Primary’s Latest Investment in Kang Health: Applying the Network Effect to Consumer Health

-By Byron Ling, Principal at Primary Venture Partners

Say the word “healthcare” to most Americans these days, and a wave of anxiety immediately rushes over them. It’s no wonder: We find ourselves in the midst of an era of rapidly rising healthcare costs, with per capita spending on healthcare having risen from $7,960 in 2009 to over $10,000 in 2015. As a percentage of GDP, health spending is expected to rise from 17.5% in 2014 to over 20% by 2025. Passage of the Affordable Care Act in 2010 and implementation of the insurance exchanges in 2014 have brought about a wider selection of health insurance products, but with the added burden of overwhelming structures that increase the role of consumers in their own healthcare. To alleviate their confusion, consumers are demanding greater access to information and tools that will empower them in their decision-making. Digital health innovators are responding in kind, particularly in the areas of insurance, pricing and quality, and telemedicine.

One area that’s long overdue for innovation is consumer search. As patients try to take control of their healthcare, they continue to turn to the internet as a source of trusted health content to learn about their symptoms and assess risks before making a costly trip to the doctor. To date, general Google searches and WebMD have been the go-to resources. But WebMD is a deeply flawed player; it’s become a Frankenstein mashup of many healthcare information sites from the late 1990s, but it’s failed to keep up with mobile and social platform shifts over the last decade. In its current form, WebMD operates as an advertising-first platform, housing woefully inadequate information that often leaves readers in a puddle of sweat as their reported (and often innocuous) symptoms lead them to a completely off-base diagnosis of some terrifying terminal illness. Obvious liability issues aside, the ensuing anxiety of using such a platform leaves consumers desperate for more reliable sources of data.

Historically, we’ve seen how network-based businesses have the ability to eliminate waste from large and inefficient markets by aggregating data and user needs to fill a critical information gap. Skype and WhatsApp helped dramatically lower the costs of international phone calls and mobile messaging, for example, displacing billions of dollars in fees once considered standard in the revenue line of large telecom companies. Redfin and Zillow have had a similar impact in the residential real estate market by bringing transparency to home pricing and transactional data, allowing consumers to make more informed decisions while eliminating reliance on real estate agents. More recently, the transportation industry has seen marked efficiencies with the introduction of platforms like Waze, which has taken the collective driving and traffic data from millions of consumers to offer a personalized GPS product that more efficiently takes users from Point A to Point B.

Within the U.S. healthcare industry, there is an estimated $750 billion in annual waste, $55 billion of which can be attributed to preventive failures, defined as poor patient education and outcomes that could have been avoided with preventive medicine. WebMD’s systematic failures have left the door open for a multibillion dollar business to step in and offer a more modern and innovative take on patient education. That business, we believe, is Kang Health, a platform that’s indexing the world’s collective health knowledge into an adaptive, personalized platform  that empowers consumers to make more informed healthcare decisions. To be clear, Kang Health is not intended to displace healthcare providers (the team includes two full-time physicians), nor does it aim to provide diagnostic services. What it does aim to alleviate, however, is the massive information void that’s putting undue strain on the our healthcare system in the form of excess cost and poor patient outcomes.

Kang is well-placed in the hands of three-time repeat entrepreneur Allon Bloch, who has a long track record of successfully reinventing outdated and bloated industries. Most recently, Allon served as CEO of Vroom, which reimagined the used car space by allowing individuals to buy, sell and finance used cars online. In less than three years, Bloch led Vroom to become a top-10 used car dealer in North America, with a $1 billion-plus annual GMV run rate. Prior to Vroom, Allon was one of the earliest pioneers of the online grocery vertical, having led global independent grocery shopping and comparison website MySupermarket, and he made huge waves as CEO of Wix, one of the earliest software platforms catering to small to medium businesses. It’s now a $2 billion publicly traded company. Under the leadership of this visionary entrepreneur with a tremendous track record of building disruptive products within huge and varied markets, we believe Kang has the power to reinvent healthcare consumer search and eliminate much of the anxiety and cost associated with today’s inadequate information sources.

We are extremely proud to announce this latest investment, and thrilled to have invested alongside some truly exceptional VC partners, including Mangrove/Bessemer - which also invested early in Wix and wished to continue supporting Allon’s future endeavors - and our local NYC peers Lerer Hippeau Ventures and Comcast Ventures.

As Reid Hoffman famously stated, network-based businesses do best when they tap into one of the seven deadly sins. Facebook and Instagram tap into Pride, for instance, while LinkedIn is associated with Greed. Within this framework, Kang is situated firmly in Wrath. The intense emotional responses elicited by feelings of physical pain and the frustration of navigating an increasingly complex healthcare landscape are multiplied tenfold when paired with the anxiety of our outdated and unhelpful sources of healthcare information. Given our uncertain political climate and the shaky foundations of our healthcare policy, the time could not be better for a truly consumer-focused platform that both alleviates anxiety around our health and eliminates wasted resources from our already-taxed healthcare system.  


RELATED POSTS