Avelios Secures $31M in Sequoia-Led Funding to Revolutionize Healthcare IT

The race to modernize healthcare software is heating up, with many hospitals still relying on outdated systems that haven't seen an update in years. Enter Avelios, a Munich-based startup with a bold vision to revolutionize healthcare operations with a new, comprehensive operating system. This system leverages cutting-edge technologies like AI and cloud services. The company recently secured a significant boost with a €30 million ($31 million) Series A funding round, announced on Thursday, signaling strong investor confidence in their approach.

Sequoia, leading the investment from its London office, spearheaded the round, with participation from earlier seed investors such as High-Tech Gründerfonds, Revent, and individual contributors. Although Avelios is keeping its valuation under wraps, the funding follows impressive growth fueled by just €5 million in previous investments. The company has already secured 12 customers in Germany, including major players like Sana Kliniken AG, one of the country's largest private hospital chains, the hospital of Ludwig Maximilians University in Munich, and the hospital of the Hannover Medical School.

"I think we've been quite efficient," CEO Christian Albrecht shared with TechCrunch, attributing the success to a strong engineering team and a dedicated group of 11 medical doctors on staff.

Co-founded by Albrecht, CTO Nicolas Jakob, and chief medical officer Sebastian Krammer, Avelios plans to use the fresh funds to further develop its system and expand into new markets. Discussions are underway with a hospital chain in Spain, and the company is eyeing opportunities in France and the UK.

Covid Beginnings

Avelios is taking a ground-up approach to healthcare system development, targeting a market traditionally characterized by fragmented systems designed for specific functions, often requiring complex integrations that don't always mesh well.

The company's origins trace back to the challenges faced during the COVID-19 pandemic, which highlighted the inefficiencies of Germany's healthcare infrastructure. Sebastian Krammer, working as a doctor during the crisis, found himself manually counting patients and reporting data, a task that underscored the need for a better system.

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"He ran through hospitals and spent almost all of his time counting patients by hand and then reporting the results to authorities by hand," Albrecht recounted. Krammer then collaborated with Jakob, a seasoned software engineer and deep learning expert, to develop a solution for improved reporting and trend analysis. Their initial efforts revealed a critical issue: the outdated hospital systems couldn't supply the necessary data for their AI research.

With Albrecht, a long-time friend of Jakob's, joining the team to bring structure to their efforts, they faced a pivotal decision. "Should we either treat the 'symptoms' and build a point solution on top of that existing chaos, on top of the existing IT systems, or do we actually treat the root cause of this, and build an entirely new hospital information system?" Albrecht recalled. They chose the latter, a challenging path but one they believed would address the core issues and set the stage for advanced AI applications.

Years of development culminated in a comprehensive system covering all administrative aspects, including electronic health records (EHR), billing, clinical records, lab results, patient portals, and collaboration tools for researchers and multi-departmental teams.

Shifts in the Market

Several market shifts have aided Avelios in securing contracts with healthcare providers. Firstly, SAP, a dominant player in legacy IT systems, is transitioning its enterprise resource planning (ERP) business to a cloud-based model, moving away from long-term vertical-specific solutions. This shift leaves over 1,000 hospitals needing new providers when upgrading, and SAP recommends Avelios as a transition partner.

Secondly, the push for AI in healthcare is driving demand for systems that can handle structured, interoperable data, something legacy systems struggle with. Avelios's modern approach aligns perfectly with these needs.

Investor Attention on Pragmatic Wins

Sequoia's interest in Avelios was sparked by an introduction from Revent, one of the seed investors. "Avelios was under the radar building this system for four years," said Anas Biad, Sequoia's partner leading the investment. He was impressed by the company's ability to quietly secure significant clients in Germany, which prompted a swift investment decision.

Despite the ambitious scope of their project, Avelios approaches it with pragmatism. Hospitals can't afford to overhaul their entire systems at once, so Avelios offers modular solutions. "We can land modularly with customers," explained Albrecht. This could mean starting with administrative documentation, then moving to billing, or a patient portal, allowing hospitals to upgrade incrementally without the risks associated with replacing one monolithic system with another.

This modular approach is particularly appealing in an industry where, according to a 2022 cybersecurity report from the Healthcare Information and Management Systems Society (HIMSS), 73% of hospitals still rely on legacy systems, including outdated operating systems like Windows Server 2008 and even Windows XP. Avelios's strategy offers a practical path forward for these institutions, addressing the critical need for modernization in healthcare IT.