Investing & Startups| July 7, 2019
Healthtech startup Livongo just filed to go public to cover losses and keep growing
Founded in 2014 and based in Mountain View, Livongo has raised $235 million so far.
Last year, the firm raised $105 million in a Series D led by General Catalyst and Kinnevik AB. Long time investors trust the company to have good results, since these two companies both co-led the firm’s Series C, with General Catalyst having led its Series A. According to its S-1 filing, General Catalyst owns around a quarter of Livongo.
Other companies focused on healthcare and technology are also going public this year. Besides Livongo, Phreesia, which facilitates patient check-ins, filed a preliminary prospectus last week, followed June 27th by data warehousing and analytics company Health Catalyst.
Help for chronic disease sufferers in the United States
Since approximately 180 million Americans are suffering from at least one chronic condition, 75 percent of all healthcare industry spending is related to chronic conditions. This makes Livongo a very oriented company, since it claims to want to “empower people with chronic conditions to live better and healthier lives.”
Livongo tries to achieve its ambitious corporate goal by providing data collection tools (blood sugar testing devices for people with diabetes, for example) to users, together with a platform that keeps track of the evolution, either good or bad, of their personal data and offers support.
Bringing actionable data and support to chronic illness sufferers is a good idea. Livongo has expanded from the diabetes market to other chronic conditions including hypertension and “prediabetes.” The company is also bringing its tech to bear on weight control, among other health issues.
Livongo is enabling its Members to make important health changes by aggregating and interpreting data, and by delivering health signals in a way that is most useful to its members. Its Applied Health Signals solution is leading to a better member experience and improved clinical and financial outcomes.
“Livongo is on a mission to transform the healthcare experience for millions of people living with chronic conditions every day,” said Livongo Executive Chairman Glen Tullman.
Personal struggle with his son’s type 1 diabetes strongly motivated Livongo’s CEO
Livongo was originally EosHealth, the brainchild of Kim Angelides. Tullman’s 7Wire Ventures invested in the startup in 2013, before Tullman came on board as CEO and relaunched it in 2014. Livongo’s mission resonated with him on a personal level: his son Sam was diagnosed with type 1 diabetes when he was eight.
Personal experience is a great motivator for health innovation. Simple Habit, an app which helps a person meditate to reduce stress, was born from its founder’s personal need. Personal struggle also prompted tech entrepreneur Onno Faber, RDMD’s founder, Chairman and Head of Product, to start a company to try and find cures for rare diseases. Kate Ryder, a former journalist for the New Yorker and mother of two, founded Maven to help fix the way the healthcare system treats mothers. Personal health issues also motivated Melinda Richter, Global Head of Johnson & Johnson Innovation, JLABS, not only to completely change her life, but also to profoundly modify the way J&J sees innovation in healthcare.
So it is no surprise Livongo concentrated on diabetes, trying to find tools to better control the condition. The company then expanded its interests to blood pressure monitoring, and unveiled its new voice-enabled cellular blood pressure monitoring system powered by Amazon Lex and Amazon Polly, during their invitation-only conference SIGNUM 2019 in San Francisco, CA.
The company needs more funds for further expansion
Livongo sells to large companies, which then provide its service to 679 “clients” and 164,000 “members,” according to the company. The company claims to have added 50,000 of its members in the first quarter of 2019.
In yearly terms, Livongo grew from $30.9 million in revenue in 2017 to $68.4 million in 2018. If the growth of over 100 percent is what investors like to see, the losses increased by the same percentage, from $16.9 million on a net basis to $33.4 million in the next year.
In the first quarter of 2018, Livongo had $12.5 million revenue, leading to a $4.2 million net loss. In the first three months of 2019, in contrast, Livongo generated revenue of $32.1 million, prompting a $15.0 million net loss. So, each time the company ramps its sales and marketing, general and administrative costs also explode. Livongo is growing, but at a cost. In the first quarter of 2019, the company spent as much cash for operations and investing as it did across the whole of 2018.
Investors are not very likely to love the growth, if losses are merely tracking its revenue north as a manageable percentage. The company is probably going public now to obtain the necessary cash to cover its bills, given the company’s cash position of $55.0 million at the end of Q1 2019.
With the growth it has already shown, Livongo has every right to expect to raise money for operations through an IPO, especially with long time investors still trusting the company enough to put their money on the company. The only thing that remains to be seen is exactly how much the company is worth, how many shares will be made available and at what price.