Innovaccer Raises $275M Series F to Fuel Healthcare AI

The Challenge of Healthcare Data Silos

The healthcare industry amasses perhaps the largest volume of data, yet it remains fragmented across numerous, isolated systems.

Millions of patient records are stored within diverse electronic health records (EHRs) from vendors such as Epic, Cerner, and Athena. Furthermore, insurance providers maintain substantial datasets detailing coverage, reimbursement, and patient demographics.

Pharmacies and laboratories add to this complexity, contributing data related to medication usage and diagnostic test outcomes.

Innovaccer's Emergence as a Key Player

For over ten years, various organizations have attempted to consolidate this dispersed patient data across different healthcare settings. However, San Francisco-based Innovaccer has recently become recognized as a frontrunner in this effort, according to multiple investors.

Currently, Innovaccer serves six of the top ten healthcare systems in the United States. The company is also expanding its reach by offering its platform to insurers, pharmaceutical companies, and governmental agencies.

Innovaccer already offers a range of applications focused on value-based care, population health management, and customer relationship management (CRM). These applications are all built on a robust cloud infrastructure.

Expanding into Healthcare AI

Innovaccer is now planning to launch several AI co-pilots and agents. These include an AI-powered medical scribe, a tool designed to streamline prior authorizations, and a solution to assist with resolving denied claims.

To realize its ambition of becoming a comprehensive provider of healthcare AI solutions – as described by co-founder and CEO Abhinav Shashank – Innovaccer has secured $275 million in Series F funding.

Investors in this round include B Capital Group, Banner Health, Danaher Ventures, Generation IM, Kaiser Permanente, and M12.

Funding Details and Valuation

This funding round incorporates both primary and secondary sales. Approximately 35% of the capital is designated to provide liquidity for early investors, specifically those from the seed and Series A stages, as stated by Shashank.

Despite the secondary component, the funding provides substantial capital to support Innovaccer’s continued growth.

While the company has not publicly disclosed its current valuation, a source close to the deal indicated a post-money valuation of approximately $3.45 billion for the primary funding. This represents a modest increase from the $3.2 billion valuation achieved during its $150 million Series E round in late 2021.

The secondary transaction likely resulted in a lower valuation, but specific details remain undisclosed.

This funding round validates a report from TechCrunch last May, which indicated Innovaccer was in discussions to raise $250 million, with Kaiser Permanente as a potential lead investor.

The Data Fabric in Healthcare

Innovaccer was established in 2014 with the initial goal of data unification across diverse enterprise types. However, a strategic shift occurred after three years, leading the company to concentrate solely on the healthcare sector.

According to Shashank, speaking with TechCrunch, the healthcare industry historically operated outside the scope of widespread internet connectivity. A cohesive informational network was notably absent.

Consequently, Innovaccer embarked on a project to construct essential data infrastructure. This involved connecting their platform to all prominent EHR systems. Over two years and an investment exceeding $100 million were dedicated to achieving this connectivity, as Shashank reported.

These efforts appear to have yielded positive results. Innovaccer has experienced a consistent 50% annual revenue increase over the last five years. Current projections indicate the company will reach $250 million in annual recurring revenue (ARR) this year.

While the full scope of Innovaccer’s service offerings presents a challenge for many healthcare providers to match, competition exists within specific areas. For instance, in population health management, the company faces rivals such as Optum and Health Catalyst. Salesforce represents a key competitor in the customer relationship management (CRM) domain.

Shashank indicated that an Initial Public Offering (IPO) is a future consideration for Innovaccer. However, the company will only seriously pursue this option once it achieves an ARR of $400 million to $500 million.

Currently, the company’s primary focus is on developing a platform to support AI applications built upon its existing infrastructure. Shashank envisions customers relying on Innovaccer as a single source for all their AI requirements, rather than procuring tools from multiple vendors.

This strategic outlook has attracted investor confidence. Rashmi Gopinath, an early Innovaccer investor previously with M12 and now a co-founder and managing partner at BAM Corner Point, commended the company’s proactive approach to integrating AI solutions.

She believes the rapid progress in generative AI will significantly benefit and accelerate the company’s growth. “I think the rapid advancements that we’re seeing in generative AI is going to be a huge tailwind and momentum driver for the company,” she stated.

Innovaccer intends to create some AI solutions internally, alongside strategic partnerships and acquisitions of promising AI technologies.

Shashank expressed confidence that successful execution of this vision could position Innovaccer as the leading healthcare business within five years. He added, “Fingers crossed,” expressing cautious optimism.