
This new round of investment, which includes participation from two major unnamed mutual funds, as well as T. Rowe Price, Redmile Group and previous investors, brings total funding to $181 million.
The previous round of funding included Morgan Stanley Investment Management, and the Wellcome Trust, U.S. Venture Partners, as well as Cleveland Clinic. The Series C round also included Maverick Capital, Oak Investment Partners and Venrock.
Castlight’s CEO Giovanni Colella, MD, co-founded the company in 2008 with cofounder of athenahealth Todd Park. Today, Park serves as chief technology office for the United States. Prior to founding Castlight, Giovanni was founder, president and CEO of RelayHealth, which McKesson later acquired.
As Colella sees it, the new funding will help Castlight “respond to the growing demand for our solutions, seize major market opportunities, increase the breadth of our offerings and extend our reach.”
He points to recent research that shows health insurance premiums in the United States increased by an average of 8 percent between 2000 and 2009, whereas average household income rose by an average of 2.1 percent.
To combat this increase, he says, many employers are asking employees to pay a larger portion of their healthcare. Without the proper tools, employees are forced to make decisions based on limited information and little understanding of options, ultimately resulting in lower quality, higher costs and a decline in overall satisfaction.
“The healthcare industry is in dire need of innovation,” said Bryan Roberts, partner at Venrock and co-founder and chairman of Castlight Health. “Castlight has the opportunity to dramatically improve the efficiency of the U.S. healthcare system, providing employers and consumers with the information required to make good cost and quality healthcare decisions. Over the last two years, Castlight Health has created the unique products to drive customer traction and ROI, which sets them on a terrific growth trajectory over the next several years.”
One investor put his firm’s reasoning this way: “We were attracted to Castlight Health's strong management team and the leadership position it has already established in the market,” said Graham McPhail of T. Rowe Price. “Castlight appears poised to dominate the segment and transform how users consume health care.”
“Traditionally, individuals have been very passive participants in managing their healthcare, as they have no insight into the cost and quality of the services,” said Toby Cosgrove, MD, CEO of Cleveland Clinic.
“Transparency in healthcare can lead to higher-quality, lower-cost healthcare, as well as more consumer engagement. With its innovative technology and strong understanding of the market, Castlight is well positioned to make health care transparency a reality and transform how users make decisions.”
Among Castlight Health customers are Allegis Group, Honeywell, Life Technologies and Regis Corporation.