The Defining Decade: CoverMyMeds Becomes a Billion-Dollar Baby
A good idea doesn't need to be glamorous to be lucrative. CoverMyMeds showed that in 2017, when McKesson, one of the largest health care companies in the world, purchased the Columbus prescription authorization startup for $1.3 billion.
Founded in 2008, CoverMyMeds develops software to automate the process of obtaining prior authorizations for prescriptions from health insurance companies. That mission isn't as sexy as, say, building a new social media platform. But it turns out solving a mundane but important problem in a gigantic industry can be enough to cross the 10-digit-valuation threshold, a milestone for the city's emerging startup community.
Columbus, of course, has a long history of birthing significant public companies, from L Brands to Wendy's to Cardinal Health. But what it hadn't done until CoverMyMeds came around was create a billion-dollar tech company—or “unicorn,” to use the common tech parlance. Local business leaders long speculated that it was possible, but nobody knew for sure until CoverMyMeds' big-ticket exit proved that the city had the talent, money, infrastructure and entrepreneurial vitality to midwife a business of scale in a more modern way. “It really validated what a lot of people have believed and have been working on, which is that you can build a great company in Ohio and in Columbus,” says CoverMyMeds co-founder and CEO Matt Scantland.
Read the rest of Columbus Monthly's Defining Decade series.
Since the acquisition, CoverMyMeds has grown tremendously, tripling its employees to 1,300 and announcing plans to build a new $240 million headquarters in Franklinton. What's more, out-of-state investors—including major Silicon Valley players—are now looking for opportunities in Columbus, with several Central Ohio startups securing major rounds of funding, including insurer Beam Dental ($55 million in 2019 and $22.5 million in 2018), biotech company Sollis Therapeutics ($50 million in 2018) and health care AI startup Olive ($33 million in 2018). “I can't tell you how many times we've had an inbound call from a venture capitalist saying, ‘I want to visit Columbus. Can you introduce me to the next CoverMyMeds?'” says Falon Donohue, CEO of Venture-Ohio, a statewide technology trade association. “People are interested in getting in on these opportunities because they now see that it can be built here.”
It also didn't take long for Columbus to birth a second billion-dollar tech baby. Root Insurance, an all-digital car insurance company that relies on an app that records driving habits, has raised a whopping $523 million in venture capital. The company is now valued at $3.65 billion, making it the first insurance tech startup in the country to achieve unicorn status, according to a report from Deloitte. Root, Beam Dental, Olive and several more of the city's hottest startups are backed by Drive Capital, the $1.1 billion, Short North-based venture fund co-founded by Silicon Valley transplant Mark Kvamme. Kvamme faced plenty of skepticism when he launched his fund focused on Midwestern companies in 2013. “The coastal reactions were, ‘You're nuts. The Midwest is where VC goes to die,'” he says.
But those critics aren't scoffing now that several of his companies are following the path blazed by CoverMyMeds. “The way I look at CoverMyMeds is, it was a great justification for what we were doing at Drive,” Kvamme says.
Like what you're reading?Subscribe toColumbus Monthlymagazine so that you keep abreast of the most exciting and interesting events and destinations to explore, as well as the most talked-about newsmakers shaping life in Columbus.
January: Colo, the matriarch of the Columbus Zoo's gorilla family and the oldest gorilla in captivity, died in her sleep at the age of 60.
April: Developers proposed building a skyscraper next to the North Market, part of a wave of new development reshaping the Short North and Downtown.
September: The opioid crisis hit Franklin County hard, with overdose deaths jumping from 353 in 2016 to 383 in the first nine months of 2017.
Other 2017 Moments