Clover Health Tops $1 Billion Value With Alphabet Backing

(Bloomberg) -- Clover Health, an insurance startup using data science for preventative health care, has become Silicon Valley’s newest, and a rather reluctant, unicorn.

Alphabet Inc.’s venture arm GV and other investors have put $130 million into the San Francisco-based company, valuing it at $1.2 billion, according to people familiar with the matter. Startups worth more than $1 billion on paper are known as unicorns. The funding round closed Wednesday.

Founded in 2014, Clover handles insurance claims and other benefits for about 25,000 Medicare Advantage customers in New Jersey. The cash infusion boosts total funding to $425 million and bankrolls the start of Clover’s expansion with operations planned in as many as three more states by October. 

Clover competes against Anthem Inc., Aetna and others who offer plans to the nation’s 18 million Medicare Advantage members. Although it operates as an insurance company and gets paid by the U.S. government, Clover’s true focus is on mining patient medical data.

The idea is that by identifying gaps in care, like when a patient fails to pick up a prescription or misses a doctor’s appointment, Clover software can predict problems. When there is such an issue, a Clover representative calls the client and, if it makes sense, dispatches a Clover nurse practitioner or other specialist to do a home visit. The hope is that a series of well-timed interventions will result in better health for members and prevent expensive emergency services.

"We have people calling us up wanting to give us the results of their MRI scans," said Chief Executive Officer Vivek Garipalli. "People want to share their data because they know it can help."

Clover’s rich valuation is a rarity these days and something of an irritation to Garipalli. He declined to discuss terms of the valuation and considers talk of the lofty number a distraction.

GV, Palm Drive Capital and Western Technology Investment, joined existing investors including Greenoaks Capital Management, Sequoia Capital and First Round Capital in the latest funding round.

For now, the company is focused on growth and remains unprofitable. It lost $34.6 million last year -- seven times more than the previous year, according to a report in Axios, which cited the company’s financial documents. Clover fumbled last year when Medicare officials fined it for misleading marketing materials.

While its ultimate goal is to operate in all states, Garipalli and his investors said Clover must grow at a measured pace.

“This will take time,” said Mike Dixon, a partner at Sequoia Capital. “It would be a mistake to scale too quickly before we’ve nailed it locally.”

Still, Clover investors remain bullish by awarding what has become an increasingly rare valuation. While a new startup was valued at $1 billion or more every 4.9 days in 2015, that number stretched to every 8.9 days in 2016, according to research firm CB Insights. Mutual funds and other late-stage investors have soured on high-flying private companies after a number of startups stumbled and others failed to sell shares to the public quickly or at a higher valuation than when they first invested.

To contact the reporter on this story: Lizette Chapman in San Francisco at lchapman19@bloomberg.net.

To contact the editors responsible for this story: Mark Milian at mmilian@bloomberg.net, Molly Schuetz