Why Lightspeed is Leading Aledade’s Series F

When we first met Aledade, co-founder and CEO Dr. Farzad Mostashari invited us to learn about the company, but also left us with a polite, albeit straightforward warning: this is a complex business, and we’d have to put in the work to understand the opportunity. We’re glad we accepted the challenge, and we are excited to lead Aledade’s $260M Series F financing round.

For background, Aledade helps independent practices, health centers and clinics deliver better care to their patients while enabling them to thrive in value-based care. Value-based care (VBC) is a care delivery models that aligns provider payments to quality of care. While there is a spectrum of VBC models, a core feature is the shift of risk from traditional payers to providers. Leveraging its deep data integrations and analytics, best practice workflows, regulatory expertise and broad payer coverage, Aledade empowers independent physician practices to succeed financially by keeping people healthy. Together with more than 1,500 practices in 45 states managing over $20 billion in medical spend, Aledade shares in the risk and reward across more than 150 value-based contracts representing more than two million patient lives under management. Aledade’s ability to concurrently scale a capital-light, tech-enabled model that aligns stakeholders across multiple lines of business while achieving industry-leading clinical outcomes and economics savings is what consistently differentiates the company in the growing VBC-enablement market.

With the intent to be helpful to others in our ecosystem and share a fresh perspective on Aledade’s potential, we want to share two core reasons that drove our conviction toward investment in Aledade.

Lightspeed puts tremendous weight on founders’ ability to articulate a vision for not just the company, but the specific market in which it innovates. In value-based care, with its myriad definitions and the inconsistency in which the concept is applied, the need for clarity of vision is paramount. For Farzad and his team, many of whom hail from the most senior roles in healthcare policy bodies, designing long-term, forward-thinking systems is not new. It wasn’t a surprise therefore that the team who helped spearhead and design the nation’s leading health initiatives, including the digitization of our health records and roll out of the Medicare Shared Savings Program (MSSP), is also the team that communicated the clearest vision of value-based care going forward — how Aledade will lead through both the tailwinds and headwinds of VBC ahead.

In this vision, what stood out most was the team’s ability to break the false dichotomy of practicality and ambition.

On one hand, Aledade’s initial focus on the MSSP program, which provides practices of all sizes with an opportunity for a gradual transition program from fee-for-service (FFS) to VBC, helped build the foundation of the business to date. Doing so, Aledade met the independent physician practice market where it was from a risk-taking perspective nearly a decade ago. This strategic yet practical decision also gave the company the time and reimbursement platform with which to gradually demonstrate an increasing ability to take on more risk and succeed at scale.

On the other hand, the ambition with which the Aledade team speaks and executes its core mission of alignment bears more resemblance to an early venture start-up than a Series F-stage company — and Lightspeed loves that. Despite nearing half a billion dollars in revenues last year, the company is innovating and investing in long-term growth like never before. From the latest technology developments, including powerful generative AI use cases to strategic services that complement Aledade’s core platform, we’ve been deeply impressed by the rigor of the team’s focus on investing in drivers of long-term growth.

Aside from clarity of vision, it is the execution of that vision that we found to be particularly compelling. Scaling across 1,500 physician practices, managing $20 billion of medical spend, and achieving more than 50% growth at the scale of $475 million in revenues are themselves impressive. What provoked Lightspeed to particularly high conviction, however, were the foundational flywheels that we believe can lead Aledade to become a multi-generational company. As we dug in, speaking with physician practices, policy leaders, and both internal and external product and technology leaders, we identified three distinct flywheels:

1. Network flywheel: Aledade executes an exceptional practice outreach playbook with a positive feedback loop. A critical mass of practices catalyzes Accountable Care Organization (ACO) formation, which leads to better payer contracts for participating practices, which in turn attracts more practices.
2. Engagement flywheel: Unlike other value-based care enablement companies, Aledade already services all the major business lines — MSSP, Medicare Advantage, Medicaid and Commercial. Aledade’s continued growth of its payer relationships leads to a higher percentage of a practice’s patient panel covered by Aledade’s risk pool, which leads to higher engagement by physician practices on Aledade’s tools and services, which leads to higher savings, resulting in more favorable payer contracts.
3. Data flywheel: Aledade has invested meaningful resources to build deep data and workflow integrations (e.g. hospital, pharmacy, claims and more). Aledade’s continued technology and data investments lead to higher fidelity insights and more actionable clinical interventions, which leads to improved health and economic outcomes for both Aledade and the ecosystem of upstream and downstream healthcare partners, which leads to higher trust and alignment to continue further data and workflow integration.

These are not just nice words — we found robust evidence driving all three flywheels, as was evidenced by Aledade’s healthy unit economics per practice with strong net retention trends. As larger cohorts mature and savings rates follow and likely improve on that of the earlier, smaller cohorts, we believe operating leverage and practice impact will continue to expand. While much remains to be done, we trust and are excited by the execution of the full Aledade team, many of whom are public company CEO-caliber executives who were compelled by the mission and larger opportunity at hand.

The fact that Aledade is one of the largest first-time checks into a company underscores Lightspeed’s conviction that Aledade will grow into a multi-generational company. Aledade is an exemplar of a new model of a true value-add, risk-bearing organization in the grand scheme of healthcare’s evolution in the US. At Lightspeed, we are humbled by the opportunity to lead investments in companies focused on patient impact — from early-stage seed start-ups to the largest late-stage growth rounds and beyond. We look forward to joining Aledade on their transformative journey as we continue to back the most impactful founders and working closely with them to turn their visions into reality.