Biggest bet yet for Kopelman's FirstRound: digital health insurer Clover

"We’re thrilled to announce our investment in Clover Health," the largest his firm has made in 10 years of backing industry-disrupting smartphone- and data-based businesses, like the Uber car service, writes Josh Kopelman, boss partner at West Philadelphia-based FirstRound Capital.

FirstRound committed $4 million -- seven to eight times its usual bet -- into a $100 million joint equity and debt fundraising, alongside New York's Flatiron Capital, in Clover, which has offices in San Francisco (data, engineering) and Jersey City (medical, finance, operations).

Founded by investment banker Vivek Garipalli and software engineer Kris Gale, Clover is a Medicare Advantage government-subsidized insurance plan for elderly people. It was previously known as CarePoint Health Plan. Garipalli is also co-owner of CarePoint Health System, a group of hospitals in northern New Jersey, with re investor Jeff Mandler and veteran hospital executive James Lawler. Clover Health was formerly known as CarePoint Health Plan. (Revised and corrected)

Kopelman said his fund is buying into Clover's "unique" mission: to out-compete larger insurance companies targeting government-paid Medicare Advantage patients, such as UnitedHealthcare and Aetna, by using digital patient and medical records to predict users' healthcare costs, schedule preventive care and reduce hospital visits. 

"It’s abundantly clear that today’s health insurance market is broken," according to Kopelman. "The giants shaping the industry are trailing 20 years behind. They have vast stores of data but aren’t leveraging them to improve the standard of service or care." Clover's modern analytics, according to his pitch, will speed diagnosis, "improve monitoring of preventative care and chronic conditions," and cut delays and administrative waste.

Clover targets rival Medicare Advantage providers in North Jersey with a program promising "$0 monthly premium, $0 co-pay for primary care doctors, $0 payment for generic prescriptions, and enhanced out-of-network benefits" to participating Medicare patients, as long as they accept Clover's direction on the care they need. Clover says this has resulted in "50% fewer hospital admissions and 34% fewer hospital readmissions" than typical Medicare patients in its target markets.

Kopelman and Flatiron CEO Nat Turner will join Clover's board. Kopelman, who is a member of the board of Philadelphia Media Network, which publishes the Inquirer and philly.com, added that Clover is a one-off and FirstRound will continue"writing checks for $250K to $750K," focusing on small "seed stage" firms in their first 18 months.