This story is the first in a series about startups that fell off the unicorn track. Some of those startups continue the struggle; others are dead. Olive is in the latter category.
Sean Lane and Brad Mascho had a great idea: link patient medical records with a single ID based on a patient’s fingerprints. Linking diverse medical records to a single known party could improve patient care, lower costs, and prevent identity theft. They secured a Series A round worth $5 million from Drive Capital, a new investment firm in Columbus, Ohio. With this capital, they set up shop in Columbus, doing business under the CrossChx brand.
By late 2015, CrossChx claimed 6 million patient identities from one million patient visits and an “acceptance rate” of 97%. CrossChx flooded the wires with stories about hospitals adopting their tech. Sure enough, in April 2015, they landed a Series B for $15 million from Drive Capital and one new investor, Khosla Ventures.
In the Series B announcement, the company claimed 100 hospital deployments. It would be impressive if those hospitals paid for the product. “Our natural inclination would be to charge hospitals,” said Lane. “But that’s not how you build a huge company and change an industry.” CrossChx counted on a cut of the savings if its technology stopped fraud and waste. To do that, they had to sign up huge numbers of users quickly. To cut costs, they used subsidized IT infrastructure provided by backers in Columbus, Ohio.
“This is what we do in Silicon Valley every day,” said Mark Kvamme, who led the original investment. He cited Google, Facebook, Twitter, and others that built an audience before they figured out revenue.
Most investors will grant seed money to startups without revenue, but they expect to see at least some paid customers before granting a Series A or B round. How did CEO Lane pull off this trick? He’s hard-nosed, said GeekWire. He rented a condo in Silicon Valley. He served five tours of duty in Afghanistan and Iraq. These are just the qualities we need in a healthtech executive.
In late 2015, CrossChx added a patient registration kiosk to its product line, branded as Queue. The company charged hospitals $299 monthly for each kiosk but still offered the identity management system (SafeChx) for free. CrossChx now claimed to have “resolved” 36 million patient profiles.
By late 2017, CrossChx had secured two more venture capital rounds, bringing its total funding to $40 million. Investors included Khosla Ventures, Silicon Valley Bank, and the aptly named Moonshots Capital. The company now claimed 1,000 deployment locations and 50 million patient profiles. Journalists breathlessly reported that sales for the company were “taking off.”
Stop me if you’ve heard this story before.
Brad Mascho moved on at the end of 2017. The company rebranded as Olive AI and positioned itself as an RPA and AI vendor. The pivot paid off quickly when the company landed a Series D round for $32.8 million in July 2018. The company said it would use the new funds to expand customer adoption for its core product and develop a new process mining product.
Betting on RPA was an odd strategy for Olive. At this point, RPA was an established category with numerous established players. Healthcare providers had unique requirements, but all major players had vertical solutions.
The company had raised $73 million through five rounds but wasn’t done yet. By April 2020, Olive claimed 500 hospital deployments and positioned itself as an automation tool for hospital administration. Leveraging that message, the company raised another $51 million in a Series E round led by General Catalyst.
CEO Sean Lane told journalists reporting on the round that the company quadrupled its topline growth from 2017 to 2018 and tripled it from 2018 to 2019. It had over 200 employees, double its headcount from last year.
Lane also delivered this word salad:
Olive’s offering…is delivered as a AI-as-a-Service model, bundling artificial intelligence technologies - robotic process automation (RPA), computer vision (CV), machine learning (ML) and deep learning (DL) capabilities - with scoping, implementation, support and optimization services. Olive learns collectively. This means whether Olive is proactively identifying and managing through third-party updates or isolating the root causes of denials, her growing wisdom allows providers to operate at the industry best, not just their personal best.
Holy shit, it’s like an artificial brain or something.
Six months later, Olive returned to the well and secured another $106 million in a Series F, raising its total capital to $220 million. The company now described its tech as an “on-site command center that rapidly deploys and manages artificial intelligence workers to health systems.” Olive claimed to have more than 600 hospital customers – 100 more than the number claimed six months previously. Olive also said it had expanded its workforce to 360 people, adding 67 new “Olivians” in August 2020.
Olive also announced a new product, Olive Helps. CEO Lane described it as “an ever-present companion that’s always sensing the needs of human workers and delivering valuable information tailored for the individual user and their environment." According to the company, Olive retrieved relevant intelligence and delivered it to employees as "whispers.” "Those 'whispers' act like a notice, alert, or pop-up that says, 'This is the right medication code to use' or 'Here is this patient's insurance information,'" said Lane.
I’ll bet those workers loved being told how to do their jobs.
In the first nine months of 2020, Olive raised $158 million. You would think their arms were getting tired from raking in all that cash.
Then, in December 2020, the company raised another $225.5 million in a Series G led by Tiger Global. That brought the total capital raised to $448 million. Olive also announced some window-dressing hires to fluff the company for an IPO. Based on the newly announced valuation of $1.5 billion, Crunchbase declared the company a unicorn.
Someone should tell Crunchbase that startup valuations are bullshit.
CEO Lane made vague statements about using the new money to support the entire healthcare ecosystem. In truth, I suspect he didn’t fucking know what to do with the money, so he used it to acquire other startups, including Verata Health and Empiric Health. Olive paid $120 million for Verata and an undisclosed amount for Empiric. Lane also started Olive Ventures to incubate healthtech startups.
Meanwhile, Lane carved out a separate company, Circulo Health, and raised $50 million from some of Olive’s investors. Circulo would run on Olive’s IT infrastructure and focus on the Medicaid market. Since Lane was completely on top of things at Olive and had spare time, he also made himself the CEO of Circulo.
By July 2021, Olive’s new executive hires had fluffed the company valuation up to $4 billion. A veritable quadricorn. That was enough to secure one last funding round, a Series H worth $400 million. Olive now claimed it was creating the Internet of Healthcare, “connecting patients, providers, and payers,” messaging that demonstrated the new CMO’s gift for alliteration.
The company’s eponymous product had she/her pronouns. "Olive is the leading force for rapid product development to better empower the humans in healthcare. She is being hired at health systems and insurance companies across the country at lightning speed," said CEO Lane. "Olive's widespread adoption as mission-critical tech makes it clear that now is the time for the healthcare industry to pull into the lead position for enterprise AI adoption."
With a laser-like focus on the important things, Olive’s executive team commissioned Dawn Goldworm, an “internationally recognized olfactive expert,” to create a unique scent for Olive. Goldworm is the co-founder and Chief Nose of 12.21, an “olfactive branding agency,” and Scent For Good, an organization committed to “healing through the power of scent.”
The fruit of her efforts: Frisson by Olive.
You can’t make this shit up.
With $850 million in venture capital and a pleasing aroma, Olive was now poised to transform healthcare. Employee headcount surged from 230 in 2020 to 800 in July 2021, passing 1,000 three months later.
The Olive Bus carried the good news to hospitals around the country.
October 2021 was Peak Olive.
It didn’t take long for the wheels to come off. Axios started sniffing around in early 2022, writing that Olive “overpromises and underdelivers” and “fails to deliver on lofty promises.” Some IPO-fluffing executives left in May; the CMO joined another healthtech startup with new venture funding that fared no better than Olive.
In June 2022, CEO Sean Lane explained to a TechCrunch panel how Olive pivoted 27 times in ten years. He thought this was a good thing.
The hits just kept coming. Olive froze hiring “to conserve capital” in June 2022; the company had burned through much of that Series H monster raise. A month later, the company cut 450 jobs.
"Our fast-paced growth and lack of focus strained our product and engineering resources and prevented us from executing quickly on key initiatives," CEO Sean Lane told staff, in a nonsense explanation. Was it the fast-paced growth or the lack of focus? Revenue growth doesn’t strain product and engineering resources; that strain comes from chasing product squirrels. And if your resources are strained, it doesn’t make sense to cut 450 of them. The more likely explanation is that Olive overhired, missed its revenue targets, and burnt cash too fast.
"I take responsibility for this,” said Lane. Two months later, he took personal responsibility for his mistakes by firing the CFO and Chief Product Officer. The CFO joined his friends at Vista Equity Partners, who led the Series H deal he had negotiated a year previously. The CPO spent a year as an “advisor,” and then secured seed money to launch a startup “empowering a healthier workforce and a healthier bottom line.”
Sounds promising. But do they smell good?
Olive flushed another 215 jobs in February 2023. After that, Olive started selling pieces of itself. First, it sold the Utilization Management business; the Business Intelligence Platform went next. Finally, on October 31, 2023, the company announced the sale of its clearinghouse and patient access units to Waystar and the prior authorization business to Humata Health.
Oh, and by the way, the company also announced it would shut down. A few employees went to the organizations that bought Olive’s parts. The rest suddenly became “Open To Work.”
Olive collapsed five days after JobsOhio requested a default judgment in its lawsuit against the company. JobsOhio spent $600 thousand to recruit and train Olive employees; the organization claimed that Olive had not met local hiring and payroll commitments. Olive did not respond to the lawsuit.
Humata Health was a shell company created by the founder of Verata Health, who was buying back the business he had sold to Olive less than two years previously. Olive paid $120 million for Verata; Humata bought it back from Olive for $1.25 million.
When I attended the Wharton School, they taught me that it is better to buy things at a low price and sell them at a high price.
Waystar paid $10 million dollars for its piece of the business. Availity paid $35 million for the utilization management business. Sean Lane paid $1 million for Olive’s stock in five health IT startups owned by Olive Ventures. He also paid $50 thousand for 25 desks, 40 computer monitors, and a Ford cargo van.
In business school, they call it a fire sale.
What was left for VC investors and employee shareholders?
Olive had borrowed more than $100 million from Silicon Valley Bank in 2020. After SVB collapsed in March 2023, First Citizens Bank of Raleigh, North Carolina, acquired the US loan portfolio. The bank had first claim on Olive’s assets. Olive made a partial payment to the bank with asset proceeds, leaving nothing for preferred or common shareholders.
VC investors ordinarily hold preferred stock. Ascension Ventures, Base10 Partners, Dragoneer Investment Group, Drive Capital, Employee Stock Option Fund, General Catalyst, Google Ventures, Healthy Ventures, Khosla Ventures, Moonshots Capital, NCT Ventures, Oak HC/FT, Sequoia Capital Global Equities, Silicon Valley Bank, SVB Capital, Tiger Global Management, Transformation Capital, and Vista Equity Partners all wrote off their entire investment in Olive.
Employee shareholders are at the end of the line. They got nothing.
Why did Olive collapse?
The original CrossChx technology was promising, but the founders thought they were building the next Google. Credulous VC investors wanted to believe that story. Sean Lane was more than happy to tell them what they wanted to hear.
By offering hospitals free software, CrossChx/Olive developed a large database of patient profiles. CEO Lane envisioned building a knowledge graph for fraud detection across those patient profiles. That’s not new; large health insurance carriers have done this for years. It’s a moot point; credible insiders say the company never got close to building such a graph.
So Olive kept pivoting and pivoting. CEO Lane thought this was a virtue; that was his ego speaking. Successful startups focus like a laser on their core value proposition. They do not chase squirrels every time the CEO has a new idea. They execute a business plan with discipline.
Around 2020, Sean Lane decided he was in the money business, not healthtech. It’s much more fun to be a dealmaker than a boring company manager. Cultivating generous investors, he built a massive warchest with no clear idea for what to do with it. He overpaid for acquisitions, grossly overhired, and mismanaged Olive’s operating cash flow.
I suspect that First Citizens had tighter credit standards than Silicon Valley Bank; they may have called the loan or declined additional credit. Olive attempted to raise money in the end but failed to do so. A liquidity crisis ensued, and the company collapsed.
The remaining employees got one to three days’ notice. No word on what they did with the bus.
Great story, in the sense of finely wrought. I remember when Sand Hill Road (and occasionally Rte 128) stories offered up one of these a generation, and a handful that miraculously survived despite everything. They metastasized during the Dot-com era; I met with 50+ companies a week who held no water but had passionate stories and expensive tchotchke. I reckon these stories now outnumber the poor earnest suckers with their workmanlike value propositions and simple love of the technology....
you can't make this shit up. keep it coming Thomas.