Welltok raises $18.7M for healthy social network CafeWell

By Jonah Comstock
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CafewellOnly four months into 2013, we've already seen several big moves from companies presenting as "health social networks."

In late January, Audax Health raised $21 million for its social network Zensey, and announced a partnership with Cigna. In February, employee wellness program Keas announced a new product that signaled a pivot into the health social network sphere. Last week, OneHealth raised $9 million for its health social network and announced a slew of employer and health plan partners.

Now Welltok, makers of the CafeWell social health management platform, have announced an $18.7 million raise. And although the company didn't announce employer or health plan partners, their platform is clearly targeted at what they call population managers -- reps for employers, providers, and especially health plans -- as well as at consumers. The company has only disclosed one customer, Coventry HealthAmerica, but it reports that it has two of the nation's largest health plans among its customers.

This is the second round of funding for the Denver-based company that's been around since 2009. Emergence Capital Partners, InterWest Partners and New Enterprise Associates (NEA) contributed to the round, which the company says it will use to "accelerate product development and strategic partnership efforts, expand into new markets, and build account teams to support the rapidly growing base of clients."

Welltok also announced that Jeff Margolis, the company's executive chairman for the last year and a half, has been appointed CEO. Margolis founded TriZetto, a healthcare SaaS company that was acquired for $1.4 billion by Apax Partners in 2008.

"I have a lot of confidence that we have a significant enough capital base to go and win this space," he said. "Not be one of the winners, but win it. And that ties very much with my excitement that we're doing something that's very important." Margolis says he thinks Welltok can provide value not just to its shareholders and customers, but also activate "the missing leg of the stool in healthcare, which is the consumer," and save money for the healthcare system in general.

Health plans sponsor consumers to participate in CafeWell. Once in, participants have access to health information, competitive wellness and fitness challenges, reward and incentive programs for healthier lifestyle changes, support for chronic conditions from peers and professionals, and anonymous social networking. The population managers, in return, get access to de-identified metrics on employee wellness and participation.

In a recent case study, the company found that engaging with CafeWell activities brought consumers up from 50 percent satisfaction with their health plan up to 66 percent.

The category of "health social network" is a hard one to pin down -- online patient communities like PatientsLikeMe have a social component (although the company resists the label "social network"), as do most wellness and fitness consumer apps. And many of the latter are directly or indirectly gunning for the employer and health plan markets as well (for instance, we wrote about EveryMove's backdoor employer strategy last week). What's clear is that it's an emerging and crowded field.

Unlike Facebook, whose back-end value to advertisers became clear after the juggernaut of adoption had already set in, these health social networks don't have much choice but to be upfront about their business model: they are selling patient health engagement -- and data to back it up -- to employers and health plans. But the people who need to really buy into these networks to make them succeed are the patients, users, and employees themselves. It's clear that many investors believe these platforms can secure that kind of engagement, and deliver value to payers. It remains to be seen if that confidence is justified.