As The RealReal begins to trade, another technology IPO is coming into focus. Today, healthtech startup Livongo filed to go public with quick revenue growth, expanding losses, and a story outlining how it intends to replicate early success across more clients, and more illnesses.
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Livongo, founded in 2014 and based in Mountain View, raised $235 million during its life as a private company. Most recently, the firm raised a $105 million Series D led by General Catalyst and Kinnevik AB. Notably, both General Catalyst and Kinnevik co-led the firm’s Series C, and the former firm led its Series A. General Catalyst owns around a quarter of the company according to its S-1 filing.
Livongo claims to want to “empower people with chronic conditions to live better and healthier lives.” As far as corporate goals go, that’s not a bad approach to making money. Its model works by providing data collection tools (blood sugar testing devices for people with diabetes, for example) to users, coupled to a platform that tracks their personal data (and its progress or regression) and provides support.
Bringing actionable data and support to chronic illness sufferers is a good idea. Livongo has expanded from the diabetes market to other chronic conditions including hypertension and “prediabetes.” The company is also bringing its tech to bear on weight control, among other health issues.
As you can imagine, Livongo sells to large companies who roll its service out to 679 “clients” and 164,000 “members,” according to the company. In the first quarter of 2019, the company claims it added 50,000 of its members. That’s a lot for a single, three-month period given its preceding customer base.
How did that accretion of new users translate to growth in dollar terms? Let’s explore.
As an initial point of reference, Livongo sells its services to customers on a recurring, often multi-year contract basis. As such, we’re dealing with a SaaS-styled company, even though it deals with health issues and not, say, enterprise software.
To understand the company’s growth, let’s compare two time periods: its most recent set of full-year results, and its most-recent quarterly performance.
In yearly terms, Livongo grew from $30.9 million in revenue in 2017 to $68.4 million in 2018. That pace of growth, clocking in at over 100 percent, is the sort of expansion that investors (private and public alike) love to see. Its losses tracked higher at roughly the same percentage growth rate, rising from $16.9 million on a net basis to $33.4 million in the next year.
The company’s more recent performance is similarly sharp. In the first three months of 2018, Livongo posted revenue of $12.5 million, leading to a $4.2 million net loss. In the first three months of 2019, in contrast, Livongo generated revenue of $32.1 million, prompting a $15.0 million net loss. Again, each figure rising quickly as the firm ramps its sales and marketing, and general and administrative spending as its top line explodes.
Inside the headline numbers, the cost of Livongo’s growth is clearer. Observe the following chart tracking its cash consumption:
Translating, the company burned nearly as much cash across its operating and investing activities in the first quarter of 2019 than it did in all of 2018. So, Livongo is growing quickly, but at high expense. Investors likely won’t care given that its losses are merely tracking its revenue north as a manageable percentage, but the company’s cash position of $55.0 million at the end of Q1 2019 implies that it is going public now to raise capital to pay its bills.
Raising money in an IPO needed for operations is no sin, even if it feels retro in the era of Slack’s direct listing. But, Livongo is a company with a working model and a growth that many companies would kill for. All that’s left here is to figure out what the firm is worth, and get it out the door.
Illustration: Li-Anne Dias.