‘ChatGPT for Doctors’ Startup Considers $6 Billion-Valuation Investment
The Takeaway
OpenEvidence, which operates a ChatGPT-like product for doctors, is considering multiple investment offers valuing the company at $6 billion.
OpenEvidence, which operates a ChatGPT-like product for doctors to find health information, is considering multiple investment offers valuing the three-year-old startup at $6 billion, nearly double its private valuation from a financing just one month ago, according to three people involved in the potential deal.
The funding conversations are still in their early stages. If a deal happens, the company is likely to raise more than $100 million, one of the people involved said. The funding interest comes as ChatGPT creator OpenAI gears up to develop products related to the healthcare sector and other health-related artificial intelligence startups make inroads into selling their products to doctors and other medical professionals.
OpenEvidence CEO and co-founder Daniel Nadler previously sold an AI startup to financial research firm S&P Global for hundreds of millions of dollars. His current startup provides a chatbot for registered physicians to find answers to their questions or to analyze peer-reviewed studies.
The Cambridge, Mass.-based company sells advertising space on its chatbot to pharmaceutical companies, similar to the way Google sells ads on its search engine.
It is currently generating more than $50 million in advertising revenue on an annualized basis, according to one of the people involved in the deal, which implies it’s generating more than $4 million in revenue per month. But it currently has more than $400 million worth of ad inventory that it could theoretically sell, they said.
The company’s gross profit margins are currently above 90%, the person said. That level puts it well above many AI startups.
Gross margins measure a company’s sales after taking into consideration the fundamental costs of its main product, known as cost of revenue. OpenEvidence’s costs of revenue include its cost of compute, including running servers and AI models, and money spent on licensing content from medical journals, they said. OpenEvidence is currently burning less than $10 million per quarter, they said.
Millions of people already use OpenAI’s ChatGPT to answer health-related questions and review bloodwork and other test results. The company is expanding its efforts in this field. Last week, OpenAI hired longtime Facebook executive Ashley Alexander to develop health-related products.
ChatGPT doesn’t sell ads but has publicly discussed doing so, and its incoming chief of applications—which include ChatGPT—was also a longtime Meta Platforms executive and has advertising-related experience.
OpenEvidence says its chatbot is more accurate than general chatbots such as ChatGPT because it was developed using information from medical journals whose content it licensed, such as the New England Journal of Medicine.
The company’s product uses open-source models to search through medical journals and return useful information and citations. It also uses AI from Google, OpenAI and other providers to write its chatbot’s responses.
With the new capital, OpenEvidence could acquire more content from medical journals to train its models or could buy other healthcare startups, like electronic health record firms, to reach hospitals and other potential customers and expand what the startup can offer doctors, one of the people involved in the deal said.
OpenEvidence’s product is used in more than 10,000 hospitals and medical centers and more than 40% of physicians in the U.S., the company said in a blog post. (There are about 1 million physicians in the U.S., according to the Federation of State Medical Boards.)
As of July, the company said it handles more than 8.5 million questions from clinicians each month. The company has raised more than $300 million from investors including GV, Kleiner Perkins and Sequoia Capital.
OpenEvidence said earlier this month that the models it developed scored perfectly on the U.S. medical licensing exam. Notably, one of OpenEvidence’s co-founders told Fierce Healthcare that OpenAI‘s ChatGPT-5 got 97% of answers right, based on OpenEvidence’s own evaluation.
Other health AI startups have received investor interest of late. Abridge, whose software transcribes physicians’ conversations with patients, recently raised funding at a $5 billion valuation, nearly double the company’s valuation from a deal three months earlier.
Ambience, a competitor to Abridge, raised capital at a valuation of more than $1 billion, more than triple its 2023 valuation.