The weirdest startup in healthcare has a blank check from General Catalyst

In the venture capital world, startups usually have to fight tooth and nail to prove they're worthy of investors' attention.

That is, unless the startup is itself the brainchild of an ultra-powerful VC.

Hemant Taneja, the CEO of top venture firm General Catalyst, cofounded the healthcare startup Commure in 2017, and launched it in 2020. According to PitchBook, Commure has raised well over $1 billion since then from General Catalyst and other investors.

It's made six acquisitions in four years — a remarkable number for a healthcare startup. Most recently, Commure was valued at $6 billion after merging with another of General Catalyst's portfolio companies.

It's also made plenty of missteps. The startup has all but abandoned its original mission: building a data platform to help developers integrate their apps with health systems' tech. It's cycled through four CEOs, including three since its 2020 launch. And one of Commure's acquisitions, Strongline, once the startup's biggest growth machine, has become a massive headache as Commure slings lawsuits against the makers of Strongline's tech.

It's all part of Taneja's colossal vision for General Catalyst's impact in healthcare — and it's clear that he will not, under any circumstances, allow Commure to fail.

Now, though, Commure seems to have settled on a vision that could stick. The startup is competing in a hot and increasingly crowded landscape, selling tech to automate healthcare administrative tasks like revenue cycle management and clinical documentation.

It's a smart move for Commure — investors and hospital systems alike are clamoring for solutions to make healthcare more efficient. Commure reaffirmed that direction in July by buying public medical scribe company Augmedix in a $139 million all-cash deal.

But whether Commure can dominate that market is almost beside the point. Commure has always enjoyed luxuries not available to other healthcare startups, including a seemingly endless network of partners and stockpiles of cash from General Catalyst.

It's all part of Taneja's colossal vision for General Catalyst's impact in healthcare — and it's clear that he will not, under any circumstances, allow Commure to fail.

"He's deeply invested in the success of the name Commure," one former Commure executive told Business Insider of Taneja's involvement. "If and when they hit their IPO date, even if it doesn't look anything like what he said it would in 2016, it doesn't matter. He just has to see it through."

Commure and General Catalyst did not respond to requests for comment.

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By the time Commure launched in 2020, Taneja had already gotten a taste of mega-success in healthcare VC.

Back in 2013, Taneja cofounded the diabetes company Livongo inside General Catalyst. The firm invested early and often in Livongo, and was its largest shareholder when Livongo went public in 2019. Livongo's IPO valued the company at $2.5 billion, making General Catalyst's 22% stake worth more than half a billion dollars.

Then, in 2020, Teladoc bought Livongo for $13.9 billion — a record-breaking sum that made Taneja's bold healthcare vision look all the more appealing.

As Livongo grew, Taneja began building the startup he hoped would lay the foundation for a new era of healthcare transformation. He hatched Commure inside General Catalyst in 2017 alongside former leaders from Google, Salesforce, and healthcare data analytics firm Health Catalyst.

In a Medium post announcing Commure's launch in 2020, Taneja introduced its core product: a tech stack for developers that would make it "faster and cheaper to build applications that are safe, secure, and play well with other applications and health systems."

But Commure's plan to lead with its own products proved challenging. The third-party developer platform was slowly sunsetted after Commure swapped out its CEOs in October 2021, according to three former employees.

Commure's new CEO, Dr. Ashwini Zenooz, unveiled a reimagination of that product in 2022, called CommureOS, a platform now built for health systems themselves that would allow healthcare leaders to integrate their existing solutions and create new ones internally.

Commure shopped the operating system around to a few health systems, namely General Catalyst's health system partners, some of which already had financial ties to the VC firm.

Two former employees identified Jefferson Health as one of the health systems that agreed to use CommureOS. The Philadelphia-based health system co-created a startup with General Catalyst, patient engagement platform Tendo, in 2020. Jefferson Health then said in October 2021 that it would partner with General Catalyst to tap into the firm's "health assurance network" and work with a number of the firm's portfolio companies, including Commure. The health system didn't respond to requests for comment for this story.

But CommureOS ultimately struggled to gain traction, four former employees said.

"There just hasn't really been a use case for it," one of the employees told BI.

With its tech foundations faltering, Commure turned to its real moneymakers — its acquisitions.

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In the past few years, Commure has made no secret of its intent to power its growth through acquisitions.

Inside the company, its leadership regularly shared the slogan, "M&A is in our DNA," former employees told Business Insider. CEO Tanay Tandon, previously the CEO of Athelas, told Business Insider in October that Commure was continuing to hunt for deals.

"Build versus buy? We'll just buy," one former Commure employee said.

The Athelas deal, while announced as a merger, was an acquisition as well, according to two investors with knowledge of the transaction. Commure used its cash reserves to buy Athelas and give itself another boost, those investors confirmed.

Athelas's products now appear to be Commure's primary growth engine. Athelas's revenue cycle management products, launched in early 2023, had been surging when Commure snapped up Athelas, according to those two investors and two former employees. Commure, which is no stranger to C-suite turnover, also slotted Athelas's CEO, COO, and CTO into those same roles at Commure.

Prior to the Athelas deal, Commure's most notable acquisitions were clinical workflow company PatientKeeper, bought in August 2021, and healthcare safety tech provider Strongline, bought in January 2022. PatientKeeper, founded in 1996, was a well-established business when Commure acquired it. Commure bought PatientKeeper from the health system HCA Healthcare, which had been running PatientKeeper since 2014.

As part of the deal, HCA Healthcare got a stake in Commure and notched a broad partnership with General Catalyst, a boon for the venture firm and for its healthcare startup darling.

Then Commure bought Strongline, arguably the startup's most successful buy, at least until its deal with Athelas. Under Commure, Strongline provided wearable panic buttons to hundreds of thousands of healthcare workers across the US.

Six former employees said Strongline was Commure's only growing revenue source at the time of the merger — all its other business lines, including PatientKeeper, had stalled.

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That deal came at exactly the right time. Just two months later, the makers of Strongline's tech spun out into a separate company, leaving Commure scrambling to reconstruct its workplace safety business.

Tandon told Business Insider in October that, aside from Athelas, most of Commure's growth was coming from Strongline.

But Commure didn't actually own the technology behind Strongline. What Commure bought in 2022 was the right to white-label and sell the safety badges, made by a company called SMP Labs, to health systems under Commure's brand, according to five former employees.

Commure first sued SMP Labs back in December 2022 for trying to terminate its agreement, after SMP Labs expressed frustration over delayed payments by Commure, per the lawsuit. That suit was dismissed the following March and settled out of court, according to documents seen by BI.

Later that year, in December 2023, SMP Labs broke away from Commure for good and took their technology with them, announcing their own company called Canopy to sell the tech to hospitals outside of Commure's brand.

Commure knew the launch was coming. SMP Labs filed to authorize its safety button technology with the FCC in July. Two weeks later, a third-party manufacturer filed to authorize the "Commure Tag," which included near-identical product details and photos to those in SMP Labs' filing.

Then, in December, five days after Canopy's news, Commure announced Strongline Pro, its recreation of Canopy's technology. The startup said only that Strongline Pro was "building upon the success of Commure Strongline."

It's not clear how Canopy's business stacks up to Commure's Strongline Pro business today — or how many of Commure's customers Canopy ran away with, if any.

Commure has certainly tried to resist Canopy's exodus. In April, the startup filed a lawsuit in the Northern District of California against Canopy, alleging that Commure had developed the idea behind Strongline as early as 2018 and that Canopy had breached the terms of its agreement to provide the underlying technology to Commure through the end of 2024. Those proceedings are ongoing, and Canopy hasn't yet filed a counterclaim against Commure as of August 29.

Commure also claimed in the April lawsuit that Canopy had failed to address key security vulnerabilities in its technology. Shortly after Canopy broke away from Commure, in January, Commure sent a report to its Strongline customers alerting them to these vulnerabilities, according to documents reviewed by BI. To address these security concerns, Commure said in the report, those customers should switch to Strongline Pro.

"Canopy's technology has been the foundation of Commure's business in staff safety," a Canopy spokesperson said in a statement to BI. "We continue to focus on innovation and pushing forward the wearable safety category we pioneered. Our hope is that Commure will choose to compete in the marketplace rather than in the courtroom."

With Strongline's business in limbo, Commure's future now depends on the foundations that Athelas built.

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Under Taneja's direction, General Catalyst has made several aggressive healthcare bets in the past decade.

Most recently, and controversially, the firm spun out a division to buy and operate an entire health system. General Catalyst announced in January that it was buying Ohio-based Summa Health, a nonprofit that the VC firm plans to turn into a for-profit enterprise.

The health system will also be a proving ground for General Catalyst's portfolio companies. The firm said the new division, called the Healthcare Assurance Transformation Corporation, or HATco, aims to build "an interoperability model with technology solutions including a subset of our healthcare portfolio companies."

"These investors, especially General Catalyst, are playing kingmakers. Even when one company is technically acquiring or merging with another, it's actually the VCs behind the scenes making the moves." Commure investor

Commure is sure to be one of those players. Axios suggested in November that Commure could build an AI-powered hospital operating system for Summa Health, standing in for Olive AI, a now-shuttered healthcare automation startup that once raised $902 million from top investors, including General Catalyst.

Although Taneja only launched HATco last year, he's been planting the seeds for a move like this since Commure's inception, spending years creating partnerships with powerful health systems and deepening those relationships by swapping assets back and forth.

General Catalyst said HATCo will work closely with its more than 20 health system partners, including HCA Healthcare. Given HCA's existing relationship with General Catalyst, and its previous sale of PatientKeeper to Commure, the health system may have something to do with Commure's acquisition of Augmedix. HCA invested in Augmedix in April 2023, and has been piloting Augmedix's technology in partnership with Google Cloud for the past year. HCA didn't respond to BI's requests for comment.

"These investors, especially General Catalyst, are playing kingmakers," a Commure investor who wasn't authorized to speak to the media told Business Insider. "Even when one company is technically acquiring or merging with another, it's actually the VCs behind the scenes making the moves."

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After years of strategic pivots and hefty turnover, some former employees said they felt disillusioned about Commure's prospects.

"When you look at the amount of cash that came in, likely behind Hemant and General Catalyst's reputation, the expectations are that there's something inside the company that's driving all of that," one former employee said. "There's this constant churn coming from needing to justify expectations that were set six or seven years ago, after several versions of the company that didn't demonstrate success."

The company is publicly confident in its new direction after jumping on the AI train. Commure's CEO Tandon told Business Insider after the Athelas deal, "It'll naturally become clear that this is going to be one of the big winners in healthcare." He said Commure was on track to go public in the next two to three years.

Commure is facing off with fierce competitors in healthcare administration AI, from hot startups like Abridge, Big Tech players like Microsoft's Nuance, and private-equity-backed businesses like R1 RCM.

Commure's $6 billion valuation doesn't quite match up with its place in that market. The startup said in October it was on track to hit a $150 million revenue run rate by the end of 2023, which would mean the startup had a valuation multiple of 40 times its revenue. In healthcare, valuations rarely exceed 10 times a startup's revenue. And for most startups, the venture funding slump has reset healthcare round sizes and valuation expectations.

With Taneja stewarding Commure through the VC ecosystem, however, the startup seems free from these typical limitations. General Catalyst will likely keep offering the startup a conveyor belt of health system partners, acquisitions, and fresh heaps of cash — for as long as Taneja is at the helm.

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Rebecca Torrence is a correspondent at Business Insider covering healthcare startups and venture capital. She can be reached via the encrypted messaging app Signal at +1 423-987-0320, or through email at rtorrence@businessinsider.com.