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YC-backed Pelago, a virtual clinic that treats addiction, raises $58 million in Series C funding

perago health, Used by Y Combinator-backed telemedicine companies Cognitive behavioral therapy (CBT) The company said Thursday it has raised $58 million in Series C funding to help treat patients suffering from tobacco, alcohol and opioid addictions.

The latest financing brings the total raised since its founding in 2017 to $151 million, two and a half years after Pelago (formerly known as Quit Genius) closed a $64 million Series B round during the COVID-19 pandemic.

Pelago co-founder and CEO Yusuf Sherwani told TechCrunch that the company plans to use the proceeds to attract more users, advance clinical research efforts and develop more products. Recently, the company expanded its virtual therapy sessions to include services for teens. The virtual clinic provides medication-assisted treatment for substance use disorders to adults and adolescents in all 50 states. It treats all severities and co-occurring mental health conditions.

Since its Series B round, Pelago has grown its revenue an impressive 11x and claims to have a 100% customer retention rate. The company did not provide a benchmark for its revenue. Sherwani said its full-time headcount has also tripled to 150 from 50 in 2021, indicating its rapid expansion.

Sherwani, Maroof Ahmed (COO) and Sarim Siddiqui (Product Lead) all met in medical school before founding Pelago. The impetus for starting the company came after the trio witnessed the devastating effects of smoking and other addictive behaviors: As the company explains, substance addiction and abuse exists on a spectrum, and each person’s experience and situation needs to be nuanced. A subtle approach, but straightforward medical approaches are often available. Not a panacea. CBT and its accompanying long-term approach have proven effective in helping many people figure out how to identify and solve problems. The co-founders combined this knowledge with technological advancements and the growing acceptance of telemedicine solutions to create Pelago, a solutions platform.

The company does not sell products directly to consumers. Instead, it works with employers and health care benefit providers who, in turn, each provide medical advice when an employee or health plan member actively seeks treatment for themselves (or their family members, if they are covered by the plan). They provide services. CBT currently focuses on substance abuse, specifically alcohol, tobacco, and opioids.

Pelago said its tele-CBT program includes a physician-led care team made up of doctors, nurses, counselors and coaches. The company diagnoses each user and develops a personalized care plan for them. Pelago members meet regularly with an in-app virtual care team that includes a health coach or a licensed drug and alcohol counselor. Its in-app telemedicine features include video and audio calling and a direct chat interface with a therapist. Therapists may also request structured health screenings for their members. It also offers PelagoRx, a medication-assisted treatment (MAT) delivered through a confidential prescription

Currently, Pelago has more than 100 enterprise customers spanning various industries including mining, manufacturing, technology, construction, education and healthcare.

As of August 2023, it had more than 750,000 registered users, according to the company’s website. TechCrunch reported that in May 2018, the company had about 300,000 registered users.

Image Source: Pelago Founder/Pelago

“Pelago provides comprehensive substance use management to employers and health plan populations, with specialized treatment for tobacco, alcohol and opioid use disorders, and support for teens,” the company’s CEO told TechCrunch.

In addition to the hit-and-miss nature of medical treatments, Sherwani said, they can also be very expensive.according to a surveyapproximately 67% of U.S. adults with an alcohol or illicit drug use disorder remain in the workforce. But treatment for substance use disorders can be very expensive for each individual with employer-sponsored insurance, Average of at least $15,640 per year.

Last year, Pelago published an internal study claiming that each participant using its services saw $9,367 fewer medical claims per year than a control group. According to the CEO, users of the Pelago platform are five times more likely to quit smoking within a year than other programs.

In addition to its virtual therapy interface, the company is investing in additional technology to support its business. For example, it launched Pelago Chart, an AI assistant for clinical teams to take notes more automatically.

Existing investor Atomico stepped up its Series C investment amid Pelago’s growth, leading the round, with other previous investors including Kinnevik AB, Octopus Ventures and Y Combinator also participating. New investors Eight Road and GreyMatter Capital also participated in the round.

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