Announcing our investment in Thatch

Today we are announcing our investment in the $108M Series C for Thatch.

Thatch is rebuilding employer health benefits from the ground up, giving employers a simpler way to offer flexible, personalized health benefits while giving employees far more choice over how they spend their healthcare dollars. Thatch already supports over 5,000 employers, and we believe that they have the opportunity to become the foundational benefits platform for the modern workforce.

The most successful businesses always look crazy in the beginning because they create the markets they ultimately come to define. Today Fidelity is synonymous with 401k recordkeeping and Epic Software is that for large hospital patient record keeping, but that destiny was far from certain. Both companies took advantage of very specific moments in time, changes in consumer sentiment, and supportive legislation. 

Tomorrow, Thatch will be the system of record for affordable employee choice in healthcare. 

Most Americans are simply enrolled in the healthcare benefits of their employer’s choice. This worked until it didn’t. More than 10% of American businesses are seeing healthcare costs increase by 20% or more annually. Benefits are decreasing and employees are left frustrated, not understanding why their employers are decreasing their benefits. It’s no longer affordable, and it’s never really been logical. A healthy twenty-five-year-old should not be on the same healthcare plan as a family of five with pre-existing conditions. But, until recently, that was the status quo.

This status quo has been disrupted by a series of legislation starting in 2019 that shifted healthcare spending to a defined contribution (vs. benefit) while maintaining tax benefits / regulatory compliance. As a result of CHOICE Arrangements (formerly known as ICHRA), companies and employees have more flexible choices to address their healthcare needs. These types of healthcare arrangements have grown from less than 50K Americans in 2022 to ~750K today, and we believe it will grow into the many millions in the next few years. Groupwide company healthcare plans are failing, and Thatch is the right alternative solution. 

Behind the curtain is a very complex, financial and record-keeping engine, and Thatch is the only company solving this with technology (versus humans). Employers need to know how much to fund each employee, employees need to access and use their funds, and Thatch needs to enroll employees across hundreds of insurance plan options. Like how Visa built the interchange system, Thatch is responsible for owning the financial network between employees, employers, and healthcare plans. 

We’re incredibly excited to back this team. As founder marriages often are, each brought the perfect background of experience, Chris hailing out of the healthcare world, and Adam being a payments expert after almost a decade at Stripe. Starting Thatch in 2021 was not obvious, and the path was murky, with the new regulations that could offer a tailwind. This is also where our paths crossed. In 2023, we started noticing similar trends in unaffordability of healthcare plans, employee frustration with limited selection, and a changing regulatory landscape, and reached out to Chris.

Our approach at Scale Venture Partners has been very consistent for a long time, which is we like to find lasting trends that are impacting large markets, and then invest in the leading company within those markets just before it becomes obvious. I am proud to join Thatch on this journey currently and am excited for their company brand to replace how an increasingly large number of American companies and employees consume their healthcare. Thank you, Chris and Adam, for working with us, and we welcome the collaboration with co-investors The General Partnership, Index Ventures, A16Z, and General Catalyst.