In the cutthroat world of digital health startups, executives at Redesign Health say they’ve figured out a way to help emerging entrepreneurs deal with the industry’s complexities.
New York City-based Redesign generates ideas to build healthcare startups based on internal and external research, connects those startups to seed funding, recruits entrepreneurs to lead the companies and provides operational assistance. The company has caught the attention of several high-profile investors.
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Pittsburgh-based University of Pittsburgh Medical Center has invested in Redesign and launched a perioperative care startup with it. Other investors include CVS Health Ventures, General Catalyst and Declaration Partners, a firm backed by billionaire David Rubenstein. Since it launched in 2018, Redesign has received $165 million in funding for itself and raised $250 million for its portfolio companies.
The company also works with a consortium of pediatric hospitals, including Boston Children's Hospital and Children's Hospital Los Angeles.
“Our best success has been when we bring a lot of different perspectives around the table in terms of building these companies as well as the governance,” said Brent Burns, executive vice president at UPMC Enterprises, the health system's venture arm. Redesign is "a nice complement to where we are going with our efforts. Their strengths on some of the upfront consumer pieces marry well with our clinical focus.”
Redesign said it has launched around 50 companies since 2018, although only 30 are on its website. Others are in development and haven’t been launched publicly, said a Redesign spokesperson. The company, which started in 2018, did not specify how many of its companies have failed.
“It would be naïve to present any situation as having 100% success rate,” said Dr. Thomas Fisher, venture chair. “Building companies is hard. Most companies, at the end of the day, are not successful for one reason or another.”
Redesign has equity in its portfolio companies and takes a portion of the seed funding the startups receive for its services. The company expects revenues to exceed $80 million this year. A spokesperson declined to discuss profitability.
From Amazon, CVS to Redesign
Digital health companies face a sluggish funding environment while operating in a complex industry. Redesign execs say it can help entrepreneurs wade through the challenges they’ll face in starting a healthcare company.
“What are the regulatory factors? What does the competitive landscape look like? We really think about what the company is trying to solve and what the solution might be,” said Neil Patel, head of new ventures. “We then use a scorecard process to look at unit economics, market dynamics and set a research plan across each one of those questions.”
The research process in developing a startup can take up to nine months before it receives seed funding and a CEO is recruited.
Patel left his role at Amazon Web Services -- head of healthcare partner strategy -- for Redesign in August 2022. He had some familiarity with Redesign through MedArrive, one of its portfolio companies, and said the job was perfect for someone curious and optimistic about the future of healthcare.
Others are drawn to the unique nature of what Redesign does and the opportunities it presents.
Adam Pellegrini was a senior vice president at CVS Health when Redesign recruited him to become CEO of startup Jasper Health, a cancer-focused digital health company in the portfolio.
“At the time, I had a secure job and was in a leadership succession [path] at CVS. I had a lot of reasons not to leave,” said Pellegrini, adding that the Redesign process was a good fit for someone like him. “When you're in your late 40s and you've been doing digital health for 23 years, you’d rather build and launch something. That's all I want to do. I don't want to lay down all of the infrastructure and pipes of a business. I want all that done for me."
The process isn’t foolproof, as it's difficult for any company to successfully scale in healthcare. The sales cycles with health systems and health insurance companies are never going to be shorter than six months and there’s no magic bullet to cut through that challenging reality, Patel said.
Also, once Redesign companies reach a certain funding stage, they are largely expected to function autonomously. One of its portfolio companies, weight loss telehealth company Calibrate Health, cut 18% of its employees in April and underwent a restructuring earlier this month.
Redesign laid off 67 people, or 20% of its employees, in October 2022. The company said the job cuts were not financially driven but more about its strategic evolution.
This article has been updated to reflect Redesign's fundraising activities since 2018.
