InstaMed, as part of JPMorgan Chase, faces new challenges and competitors

Tom Paine

By offering a better customer experience for healthcare payments, Philadelphia-based InstaMed created a new market and was acquired by JPMorgan Chase a year ago for a reported $500 million-plus.

But by no means is the market closed to competition. In fact, new investments are springing up all over the place. New York-based Cedar just scored a $102M series C funding round, led by Andreessen Horowitz, which has also been active in Philly lately. Cedar describes itself as having payment systems similar to InstaMed. I’ve found no information as to how much in payments Cedar is processing.

Also, Atlanta-based Patientco seems to be offering similar services. And San Francisco-based Alpha Heath just raised $29 million, led by Andreesson Horowitz again.

Total US healthcare expenditures are just under $4 trillion per year. Out of pocket consumer payments are about 10% of that, or $400 billion. That’s the primary market InstaMed serves. The market has grown faster than total expenditures, largely due to higher deductibles..

InstaMed is currently processing about $100 billion per year.

Some time before the JPMorgan acquisition, I had discussed with InstaMed management whether its product would become”smarter”, perhaps offering consumers more benefits and options.. I was told that InstaMed had operated to that point with a single objective of growing payment volume in a highly secure environment. That focus payed off. But I still think more intelligence could be built into its product.

Covid-19 has added complexities, but it could convert more consumers to online payments. InstaMed.now has just shy of 300 employees between Philadelphia and its Newport Beach data center according to LinkedIn (sometimes not a perfect indicator). It had 258 employees at the time of its acquisition.

JPMorgan is also part of joint venture Haven, along with Amazon and Berkshire Hathaway, that aims to revolutionize healthcare.

JP Morgan Chase closes InstaMed purchase

Jamie Dimon in Philly to welcome InstaMed to JP Morgan Chase (From press release)

Tom Paine

JP Morgan Chase CEO Jamie Dimon, an iconic leader in the financial community, came to Philadelphia yesterday to welcome InstaMed officially to the family, as the acquisition announced in May closed. InstaMed put itself up for sale in February.

I’ve seen the price mentioned as anywhere between $500 and $600 mllion.

Senior leadership, including the co-founders, CEO Bill Marvin and CTO Chris Seib, are staying on. Headcount is now at 275, according to a post by the co-founders. InstaMed’s data center operations remain in Newport Beach, CA.

Ownership by Morgan Chase likely means acquisitions will be more of a possibility. Instamed’s growth was completely organic.

InstaMed, founded in 2004 , raised $134 million. Osage Venture Partners, which was part of InstaMed’s early venture round, was one of the biggest beneficiaries of its success.

Financial Technology Partners LP and Pepper Hamilton LLP advised InstaMed, and Morgan Lewis & Bockius LLP advised InstaMed management.

Dimon was also in town last month for BIO 2019.