Ali Parsa became a billionaire on paper after his Babylon company rose to $4 billion in value following its US listing
Patient awaiting US inspections received an unexpected email earlier this month. Babylon, the therapist's virtual app, has informed them that their bookings have been canceled and are closing. Some were notified in just an hour.
The employees of the telemedicine company were also stunned. On Monday, August 7, American employees were laid off. Two days later, the company filed for bankruptcy protection for two US divisions.
Babylon, a British tech company trying to transform healthcare, is on the brink. Founded by 58-year-old Iranian-born entrepreneur Ali Parsa, it has suffered huge losses and is struggling with debt.
Its UK division, which serves the National Health Service through the GP at Hand app, is up for sale. Babylon has warned the UK Business Risk Administration if there is no sale or financing.
The company's New York-listed shares plunged 99% after a disastrous 2021 offering that saw them briefly valued at $4 billion. Investors were wiped out and hundreds of jobs were at stake.
Per Briliot, an investor in the Swedish VNV fund who backed Babylon, wrote in his firm's annual report that the company's fate was «extremely painful… a bullet.» , a scar that will hurt for a long time.”
What went wrong? And how did the normally risk-averse NHS end up partnering with a company that went from boom to bust so easily?
Founded in 2013, Babylon has raised over $1 billion from investors to make health care «accessible to everyone on earth.» The sponsors included the State Investment Fund of Saudi Arabia.
Parsa, who fled Iran in the 1980s as a refugee, worked at Goldman Sachs before founding Circle Health, a private hospital company in the UK.
His new venture, Babylon, will allow patients to consult via video link with qualified doctors. The meetings were recorded and held in the app.
In addition to private visits, in 2017 the company launched a free National Health Service 'GP at Hand' service, which still serves 100,000 patients.
The company partnered with a local general practice clinic in Fulham, promising the NHS faster . triage of patients using their technology instead of registrars. They also promise to free up GP time and save National Health Service money.
The service was a success with patients enrolling en masse. However, a surge in the number of new patients at the clinic has resulted in a funding gap for the local health authority of over £20 million.
Patients from outside the region eagerly subscribed to the new digital GP of the National Health Service, but this forced the local foundation to bear their costs.
Nevertheless, the startup received support Matt Hancock, former health secretary, who hailed his «revolutionary» app in a speech at headquarters in 2018. He promised to make it «accessible to everyone».
Babylon has also expanded its NHS services outside of London to Birmingham and Wolverhampton, although the company cut costs last year as it admitted the service was simply not cost-effective.
There have been criticisms from the outset. A few years before ChatGPT, the company launched a symptom-checking chatbot using artificial intelligence. Some doctors questioned its accuracy. Babylon accused competitors of «spreading dirt».
1008 NHS Waiting List
Doctors also argued that the app mainly attracted younger, healthier patients, rather than those most in need of a therapist. As a result, NHS GPs have had to deal with more patients who are more severely ill and require more expensive treatment.
However, the pandemic seems to have confirmed Parsa's decisions as interest in telemedicine has skyrocketed.
The company set its sights on rapid expansion in the US. The company went public in a complex deal known as Spac, which at one point valued the business at $4 billion.While the deal briefly made Parsa a paper billionaire, it turned out to be a «disaster» as he later confessed. . The deal largely fell through and the company faced a $300 million funding gap.
Tommy Stadlen, co-founder of investment firm Giant Ventures, said the failed deal «started a downward spiral that Babylon couldn't stop.»
Babylon lost money as the US market proved hard to crack. In 2022, the company lost $221 million on $1.1 billion in revenue. The company also invested $31 million in an American personal health care network, which it never truly connected to its digital business.
One source claims, «The United States was built on a house of cards.»
There are questions about its spending. In the summer of 2021, the company opened a swanky London headquarters close to Harrods in Knightsbridge, despite still being unprofitable.
According to one claim, the company also spent a «six figure» office space and bonsai trees.
Parsa's lavish pay package and six-figure office greening funds helped drain Babylon' ;s funds Photo: Geoff Pugh
In 2022, Parsa received $7.1 million in wages and shares , despite the collapse in the stock price.
As losses mounted and the share price fell, Babylon turned to creditors to close the funding gaps. He borrowed more than $300 million from lender Albacore.
However, this was not enough. In recent weeks, attempts have been made to save the business.
Albacore tried to broker a merger deal to save the business, but it fell apart earlier this month after one of Babylon's biggest customers, medical giant Centene, told the company it would not renew contracts.
Centene accounts for half of Babylon's revenue.
Babylon and its creditors are expected to make a final decision on its future on Friday, according to technology news site Sifted.
< p>If a buyer can't be found, the 100,000 people who signed up for GP at Hand will be left in limbo.
Andy Slaughter, Labor MP Hammersmith, says Babylon's difficulties are creating a «new set of problems» . What will happen to 100,000 people who signed up? How will this affect other practices that are already struggling?”
Babylon previously said its operations in the UK were continuing as normal, and a North West London NHS spokesman said earlier this month that «This will not affect services at this time.» ”.
Parsa admits that making Babylon public when he did was his “biggest mistake.”
If Babylon and GP at Hand do fail, it could deter the National Health System from experimenting further with market entry. digital. Due to record queues and staff shortages, patients may be counting the cost.
Babylon did not respond to requests for comment.
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