Carbon Health isn’t an outlier. It’s part of a trend that founders and senior managers must beware. This Editor didn’t know much about Carbon Health when news of its bankruptcy made the news [TTA 7 Feb]. It was of interest because of its telehealth roots and its growth into a current combination of bricks-and-mortar primary care with telehealth. The liabilities were king sized but the way out they chose was unusual, a combination of a sale and a reorganization.
In context and by comparison, Carbon Health follows a path of inevitable failure trod by two other companies, Olive AI and IBM Watson Health. 2022, an ‘in the money’ year for some, was the finis year for all these companies.
- Olive AI started to fall apart in late 2022, was closed or parted out a year later, and was a classic case of a company that was overfunded, all over the healthcare map, and finally ran out of time and money. (It was also funded heavily by General Catalyst, another red flag.)
- IBM Watson Health was originally a company that everyone wanted to like with playing chess on Jeopardy. As it grew, it became less lovable and, just like Olive AI, started to pursue multiple lines of business without a solid track record on their main lines as it gobbled up smaller companies. It started to go sideways as early as 2020, it repeatedly failed in high profile pilots with major healthcare organizations, parts were sold off, then the remainder sold by IBM by July 2022. Most of it still does business as Merative, maintaining a very low profile.
- Carbon started to fail in 2022 as the pandemic tide receded, their overextension was revealed, and their growth plans collapsed; despite buckets of cash extended by CVS and other investors, it was well on the road to bankruptcy. Their creation of and practice dependence on a proprietary EHR in retrospect was mind-boggling.
Get the cuppa and settle in. Stuart Miller of Haverin Consulting, writing on Substack (free article), draws the Ominous Parallels among the three companies first on a seven-point comparison grid: peak valuation (always inflated), core promise (always 35,000 feet), growth strategy (always hyper), strategic overreach (always too complex), technology gap (always aggravated by overreach), demand dependency (always a fadeaway), and outcome (inevitably, failure). He then illustrates what your company should avoid. What are the lessons smart founders and funders should be minding? If you’re a potential partner, investor, or a board member, what are the yellow and red flags? The deal breakers? The simple questions the company should be able to answer?
The subscriber version goes into far greater detail and is recommended if you have earnest money or your future at stake in digital health companies.
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