AI Unicorns: The Fall of Babylon as a Warning
But the US venture was also ultimately doomed. It was entering a very crowded market, and wasn’t ready to compete. “There are a lot of scaled telemedicine companies here that have been around a lot longer than Babylon,” says Christina Farr, a health-tech investor at OMERS Ventures in San Francisco.
One ex-employee says that Parsa didn’t fully understand that the US was a mature market. The final straw for the employee was when they saw a contract being drawn up to provide telehealth services in Missouri through Medicaid. Essentially, Babylon would be taking on all of the financial responsibility and financial liability of a health insurer, but without any of the sky-high premiums that are required to cover that kind of liability. “I was like, ‘No, absolutely not,’” says the ex-employee. “‘This is going to go tits up, and I don’t want to be around when that happens.’” They quit.
Even the company’s stock market debut quickly went south. Within 18 months of listing, its shares had dropped 99 percent. Parsa described the nosedive as an “unbelievable, unmitigated disaster.” It wasn’t that surprising. Although Babylon was generating revenue, it was losing a lot of money. In 2022, the company lost $221 million. In the first three months of 2023, it lost a further $63 million. In May 2023, the company’s biggest lender, Albacore Capital, took the company private and tried to merge it with another health-tech company, MindMaze. The merger fell through in early August.
Babylon isn’t the first company at the interface of AI and health care to struggle to move from hype to commercial success. Its fate “raises questions around how you commercialize AI in health care,” says David Wong, an associate professor of health informatics and data science at the University of Leeds in the UK. Wong points to another failure: the collapse of Sensyne Health, an AI startup, which cost two NHS trusts $18 million when it was delisted from the London Stock Exchange in 2022. The same year, IBM dumped Watson Health. Olive AI, a health care automation startup valued at $4 billion in 2021, fired a third of its staff in February 2023.
The reason companies like Babylon fail, experts say, is simply that it’s hard to replace flesh-and-blood clinicians with an algorithm, and there’s an inherent mismatch between the move-fast-break-things culture of tech startups and that of health care, where caring for patients requires thoughtfulness and context.
“I think probably the tricky part of the startup world is there are a lot of people with ideas, and most of them won’t work,” Wong says. “And I think if there were more clinicians on board, most of them would be very quick in telling you which ones had a chance of working and which ones didn’t.”