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Color raises $167 million funding at $1.5 billion valuation to expand ‘last mile’ of U.S. health infrastructure

Healthcare startup Color has raised a sizeable $167 million in Series D funding round, at a valuation of $1.5 billion post-money, the company announced today. This brings the total raised by Color to $278 million, with its latest large round intended to help it build on a record year of growth in 2020 with even more expansion to help put in place key health infrastructure systems across the U.S. – including those related to the “last mile” delivery of COVID-19 vaccines.

This latest investment into Color was led by General Catalyst, and by funds invested by T. Rowe Price, along with participation from Viking Global investors as well as others. Alongside the funding, the company is also bringing on a number of key senior executives, including Claire Vo (formerly of Optimizely) as Chief Product Officer, Emily Reuter (formerly of Uber, where she played a key role in its IPO process) as VP of Strategy and Operations, and Ashley Chandler (formerly of Stripe) as VP of Marketing.

“I think with the [COVID-19] crisis, it’s really shone the light on that lack of infrastructure. We saw it multiple times, with lab testing, with antigen testing, and now with vaccines,” Color CEO and co-founder Othman Laraki told me in an interview. “The model that we’ve been developing, that’s been working really well, and we feel like this is the opportunity to really scale it in a very major way. I think literally what’s happening is the building of the public health infrastructure for the country that’s starting off from a technology-first model, as opposed to, what ends up happening in a lot of industries, which is you start off taking your existing logistics and assets, and add technology to them.”

Color’s 2020 was a record year for the company, thanks in part to partnerships like the one it formed with the the City of San Francisco to establish testing for health care workers and residents. Laraki told me they did about five-fold their prior year’s business, and while the company is already set up to grow on its own sustainably based on the revenue it pulls in from customers, its ambitions and plans for 2021 and beyond made this the right time to help it accelerate further with the addition of more capital.

Laraki described Color’s approach as one that is both cost-efficient for the company, and also significant cost-saving for the healthcare providers it works with. He likens their approach to the shift that happened in retail with the move to online sales – and the contribution of one industry heavyweight in particular.

“At some point, you build Amazon – a technology-first stack that’s optimized around access and scale,” Laraki said. “I think that’s literally what we’re seeing now with healthcare. What’s kind of getting catalyzed right now is we’ve been realizing it applies to the COVID crisis, but also, we started actually working on that for prevention and I think actually it’s going to be applying to a huge surface area in healthcare; basically all the aspects of health that are not acute care where you don’t need to show up in hospital.”

Ultimately, Color’s approach is to re-think healthcare delivery in order to “make it accessible at the edge directly in people’s lives,” with “low transaction costs,” in a way that’s “scalable, [and] doesn’t use a lot of clinical resourcing,” Laraki says. He notes that this is actually very possible once you re-asses the problem without relying on a lot of accepted knowledge about the way things are done today, which result in a “heavy stack” vs. what you actually need to deliver the desired outcomes.

Laraki doesn’t think the problem is easy to solve – on the contrary, he acknowledges that 2021 is likely to be even more difficult and challenging than 2020 in many ways for the healthcare industry, and we’ve already begun to see evidence of that in the many challenges already faced by vaccine distribution and delivery in its initial rollout. But he’s optimistic about Color’s ability to help address those challenges, and to build out a ‘last mile’ delivery system for crucial care that expands accessibility, while also making sure things are done right.

“When you take a step back, doing COVID testing, or COVID vaccinations is actually those are not complex procedures at all – they’re extremely simple procedures,” he said. “What’s hard is doing them massive scale, and with a very low transaction cost to the individual and to the system. And that’s a very different tooling.”

Tech’s role in the COVID-19 response: Assist, don’t reinvent

The pandemic has affected just about every business in the world, but tech has also geared up to fight back in its own way, as we found out from speakers at Disrupt 2020. But technology has opted to take a back seat to frontline workers and find ways to support them rather than attempt to “solve” the issues at hand.

The founders of tech-forward healthcare startups Color and Carbon Health explained their approach in one panel, emphasizing that the startup mindset is a resilient and adaptable one.

“You’re seeing, I think, the distributed nature of the U.S., where at some point it’s clear that you can’t wait for someone to solve your problem, so people just start jumping in and building the solution themselves,” said Othman Laraki, Color’s CEO.

His company took on the issue of bottlenecks in the COVID-19 testing ecosystem, finding that with a few tweaks Color could contribute a considerable amount.

“We realized that there were several assets that we could bring to bear,” he said. “We decided to build a platform to get around some of the logistical constraints and the supply chain constraints around COVID testing. We did that, got large-scale COVID testing lab online, but also repurposed a lot of our digital platforms for COVID testing … I think we’re doing approximately 75% of all the testing in SF right now.”

Carbon Health CEO Eren Bali noted that companies like theirs are important props at a time when the medical infrastructure of the country buckles under pressure.

“At this point the U.S. doesn’t have the best public health system, but at the same time we have best-in-class private companies who can sometimes operate a lot more efficiently than governments can,” he said. “We also just recently launched a program to help COVID-positive patients get back to health quickly, a rehabilitation program. Because as you know even if you survive it doesn’t mean your body was not affected, there are permanent effects.”

This type of at-home care has become increasingly important, both to take pressure off hospitals and frontline workers and to improve accessibility to resources.

“Sometimes the cost of care is a lesser problem compared to the access,” said Laraki. “Like if you need to drive for an hour and take time out of your day, etc., if you’re an hourly worker. That’s what makes healthcare inaccessible.”

Color is launching a high-capacity COVID-19 testing lab and will open-source its design and protocols

Genomics health technology startup Color is doing its part to address the global COVID-19 pandemic, and has detailed the steps its taking to support expansion of testing efforts in a new blog post and letter from CEO Othman Laraki on Tuesday. The efforts include development of a high-throughput lab that can process as many as 10,000 tests per day, with a turnaround time of within 24 hours for reporting results back to physicians. In order to provide the most benefit possible from the effort of standing this lab up, Color will also make the design, protocols and specifics of this lab available open-source to anyone else looking to establish high-capacity lab testing.

Color’s lab is also already nearly ready to begin processing samples – it’s going live “in the coming week,” according to Laraki. The Color team worked in tandem with MIT’s Broad Institute, as well as Harvard and Weill Cornell Medicine to develop its process and testing techniques that can allow for higher bandwidth results output vs. standard, in-use methods.

The focus of Color’s efforts in making this happen have been on using automation wherever possible, and seeking techniques that source parts and components, including reagents, that can come from different supply chains. That’s actually a crucial ingredient to being able to ramp efforts at scale nationally and globally, since if everyone is using the same lab processing methods, you’re going to run up against a bottle neck pretty quickly in terms of supplies. Being able to process tens of thousands of tests per day is great on paper, but it means nothing if one ingredient you need to make that happen is also required by every other testing lab in the country.

Color has also made efforts to address COVID-19 response in two other key areas: testing for front-line and essential workers, and post-test follow-up and processing. To address the need for testing for those workers who continue to operate in public-facing roles despite the risks, Color has redirected its enterprise employee base to providing, in tandem with governments and employers, onsite clinical test administration, lab transportation and results reporting with patient physicians.

For its post-test workflow, Color is working to address the challenges reported by other clinicians and health officials around how difficult it is to be consistent and effective in following up on the results of tests, as well as next steps. So the company is opening up their own platform for doing so, which they’ve re-tooled in response to their experience to date, and making that available to any other COVID-19 testing labs for free use. These resources include test result reporting, guidelines and instructions for patients, follow-up questionnaires around contact tracing, and support for how to reach out to potentially exposed individuals tied to a patient who tests positive.

To date, Color says that its been able to operate at cost, in part backed by support by philanthropic public and private donations. The company is encouraging direct outreach via its [email protected] email in case anyone thinks they can contribute to, or benefit from the project and the resources being made available.