Digital benefits startup First Dollar raised $14 million led by Blue Cross Blue Shield Association's venture arm, with participation from Next Coast Ventures and Meridian Street Capital, the company announced on Thursday.
First Dollar, which offers a digital wallet consumers can use to spend tax-advantaged cash like Health Savings Accounts, adds the Series A round to cash from angel investors Firefly Health CEO Fay Rotenberg, Bright Health Group chief technology officer Brian Gambs, RPM Ventures Managing Director Marc Weiser and more. The Austin-based company said it has raised $19 million in total venture funding.
"Paying for care is the main way consumers engage with their health plans. However, the consumer payment experience today requires consumers to navigate a complex web of healthcare benefits, spending accounts and payment cards," Michael Spadafore, managing director at the Blue Venture fund, said in a news release. "First Dollar's platform and vision to power a unified health wallet are critical to streamlining how consumers pay for healthcare."
The startup emerged from beta in May 2020 and was co-founded by Colin Anawaty and Jason Bornhorst, who sold their care coordination startup Patient IO to athenahealth for an undisclosed sum in 2016. Athenahealth's former CEO Jonathan Bush is also an angel investor in First Dollar.
The business got its start by focusing on drug discounts through a partnership with RxSaver, and has now expanded to streamline consumer use of tax-advantaged savings accounts, like HSAs or supplemental benefits. In the almost two years since the company's launch, it counts cash pay startup Sidecar Health, and digital brokers KindHealth and Decent Health as customers. The startup plans to invest the Series A funding to develop its platform to accept additional benefit types.
Despite the increasing popularity and value and assets linked to HSAs, First Dollar claims that very few individuals actually use the funds they–or their employer–have contributed to the accounts thanks to bad UX. The accounts, which are only available to people with high-deductible health plans, grew to $92.9 billion in assets in more than 31 million accounts at the end of June 2021, with account value increasing 26% year-over-year and number of accounts increasing 6%, according to research by HSA advisory group Devenir. The company said HSA assets have doubled in the last three years.
UnitedHealth Group's Optum Financial claims to be the leading provider of HSAs nationwide with more than 8 million accounts. The space has also attracted other venture-backed competitors, including San Francisco-basd Lively, which has raised $122.2 million in funding.