The year 2023 was not a great one for health tech startups. The boom they witnessed in the pandemic years was catching up to them last year. However, no news was as shocking as the sudden end of Olive AI. Once touted as the star of health tech startups, the fall of Olive AI came as a surprise to everyone. How did a $4 billion startup grabbing praises in 2022 meet such a rapid demise? Let’s try to dig deeper.
What was Olive AI?
Olive AI Inc. was founded in 2012 in Columbus, Ohio by CEO Sean Lane and CTO Jeremy Yoder. The company was created with the vision of utilizing artificial intelligence in the healthcare industry.
Sean Lane initially envisioned a very specific use case for his company’s AI solutions – automation. Olive AI aimed to use AI to automate labor-intensive tasks like data entry, prior authorization, and claims processing. These repetitive tasks were the ideal test cases for AI-enabled automation that would save precious time for healthcare staff and improve operational efficiency.
However, Olive AI soon started expanding to more use cases for their product. These included:
At its peak, Olive healthcare emerged as a comprehensive AI-enabled solution to improve the operational efficiency of hospitals across multiple dimensions.
The Meteoric Rise
For most of its early years, Olive AI focused on building its base and getting a decent clientele. They saw success as their product was widely adopted by major healthcare providers and received praise.
However, their true rise began only after 2019, when the company announced expansion of their staff to accommodate for the ever-increasing sale of their products. In 2020, they secured $106 million in funding from Ascension Ventures. A few months later, in December 2020, they acquired another $225.5 million in funding, bringing their net worth to $1.5 billion. The same month they began their string of strategic acquisitions, beginning with acquiring Verata Health. The company’s primary product was built on using AI to streamline the Olive revenue cycle of hospitals.
In April 2021, the company acquired the AI analytics startup Empiric Health. The next month, it collaborated with Asus to provide AI coding assistants to more than 750 hospitals. In July, it acquired another $400 million in funding, bringing its total valuation to $4 billion.
The Tragic Fall
As 2022 began, Olive.AI stood firmly as the most promising startup in the health-tech domain. However, by mid-year, troubling news began to leak out of the company. First, the company introduced a new revenue management system – at the time cited as a routine exercise – and froze all new hires. The next month, they laid off 450 employees. In September, the CFO, CPO, and the president of the payer market, left the company at once. This was the first sign that Olive AI might be becoming a sinking ship.
In October, the company announced that it had lost two of its major healthcare clients. In February 2023, the company fired another 215 employees. Olive AI continued acquiring small funding in the meantime. As of March 2023, it had cumulated $852 million in funding – the most investment a health tech startup had ever received. But despite this, the company started selling off its assets in the coming months.
In April, it sold off its management utilization line of products to the firm Availity. In June, the business intelligence line was bought by BurstIQ. Some experts commentated that the company is trying to drop dead weights to save the rest of the company. However, they were sadly mistaken. On October 31, the company formally announced that it was shutting off. It also announced that the Olive clearinghouse and patient access business line was sold to Waystar, while the prior authorization unit to another startup, Humata. All remaining business units were shut down.
What Went Wrong?
Barely two years ago, it would have seemed foolish to suggest that Olive AI – touted to be the next big thing in the healthcare domain – would shut down so rapidly. But now, as the smoke clears a few months after the incident, we can see better. Here is everything that contributed to the early demise of the promising startup.
A Fate Similar To Others
While the most shocking, Olive AI is hardly the first victim. In 2021, the health-tech domain was booming, and startups in this domain collected $29 billion in funding rounds. However, this had dropped to just $2.5 billion in the 3rd quarter of 2023 – almost a drop of 65% when extrapolated to annual numbers. Far fewer startups are now raising IPOs or going public, which is a sign of diminishing confidence.
However, all is not bleak. As the healthcare domain stabilizes, it would be worth noting which companies managed to stand their ground during this storm. At the end of this, these companies are likely to acquire the failing or defunct startups to start the next wave of health-tech solutions.
