Livongo Health: Empowering Individuals To Better Manage Chronic Conditions

By Dave Hartwig, managing director, Sapphire Ventures and Rajeev Dham, vice president, Sapphire Ventures

Today, we’re happy to announce our Series C investment in Livongo Health. Livongo provides an end-to-end solution for diabetes management, including the latest technology and personalized coaching.

While we carefully evaluate a host of characteristics when making any one investment, in the case of Livongo the tried and true “Market, Model, Management” framework best illustrates why we decided to partner with Livongo on its exciting journey ahead.

Market

There are two major trends in healthcare that we believe will drive the continued need for Livongo’s solution and its ultimate success.

First, is the fact that nearly 90 percent of all healthcare spend is for people with chronic conditions[1], the bulk of which are elderly individuals at a time when the aging of the overall population is one of the largest demographic shifts in the United States.

Second, is the meaningful transition from reactive to proactive and preventative healthcare models, buoyed by the change from fee-for-service to fee-for-value. The idea of the “connected healthcare individual”, who can proactively monitor and improve their health, is one that may provide significant relief to the cost of this aging population.

Of the chronic conditions, diabetes is among the most prevalent and costly. According to the International Diabetes Federation, diabetes affects 415 million people globally and 29 million people in the United States.[2] And it is estimated that one of every five healthcare dollars is spent treating this chronic condition.[3] Livongo aims to empower individuals to better care for their health through a more personalized and engaging experience thereby also saving costs to the ‘system’ at large.

Management

The quality of a management team is tremendously important for all investments. But in B2B healthcare, in particular, we’ve found the experience and network of the executive team is often the most important attribute for the business’s ultimate success.

Although as investors we provide guidance whenever we can, we ultimately rely on management to make critical product and go-to-market decisions, which can be particularly complex given the multiple constituencies that must work together in delicate balance within the healthcare system.

Fortunately, Livongo has an experienced team led by Glen Tullman, an historically successful CEO who was most recently at the helm of Allscripts, a multi-billion dollar healthcare IT provider. We believe that Glen’s understanding of the healthcare ecosystem and ability to recruit talented executives with healthcare and consumer technology expertise make the Livongo team uniquely qualified to solve one of the largest challenges facing individuals dealing with chronic conditions and our healthcare system as a whole.

Model

To create a big business in digital health, a company needs to provide meaningful value to each of its stakeholders, which can sometimes feel like a zero-sum game in the healthcare vertical. The Livongo team has been able to strike a balance by first attempting to ensure that a positive end-user experience promotes usage, ongoing engagement and better management of their chronic condition, and secondly striving to ensure that its solution costs less than traditional options that require individuals to pay onerous monthly fees for testing materials.

On the other hand, because Livongo has been relentlessly outcomes focused, the company has been able to show results that indicate a true ROI to the paying customer as a result of end-users’ better management of diabetes. Livongo’s innovative business model — that delivers clear and differentiated value to each stakeholder — coupled with its B2B2C approach have created a perpetual push and pull dynamic for its solution. We believe these models have the potential to create and capture significant value.

Oftentimes, a business may perform well against any one of these parameters; yet we believe that Livongo has found a way to excel across all three. More remarkably, Glen and team have all three elements working in harmony, each providing synergy with the others.

The obvious business rationale aside, we also consider less tangible, but no less important characteristics of any investment. In this case, Livongo is a business that is large-scale, purpose-driven and transformative to people’s everyday lives. While generating strong returns for our LPs is always the aim, the broader impact that a company like Livongo can have directly on society is immensely compelling to us. This large market, mission-driven angle is a characteristic that attracted us to some of our prior investments such as IEX, a next-generation stock exchange that promotes fairness, and Fitbit a connected device allowing consumers to measure, compare and improve their health.

With Livongo, we’re partnering with a world-class team that has a disruptive business model and a solution addressing one of the largest health and economic challenges in our global society. We’re eager to get to work!

Disclosures:

The information set forth herein is not intended to constitute investment advice and under no circumstances should any information provided herein be used or considered as an offer to sell or a solicitation of an offer to buy an interest in any investment fund managed by Sapphire Ventures. Sapphire Ventures does not solicit or make its services available to the public and none of the funds are currently open to new investors. Past performance is not indicative of future performance.

The portfolio companies referred to above do not necessarily represent all of the investments made or recommended by Sapphire Ventures, and were not selected based on the return on Sapphire Ventures’ investment in them. It should not be assumed that the specific investments identified and discussed herein were or will be profitable. Not all investments made by Sapphire Ventures will be profitable or will equal the performance of the companies identified above.

[1] http://www.cdc.gov/chronicdisease/ (April 11, 2016)

[2] http://www.diabetesatlas.org/ (April 11, 2016)

[3] http://www.diabetes.org/advocacy/news-events/cost-of-diabetes.html (April 11, 2016)