Oscar, the health insurance startup that targets millennials, freelancers and people just generally tired of dealing with large insurance companies, just received a 1.5 billion dollar valuation.
The company, which uses “technology and design to make healthcare simple, intuitive, and human,” raised $145 million in a Series B round of funding. “Series B” refers to the second round of financing that a company or start-holds. Typically, Series B investors pay more than earlier investors (such as those in Series A or “Angel” investors, who got in to the business closer to their start) because the business model has already been tested.
Oscar has been around for sixteen months and raised $30 million in a round of fundrasing last January. This latest valuation has earned it “unicorn” status, a name attributed to startups like Warby Parker or Uber, which carry valuations greater than $1 billion.
Currently, Oscar only operates in New York State and has enrolled about 40,000 customers. With new funding and a proven business model, the company plans to expand to California and Texas.
“There has been such strong customer satisfaction, we thought we were ready to push the product forward,” said Oscar’s Founder and Chairman, Joshua Kushner to the New York Times.
The company’s success has been driven by a customer-focused approach, embracing technical advances such as encouraging users to use a fitness tracker in order to meet goals and, subsequently, save money on their premiums.
On the back-end, the company tracks patient data in order to improve customer service and drive satisfaction. Part of the incoming money will be used to help integrate that patient system with hospitals and other health providers.
“We have a smaller tech team than anybody else in healthcare and we have much grander ambitions in the technology we want to build to rewire the healthcare system,” said Oscar’s CEO Mario Schlosser.
Our Take
The US Healthcare industry is one that’s ripe for disruption: a recent Gallup poll found that 45 percent of respondents had a negative perception of the industry. Furthermore, while many Americans are insured thanks to the Affordable Care Act, millennials are especially unlikely to make their own decisions when it comes to which insurer they use, deferring to their families to help them decide who insures them.
Oscar took advantage of that gap. By identifying the things that younger customers desire — easy access, great customer service, integrated technologies — the company attracted customers in droves. It’s entirely possible that, within the next few years, more established companies are going to be playing catch-up with the lean, idealistic startup.
If there’s anything to be learned from the launch of Oscar, it’s that, while we might make fun of startups like Snapchat for receiving massive valuations for what seems like no reason, there are plenty of new companies that are seriously shaking up traditional marketplaces. We’re just excited to see what will come next.
