2025-10-03 20:58:54
Hi friends 👋,
Happy Friday, happy Fall in New York to those who celebrate, and welcome to our 164th Weekly Dose of Optimism.
Big, big week for the optimists. We’ve got optimistic sci-fi, space deliveries, delivery robots, AI scientists, bioelectricity, and bone glue.
We didn’t even have to talk about Sora 2, which does seem better than Vibes but does not meet this week’s high bar. A story on TrumpRx also landed on the cutting room floor; cheap drugs are great, but the grift was enough to drop it out of the Top 5. We did, however, sneak in an extra little story about super stem cells improving monkey longevity. What a world.
Let’s get to it.
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(1) Jason Carman and StoryCo Release Planet
Packy here. Long time readers of the Dose will know that we are big Jason Carman fans. We’ve shared a ton of his S3 videos and collabs with the Abundance Institute on many of the most compelling startups in the physical world.
But Jason has been saying from the first time I spoke with him that the plan was to use those videos to learn, and that the real goal was to turn those learnings into realistic, optimistic sci-fi films. And by god, he pulled it off.
Last weekend, Jason and the Story team premiered their first sci-fi short film, Planet, in San Francisco and then dropped it on YouTube. I watched it this week and it’s shockingly good, and they apparently made it on a small budget. Patrick O’Shaughnessy tweeted, “I asked Jason what this cost him to make and could not believe the answer. Incredible visuals per $ spent.” I honestly don’t know how they did it. It’s crazy that someone I’ve hung out with can make something that looks like this.
The story is great too. Surprisingly beautiful. I won’t spoil it. It’s only 38 minutes and you should watch it this weekend.
Congrats Jason! Can’t wait for the next one (will rewatch this many times until then).
(2) Inversion Unveils Arc - A First of its Kind Space-Based Delivery Vehicle
From Inversion
Inversion, the aerospace and defense technology company building highly-maneuverable reentry spacecraft, today unveiled Arc, its flagship space-based delivery vehicle. Arc reshapes defense readiness by enabling access to anywhere on Earth in under an hour – allowing for the rapid delivery of mission-critical cargo and effects to austere, infrastructure-limited, or denied environments.
Meanwhile, startups are building real products that would fit perfectly in Jason’s film.
Inversion unveiled Arc, a spacecraft designed to deliver cargo from orbit to anywhere on Earth in under an hour. Basically like GoPuff for critical supplies.
Instead of waiting days for military logistics, you call a capsule down from low-Earth orbit, it screams through hypersonic reentry, and lands under parachutes with whatever you need. Arc also doubles as a reusable hypersonic testbed, giving the Pentagon a cheaper, faster way to study high-speed flight trajectories. We do love a good dual use business model like Inversion’s.
Like many of the moonshot companies using that business model, Inversion is starting by serving existing customer needs like dropping military supplies in far-flung places and helping with hypersonic testing. But if it can scale and bring down the costs of its delivery meaningfully, you can envision a world in which space becomes the most efficient delivery route for moving certain goods across the world.
While you wait for your space delivery, DoorDash rolled out a cute little food-delivering robot named Dot.
(3) Top A.I. Researchers Leave OpenAI, Google, and Meta for New Start-Up
Cade Metz for The New York Times
But Mr. Fedus and Dr. Cubuk believe that no matter how many textbooks and academic papers these systems analyze, they cannot master the art of scientific discovery. To reach that, they say, A.I. technologies must also learn from physical experiments in the real world.
Periodic Labs has $300 million and some of the people behind ChatGPT, DeepMind’s GNoME, the neural attention mechanism, and MatterGen to create an AI scientist.
The plan is to combine models with autonomous science labs, where bots can carry out experiments that both test their hypotheses and generate tons of new data:
Autonomous labs are central to our strategy. They provide huge amounts of high-quality data (each experiment can produce GBs of data!) that exists nowhere else. They generate valuable negative results which are seldom published. But most importantly, they give our AI scientists the tools to act.
They’re starting with physical sciences where results are verifiable, the closest physical-world equivalent to something like coding, which has been the most successful AI use case outside of chat so far. It’s where they can most easily apply the scientific process.
It’s also where they might be able to produce some sci-fi results pretty early. The company says it’s targeting superconductors that work at higher temperatures (remember the high-temperature superconductor rollercoaster last year?) but plan to attack a much wider variety of materials and uses over time.
Periodic is not quite as addictive as feeds full of slop videos, but it seems pretty cool!
This seems to be an idea whose time has come. This week, researchers at MIT announced CRESt, is an AI–robotics platform built to accelerate materials discovery.
CRESt pulls from scientific papers, chemical recipes, imaging, and human feedback. Robots handle the lab work (mixing, testing, analyzing) while the system processes results, forms hypotheses, and suggests the next step. Scientists can talk to it in plain English, and CRESt flags errors mid-experiment with cameras and vision models. Think of it as an army of little MIT lab assistants, but faster and tireless.
In a three-month trial, CRESt ran 3,500 experiments across 900 chemistries and discovered a fuel cell catalyst that reduced reliance on expensive palladium while hitting record power density. That’s notable because rare metals remain a big bottleneck in fuel-cell economics.
One discovery is proof of concept. The real importance is scale: if CRESt can run hundreds of thousands of experiments, stacking insights along the way, the pace of progress might really begin to accelerate.
May the best AI scientists win.
(4) Field-mediated bioelectric basis of morphogenetic prepatterning
Santosh Manicka & Michael Levin in Cell Reports Physical Science
These results highlight the potential of the electric field both as a facilitator of collective patterning and as a macroscale interventional target for applications in regenerative medicine and bioengineering.
Don’t count the human scientists out just yet!
This week, Michael Levin (who you might remember from last week’s Dose) and Santosh Manicka released a paper showing that bioelectric fields (invisible, tissue-wide electrical patterns) play a direct role in how living things develop their shapes (morphogenesis).
Scientists have traditionally focused on genes, proteins, and chemicals as the main drivers of how living things develop. DNA is the blueprint of life, etc… Levin has been arguing that bioelectricity is way more important than it’s gotten credit for, and in this paper, he and Manicka argue that electric fields themselves can act as a kind of “control knob” for shaping biological form.
This is incredibly cool science. It suggests a new, potentially more powerful way to influence development and regeneration: instead of micromanaging every gene or cell, you could steer the whole system by tweaking its bioelectric field. This approach could open up new strategies for regenerative medicine, birth defect repair, and even synthetic biology. Imagine “sculpting” tissues or organs by applying the right electrical signals.
Beyond making the argument, Levin and Manicka built computational models showing that adding an electric field to a network of cells makes it much better at forming complex patterns. They show that you can “seed” a pattern (like a face) by briefly stimulating just the boundary of a tissue, and the field will help the rest self-organize. Strikingly, their model’s behavior matches real developmental patterns seen in frog embryos! It seems like there’s a there there.
If we’re entering the Electric Era, there’s something beautiful about the idea that the biggest breakthroughs in biology might come from applying electricity, too.
(5) Chinese Doctors Develop Bone 02 Bone Glue
via Arnaud Bertrand on Twitter
It’s inspired by oysters because the researchers noticed their extraordinary ability to firmly attach themselves in harsh underwater environment by secreting a special adhesive known as bio-cement, which creates a strong chemical interaction with surfaces and hardens quickly.
A couple of weeks ago, a team of orthopedic surgeons in Zhejiang province who formed a company called 源囊生物 (Yuannang Bio) released a product called Bone 02. Forgive us for missing it; the release was in Mandarin. This week, Arnaud Bertrand summarized the news in English.
Basically, Bone 02 is glue for bones modeled after oysters’ bio-cement. We’ll just quote Arnaud on what the stuff does:
The properties of the glue are almost miraculous (sources: http://news.cn/20250910/1df9380a9ed945dca7142431f530a0c8/c.html and https://news.ifeng.com/c/8mVMq4PBdmJ):
- Nearly instant adhesion in blood-soaked wet physiological environments (it just takes 2-3 minutes)
- Extremely strong adhesive properties (bonding tensile force of over 400 pounds - over 181 kg)
- Complete biodegradability that naturally absorbs after about 6 months as the bone heals (no need for secondary surgery previously required in conventional treatments)
- Vast reduction of infection risks related to the traditional metal plates and screws normally needed for bone surgery
- Minimally invasive and rapid surgery since you just need a small opening large enough to apply the glue (as opposed to a complex surgery attaching metal fixations)
This glue could be especially useful for fractures with small bone fragments which are very difficult to fix with metal plates and screws.
Bone 02 has undergone trials - it “achieved seamless bonding of all fracture fragments” - the results of which will soon be published in a peer-reviewed paper.
Separately, Chinese scientists announced that super stem cells reversed signs of aging in monkeys. Improved memory, protection against neurodegeneration, bone loss prevention, tissue rejuvenation, and a reduction in inflammation and senescent cells (cells that accumulate to promote aging). Oo oo ah ah. Big month for Chinese scientists!
If we don’t get access to the bone glue and life extension because of a trade war, we’re going to have a bone to pick with someone.
Bonus: Thatch
ICYMI, we published a Deep Dive on Thatch on Wednesday. For as many people as possible to access the breakthroughs we write about here every week, we need to rewire the incentives in the US healthcare system. Thatch is doing it.
Have a great weekend y’all.
Thanks to WorkOS for sponsoring. Fight the bots and fakes.
We’ll be back in your inbox next week
Thanks for reading,
Packy + Dan
2025-10-01 20:53:33
Welcome to the 2,123 newly Not Boring people who have joined us since our last essay! Join 251,962 smart, curious folks by subscribing here:
Hi friends 👋 ,
Happy Wednesday! Since our last essay, we crossed the quarter-million subscriber mark. A huge thanks to all of you for reading Not Boring.
Today’s Deep Dive is a long time in the making.
Since Not Boring Capital invested in Thatch in early 2022, I have been talking to the company’s founders, Chris and Adam, about doing a Deep Dive when the time was right.
The time is right now.
For the first time since World War II, America has a real shot at fixing its healthcare system. A 2020 regulation called ICHRA lets employers give employees tax-free dollars to spend on whatever insurance plan and healthcare services work best for them.
It sounds small, a quirk in the tax code. But little tax code quirks are how we got into this mess (WWII wage freezes leading to employer insurance), and how we got out of a similar one (401(k)s replacing pensions). And as we speak, legislation is being introduced that would make ICHRA permanent under a new name, CHOICE, and provide businesses with a $1,200 per employee tax credit for offering it.
ICHRA can decouple insurance from employment, give people control over their health, and unleash free markets on a $5.6 trillion system.
Thatch builds infrastructure to make ICHRA work. Because of how insurance works, the more members Thatch covers, the better and cheaper the plans become. With enough scale, Thatch can help decouple insurance from employment, align incentives towards long-term health, and bring down costs.
Which means that you can help fix American health insurance by considering Thatch for your business.
American healthcare seems hopelessly broken. It’s not. Thatch can help fix it.
Let’s get to it.
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In May, I was catching up with Chris Ellis and Adam Stevenson, the founders of Thatch, when they told me a story.
Chris and Adam had recently spoken to someone at a health insurer about whether they’d offer things like Prenuvo screens that might catch cancer and improve outcomes (at lower cost).
They wouldn’t, the insurer said.
“If I catch that person’s cancer,” he explained, “They’ll leave their job in 2.5 years and go to a competitor insurer.”
In other words, the insurance provider that someone gets through their job isn’t incentivized to save that person’s life because that person might switch jobs, and if they do, the initial insurer is left holding the bag on the treatment cost while the next insurer reaps the benefit of covering a now-healthy member. The numbers say the insurer just needs to let the cancer odds ride.
That should make you angry. Because you’re probably insured by one of these insurers, too.
This is one of the many, many things that should make you angry about, and embarrassed by, the American healthcare system. It’s bad enough that it’s expensive, but after all that money, your life is not their top priority!
But who do you get mad at?
The insurer is just doing their job. If they loosen things up, they either lose money and go out of business, or everyone’s health insurance premiums go up.
The employer is doing their job, too. They’re just offering health insurance to attract and retain the very best people. If they don’t, how could they possibly compete in the talent marketplace?
Run through this exercise with each of the players involved, and you end up mad at a system, tilting at windmills.
So how do you change a whole system?
“Show me the incentives,” Charlie Munger said, “and I’ll show you the outcome.”
The American healthcare system is a layer-cake of misaligned incentives so complex that attempts to fix it by changing one thing here or another there often make things worse. It is the rare non-socialist system (the only one in the OECD that doesn’t guarantee health coverage to its citizens) that makes you think the socialists may be on to something, after all.
At least, when the government is responsible for healthcare, there is one payer, which reduces administrative burden (America pays 7.6% of healthcare costs on administration vs. a 3.8% OECD average) and, more importantly, aligns incentives. If a Swedish person gets cancer at any point in her life, the Swedish government is on the hook, regardless of which company she happens to be working for when the bad news comes.
The original sin of American health insurance is that our insurance is tied to our employer. America is the only developed nation in which:
Your employer chooses your insurer.
You lose that insurer when you leave your job.
Private insurers make coverage decisions based on expected customer lifetime value.
That lifetime value is artificially capped at ~2.5 years (average job tenure).
As constructed, the American system manages to combine the worst aspects of market-based and employment-based systems while capturing the benefits of neither. In fact, it mixes in the worst aspects of socialist healthcare, too: because many chronic conditions get really costly as people age, taxpayers often foot the bill for the private insurers’ short-termism via Medicare.
That we are in this mess is an accident of history, a corporate response to World War II-era incentives that froze wages and tax-advantaged defined benefits, that has been codified and coagulated into an increasingly sticky mess over the intervening seven decades. The misaligned incentives in health insurance compound, and are compounded by, everything else broken in American healthcare, from pharmaceutical pricing to hospital consolidation to what we eat.
The way out of this mess is the same way America finds its way out of any mess too complex for top-down, one-size-fits-all solutions: by using new regulation to unleash the twin powers of free market capitalism and American consumer choice.
That is how we replaced pensions with 401(k)s.
That is what Chris and Adam built Thatch to do for healthcare.
Thatch is rewiring the incentives in the American healthcare system by giving individuals choice under the Individual Coverage Health Reimbursement Arrangement (ICHRA).
Through ICHRA, employers can offer their employees a defined contribution, or allowance, towards healthcare each year, tax-free. With those dollars, employees can choose their own individual insurance plans, which they can keep even after they switch jobs, and spend on any health-related expense that they believe is best for them and their family.
ICHRA has all sorts of implications.
Employers are no longer stuck with group plans (the longstanding existing system in which employers choose a single plan for all of their employees) whose premiums continue to skyrocket because no one is incentivized to see them come down. In 2005, it cost $12,214 to insure a family of four in a typical employee-sponsored health plan. Today, it costs $35,119. That 6.1% annual growth has far outpaced inflation, even while contributing to it. Over the past 20 years, wages in America have grown 84%; healthcare costs have grown 188%.
Healthcare’s ridiculously high costs are bad because they’re directly high, but also because they keep people stuck in safe jobs that offer good benefits instead of starting new businesses or pursuing their passions. The opportunity costs extracted by healthcare don’t show up in the numbers, but they’re high, too.
With ICHRA, employees can now choose their own plans, no longer saddled with the lowest common denominator option. They can pick the one that works best for them and their family. And they can pick the job that works best for them and their family.
They can also choose to spend their allowance on the things that they believe will improve their health, save their lives, and even bring new life into the world, things like cancer screenings, Function diagnostics, Oura rings, therapy, TrueMed, Eight Sleep mattresses, or IVF. Many of these are currently inaccessible to virtually all Americans due to their cost.
And by giving employees the ability to choose individual plans, they also give them the chance to bring their plans with them from job to job, and even when they’re between jobs. Your insurance is no longer tied to your job, and you can keep the same insurer for decades, assuming they do a good job for you. All of a sudden, that insurer is incentivized to make sure that you stay healthy: you’ll pay them for longer, and if you catch something like cancer early, it will cost them a lot less to fix it now than to pay for less effective and more expensive treatments later.
When I spoke to Chris and Adam in May, it was the day after I’d written Everything is Technology, one of the main points of which was that technology companies can replace seemingly permanent institutions surprisingly quickly. Humans used horses to get around for thousands of years, then boom, Model T, and within a decade, New York’s streets were horseless.
So Chris and Adam were excited: this was exactly how they thought about the healthcare system, they told me.
Healthcare in America seems hopelessly broken. It’s not. Nothing is.
Thatch’s mission is “to build a healthcare system people love.”
And you know what? I think they just might pull it off.
There is no team better equipped to bring ICHRA to the people. While the program has a ton of potential, it’s also hard for companies to administer and for employees to use. Without good products, more choice can just mean more mess.
Employers are required to define budgets, handle reimbursements, ensure regulatory compliance, manage payroll, provide guidance to employees, and juggle countless other details. Employees need to obtain coverage themselves, submit reimbursements, and manage their own budget themselves. Freedom isn’t free.
What Chris and Adam realized, though, is that “the hardest parts of making ICHRA work are primarily fintech problems: managing budgets, issuing funds, remitting and tracking payments, handling adjudication.”
So Chris, an MIT cancer researcher turned biotech salesperson, and Adam, a former founder and early Stripe employee, brought together a team of top performers from Stripe, Ramp, Rippling, and even the former CEO of UnitedHealthcare Pacific Northwest, to build the financial and operational infrastructure necessary to abstract away ICHRA’s complexity.
It’s early, but it’s working.
Since I invested in the a16z-led Seed round in 2022, Thatch raised a $38 million Series A in July 2024 and a $40 million Series B in March 2025. Both rounds were led by Index Ventures, with participation from a16z and General Catalyst (which bought an entire healthcare system in 2024).
“When a reputable venture firm leads two consecutive rounds of investment in a company,” Andreessen told me [Tad Friend, for an excellent 2015 New Yorker Profile, Tomorrow’s Advance Man], “Thiel believes that that is ‘a screaming buy signal,’ and the bigger the markup on the last round the more undervalued the company is.”
Jahanvi Sardana, the Index Ventures Partner who led both of the firm’s investments in Thatch, told me that for Index to lead the Series A and Series B for the same company so quickly has only happened once in the firm’s history. “Wiz was the only other one,” she said, referring to the five-year-old cybersecurity company that Google recently bought for $32 billion in cash.
Thatch grew revenue 8x last year. It’s on pace to 4x again this year, conservatively.
That number may be very conservative if the government passes standalone CHOICE bills, which look to be coming in the Senate and the House, that would give employers a $1,200 per employee tax credit to implement ICHRA, or as the proposed bill rebrands it, CHOICE. A separate bill, the Small Business Health Options Awareness Act of 2025, was introduced last week to require the Small Business Administration (SBA) to provide more outreach and education on ICHRA to small businesses. Gary Daniels, the former UHC Pacific Northwest CEO who is now the Chief Growth Officer at Thatch, told me that if passed, CHOICE “will kill small business group insurance. The entire industry will have to rotate into it.”
All of which means that Thatch really does have the opportunity to elevate US healthcare, by giving individuals control over their own healthcare spending, saving businesses money, and aligning insurer incentives.
Like products with network effects, systems tied together by a certain set of incentives are incredibly hard to change, until they’re not. As network effects and incentives unwind, they fall with speed proportional to their original strength.
Because of how insurance works, as people switch from group to individual plans, group plans get more expensive and individual plans get less expensive, which causes more people to switch, which accelerates the vicious (from the perspective of the incumbents) or virtuous (from the perspective of all of the rest of us) cycle.
In this Deep Dive, we’ll cover exactly how this mechanism works by talking about how the healthcare system currently works, how we got here, how it’s starting to change, and what Thatch is building to accelerate the change. Then we’ll imagine a world with better healthcare.
There is no law of physics that says that American healthcare needs to suck. So eventually, it won’t. Thatch is pulling eventually forward.
We are going to dive into a dizzying amount of detail about the American healthcare system. As we do, it’s helpful to keep the Thatch thesis in mind. Here’s how I think about it.
The Thatch thesis is that free markets with aligned incentives can, over time, fix healthcare, and that by providing the infrastructure to make free healthcare markets work, Thatch can unlock and capture a tremendous amount of value.
Currently, 154 million Americans are covered by employer-sponsored insurance (ESI) under plans that cost $1.3 trillion annually. These employer-linked plans are typically not ideal for employers (costs increasing and unpredictable), employees (not personalized, can’t take it with them), or the system (no one is incentivized for long-term health).
ICHRA has the potential to fix many of the issues with health insurance today.
For employers, it is a defined contribution and can offer better perks to employees while saving money.
For employees, they can choose the plan that best suits their and their families’ needs, and spend on the things that matter to them; a young person who never goes to the doctor might choose a low-cost plan and spend the balance through Thatch’s marketplace.
For the system, it incentivizes insurers to optimize for long-term health, and introduces free market competition.
That last point on competition is crucial. As ICHRA membership scales, insurers (carriers) will offer increasingly tailored plans and compete in the marketplace. While ESI plans are full of bloat - Mario Schlosser, Oscar’s co-founder and President of Technology, told me that in large employer markets, vendors will charge $8 per member per month (PMPM) just for monthly billing, and multiple dollars PMPM to maintain the plan’s mobile app - in the individual market, every cent PMPM matters. And because employees will have excess healthcare budget to spend, their dollars can go to a growing number of consumer health startups who can build better individualized products.
But ICHRA is too complex for almost any business or employee to manage on their own. For it to succeed, it needs a product like Thatch.
Thatch makes ICHRA simple.
Before even signing up, employers can enter some information about their employees to understand potential costs and coverage. Employers connect their payroll and set a healthcare budget. Employees get a Thatch card and choose any health insurance plan they want, and can spend remaining funds on health services from glasses to therapy to scans in Thatch’s Marketplace. Thatch handles all the compliance, payments, reimbursements, and complexity that made ICHRA impossible for most companies to implement themselves. It’s extremely complex under the hood so that it can be incredibly simple for users.
By handling all of the financial and operational complexity of ICHRA – compliance, payroll, payments, plan selection, marketplace, and more – with modern software and products, Thatch can both accelerate ICHRA adoption and make money in a number of different ways.
Thatch can monetize through subscriptions, interchange, commissions, and a marketplace take rate. They do well if the ecosystem does well.
“Thatch’s is a win-win-win business model that’s hard to find,” Julie Yoo, the a16z Partner who led the firm’s investments in Thatch, explained. “Usually in healthcare, business models are: you get screwed on multiple fronts and eke out one way to make money. Thatch uniquely benefits from everyone else doing well.”
It is a situation well-suited for Thatch’s founders, who are as nice as any founder this side of Ramp’s Eric Glyman. “I like to back mama’s boys, like Chris,” Jahanvi joked, seriously. “The fact that you care about somebody more than you care about yourself is a good indicator because you have to care about your company more than yourself.”
Chris and Adam are two people you want to see win. They bonded over the shared tragedy of losing parents to cancer, decided to build a company to enable precision medicine for every cancer patient by helping them access precision oncology trials, and realized, because of the way the incentives work, that if you really want to cure cancer, and fix American healthcare more broadly, you’ve got to fix the incentives first.
So that is what they are doing. They are two people you want to see win building a company that America needs to see win.
And you can help Thatch win, and help fix American healthcare, by winning for your employees. With Open Enrollment coming up, I would encourage you to check out Thatch for your business.
The more members in the individual market, the better the plans get. If it reaches escape velocity, ICHRA could be the rare healthcare experience that gets better and cheaper with time.
ICHRA is a once-in-a-lifetime opportunity to change the way healthcare works in America.
Jonathan Swerdlin, the founder of Function Health, was clear about what’s happening: “This is where the world is going, and everything is going to bend towards it. The transformation is happening in politics, tech, and culture. Now, people are getting the opportunity to make better decisions for themselves. It is not a trend. It’s an evolution.”
What might stop the evolution, I asked. “Nothing man. Fucking nothing. Nothing’s going to stop this.”
So this is the story of the evolution of healthcare in America, and how you build a company to accelerate something that, once started, fucking nothing can stop.
To understand how we get out of this mess, we need to understand how we got into it in the first place.
“It was started 80 years ago as a result of soldiers and personnel coming back from war,” former Aetna and current Oscar Health CEO Mark Bertolini told Patrick O’Shaughnessy on a recent episode of Invest Like the Best.
What had happened was, Congress passed the Stabilization Act in 1942, giving the President the authority to freeze wages and salaries to combat inflation during World War II. Franklin Delano Roosevelt invoked these new powers the very next day with an Executive Order which applied to “all forms of direct or indirect remuneration to an employee,” including but not limited to salaries and wages, as well as “bonuses, additional compensation, gifts, commissions, fees, and any other remuneration in any form or medium whatsoever.”
FDR then slipped in what may be the most consequential parenthetical in history: “(excluding insurance and pension benefits in a reasonable amount as determined by the Director).”
Employer-sponsored insurance found itself in the right place at the right time. It was a relatively new phenomenon. In 1883, German Chancellor Otto von Bismarck introduced the world’s first system of employer-based insurance. German employers and employees contributed to sickness funds that in turn pay for employees’ healthcare needs from state-run or private providers. This came to be known as the Bismarck Model.
In 1948, Lord Beveridge established the first system in which the government provided health care for all its citizens through tax payments. In the Beveridge Model, many of the hospitals and providers themselves are government owned and operated.
With the introduction of the Beveridge Model, nearly every Bismarck system became universal, meaning that even with private insurance and providers in place, the government supported those who couldn’t pay through taxation.
Today, nearly every developed country uses some version of Bismarck (Germany, Austria, Switzerland, Czech Republic, South Korea, Netherlands), Beveridge (UK, Italy, Spain, Denmark, Sweden, Norway, New Zealand), or a hybrid of the two (France, Hungary, Slovakia).
I say “nearly,” because that is not how it works in the United States.
The desire to pool risk in order to avoid catastrophic ruin seems to be fundamental. In the same year (1787) and in the same city (Philadelphia) that the Constitutional Convention met to draft the U.S. Constitution, two African American ministers, founded The Free African Society, America’s first mutual aid society, to provide burial assistance, support for widows and orphans, care for the sick, financial assistance during hardship, and moral and social support to freed slaves in the city.
The concept spread. By 1920, one in three American men belonged to fraternal societies that, among other things, provided “cradle to grave” benefits including medical care, sick pay, and burial insurance for approximately one day’s wages annually.
Around the same time, hospitals were modernizing. No longer simply charity-supported “shelters for the sick poor,” in order to make the capital and operating investments necessary to provide modern services such as surgery and medical laboratories, hospitals began relying on charges instead of charity. This created a problem: many patients were unable to pay, which meant many hospitals were unable to collect.
This seemed to be a challenge perfectly suited to insurance. Insurers in America were already charging premiums to protect against risks they could calculate, like fires, hurricanes, and even loss of income due to illness. They couldn’t, however, figure out how to underwrite medical expenses. The issue was that medical expenses lie within the control of the insured; those with insurance could choose to buy more, and more costly, medical care on the pool’s dime. This “moral hazard” kept insurers away from health insurance.
Insurers weren’t incentivized to take on that risk, but hospitals were. They were the ones stuck footing the bad debt created by patients’ inability to pay.
So in 1929, at Baylor University in Texas, executive vice president Justin Ford Kimball combed through data from a successful sick pay fund he’d established for teachers a decade earlier to determine how he might solve the health insurance problem. He saw that teachers in the plan used, on average, about 15 cents per month on hospitalizations. “With hospitalizations on the rise,” writes Helen Jerman, “Kimball decided to assume that teachers would use triple that amount; then, to be safe, he rounded up, to 50 cents per month.” In exchange for that monthly premium, teachers got access to 21 days of hospital care at Baylor Hospital.
Within months, 75% of Dallas teachers enrolled in the plan that would become the basis of a nationwide network of “Blue Cross” plans. By 1940, six million Americans had joined Blue Cross plans, laying the foundation for private insurance in America.
Although the insurance was private, the American Medical Association fought it as “socialized medicine,” fearing a loss of autonomy over fees. As the plans spread anyway, doctors created their own “Blue Shield” plans, starting with the California Physicians Service in 1939.
FDR entered the White House in the midst of the birth of private health insurance in the US, and of the Great Depression. Not one to shirk from having his government pay for things, FDR entertained the idea of nationalizing healthcare as part of his plan for Social Security, but didn’t pursue it. The AMA would have had a strong case that this really was “socialized medicine” and could have tanked Social Security with their opposition.
This, then, was the state of the health insurance landscape when America entered World War II. Health insurance was growing, paid for by individuals, not employers or the government.
Then, FDR froze wages but not benefits.
Follow the incentives. No longer able to compete for talent on wages, companies competed by offering pensions and health benefits.
An EO is just an EO, but in 1943, the IRS codified it by ruling that employees didn’t owe taxes on employer-provided pensions and health benefits, amplifying this incentive at a time when taxes on corporate profits reached 80-90%.
By 1946, 30% of Americans had health coverage, compared to just 9.6% in 1940. By 1950, 9.8 million Americans received company pensions, up from just 4 million in 1940.
The postwar period cemented this accidental system through deliberate policy choices. The 1954 Internal Revenue Code formally codified the tax exemption for employer health contributions, making them fully deductible for businesses while excluding them from employees’ taxable income, creating a permanent tax subsidy that now costs over $300 billion annually.
By 1958, the year my mom was born, approximately 75% of the 123 million Americans with private coverage obtained it through employment, establishing a pernicious path dependency that we are stuck in to this day.
A lot has happened since 1958, but mostly all within this employer-first path. In 1965, President Lyndon B. Johnson signed the compromise that was Medicare and Medicaid into existence, combining Democratic proposals for hospital insurance (Medicare Part A), Republican proposals for voluntary physician insurance (Medicare Part B), and expanded state programs for the poor (Medicaid). Facing growing healthcare inflation in the 1970s, President Richard Nixon signed the HMO Act of 1973, requiring employers to offer health maintenance organizations (HMOs), with smaller, more restricted provider networks, if available locally.
The “managed care” revolution actually kind of worked, at least financially: HMO enrollment grew from 9.1 million people in 1980 to 58.2 million in 1995, and between 1993 and 2000, healthcare’s share of personal consumption actually declined, from 14.6% to 13.6%.
But as the old adages go, “you get what you pay for” and “there ain’t no such thing as a free lunch.” HMOs were cheaper because they offered a worse product. The focus on cost led to headline-making atrocities like “drive-through deliveries” in which women were sent home 24 hours after giving birth, cancer patients being denied experimental treatments, and people literally dying while waiting for out-of-network referrals.
In a booming, labor-tight economy, employees demanded choice, and they got it.
Employers began offering Preferred Provider Organizations (PPOs), which allow members to use out-of-network providers by paying more out of pocket, as a recruiting weapon. PPOs grew from just 11% of plans in 1988 to become the dominant model by the early 2010s.
Predictably, however, with PPOs, healthcare inflation resumed its upward march. Employer premiums, which had been growing ~3% per year in the 1990s, grew 10-15% per year in the 2000s. And now, as we’ve learned and as you are probably painfully aware, it costs an average of $35,119 to insure a family of four.
So are we just stuck with the consequences of a situation-specific decision made in the midst of the largest war in human history? Are employees just doomed to suboptimal coverage and employers to ever-increasing costs forever?
I don’t think so, and I planted a little seed earlier that we’ll now water a bit.
Recall that in response to Executive Order 9250, employers began offering health insurance and pensions.
Does your employer still provide you with a pension today?
If you wanted to summarize the bull case for ICHRA, and for Thatch, in one chart, it would be this:
Just as World War II era decisions led to the rise of employee sponsored insurance, which offered defined benefits, those same decisions kickstarted the growth of defined benefit pension plans. Employers couldn’t offer wage or salary increases, but they could offer pensions with defined benefits tax-free.
And they did. Between 1945 and 1975, the amount of assets in defined benefits pension plans grew nearly twelve-fold, from $20 billion at the end of the War to $235 billion three decades later.
Under defined benefit pensions, employers guarantee workers a specific monthly payment in retirement, typically based on salary or wage and years of service to the company. The employer is responsible for investing enough, tax-free, to meet the obligations to their employees regardless of market performance or how long the retiree lives. The employer bears all of the investment risk and must make up any shortfalls from their balance sheet if the fund’s assets can’t cover the promised, or defined, benefits.
In retrospect, that’s an insane promise to have made, and predictably, companies came to struggle under the weight of their pension plans.
By the 1970s and 1980s, a bunch of factors combined to make defined benefit pensions unsustainable for employers, including:
People Lived Longer: In 1945, an American expected to live until they were 65. By 1975, that had increased to 72.5, and by 1985 to 74.7. Each extra year of life, while a blessing, meant another unexpected year that the company had to meet its monthly payments.
Markets Got More Volatile: The Oil Crisis, stagflation, and market crashes of the 1970s left companies exposed. The 29.7% decline in the S&P 500 was the largest annual drop since before America entered World War II. Despite weak returns and high inflation, employers still owed their retired employees what they’d promised.
Competition from Unburdened New Entrants: This difficulty was compounded by the fact that incumbents with decades’ worth of pension liabilities faced competition from new entrants who were free of that drag. In the late 1970s, Chrysler and Bethlehem Steel, among many others, cited pension costs as a key reason they struggled against foreign competition.
New FASB Rules Brought Things to a Head: Still, many companies could hide their liabilities and worry only about what they had to pay out each month. In 1985, however, new FASB rules required companies to show pension liabilities on their balance sheets, exposing massive unfunded liabilities to investors.
By happy accident, however, the government accidentally buried a solution in the Revenue Act of 1978. Section 401(k) was a tiny provision hidden deep in the Act meant to solve a specific technical problem with executive bonus deferrals:
“A profit-sharing or stock bonus plan shall not be considered as not satisfying the requirements of subsection (a) merely because the plan includes a qualified cash or deferred arrangement.”
The magic was in what the language didn’t say - it didn’t limit it to executives, didn’t cap contribution amounts aggressively, and didn’t prevent employer matching - omissions upon which a benefits consultant in Pennsylvania named Ted Benna seized on one of what TIME Magazine would call one of the “80 Days That Changed the World.”
Benna’s plan combined employee salary deferrals, employer matching contributions, and existing rules for profit-sharing plans to create something in which ordinary workers and executives alike could save pre-tax dollars with an employee match.
The IRS approved Benna’s interpretation in 1981 and ignited a firestorm in retirement savings. Companies quickly realized that 401(k)s solved a number of problems in one fell swoop:
Employees got an immediate tax deduction instead of having to wait as they did with pensions, and gained control over their investment decisions.
Employers got predictable costs and no long-term liabilities.
Politicians on both sides of the aisle loved it. Republicans liked individual ownership and Democrats liked expanding retirement coverage.
In just two years from the IRS interpretation, by 1983, nearly half of all large firms in the US offered 401(k)s. By 1995, they had accumulated more assets than traditional private pensions. Today, “Americans held $13.0 trillion in all employer-based DC retirement plans on June 30, 2025, of which $9.3 trillion was held in 401(k) plans.”
As it stands, more than three-quarters of private retirement assets are held in defined contribution plans, and the share is growing rapidly. Most defined benefits assets are legacy dollars in legacy plans. Today, over 90% of private retirement plan dollars go to direct contributions, and my hunch is the 10% going to defined benefits are part of plans that legacy companies are unable to get rid of. Your startup doesn’t offer a pension.
So why, in a Deep Dive on healthcare, did I just spend 850 words on 401(k)s? Why is all of the above bullish for ICHRA and Thatch?
ICHRA has the potential to do to employer-sponsored healthcare what 401(k) did to employer-funded retirement savings.
This is not a reach.
Exactly two trillion-dollar accidents emerged from the Stabilization Act of 1942: employer-sponsored defined benefit pensions and employer-sponsored defined benefits insurance.
Both grew dramatically.
Both caused very similar problems.
The problems created by defined benefits retirement plans were solved by the free market response to an initially-underappreciated 1978 regulation that shifted the industry to defined contribution.
The problems created by the other remain both unsolved and critically important to solve; an underappreciated 2019 regulation that incentivizes defined contribution may hold the key.
Healthcare is complex, but it is not uniquely complex. Markets are mind-numbingly complex as well.
From the perspective of a person living in 1975, the unfunded liabilities problem likely seemed almost impossibly hard to solve. You can’t simply make returns better by wishing that they were so. And how do you solve the complex coordination problem among employers, employees, and even unions around retirement benefits? Your company just stops offering pensions. Great. Guess what. You lose your employees to a company that does. There is no top-down solution.
But markets, ignited by regulation, can work. Show it the incentives, and the market will get to work creating the inevitable outcome.
So while healthcare seems unfixable today, there is precedent. And if the flint that started the 401(k) fire was Section 401(k) of the Revenue Act of 1978, the flint that will start the right-sizing of healthcare may be the Individual Coverage Health Reimbursement Arrangement.
An Individual Coverage Health Reimbursement Arrangement (ICHRA) is a defined contribution health benefit. Employers give employees a tax-free allowance to spend on a health plan of their choosing from the individual market.
An ICHRA is the 401(k) of healthcare. It’s a clear, predictable contribution from the employer with total choice and ownership on the part of the employee. Instead of employers choosing plans that kind of work for their average employee, they just fund the ability for each employee to choose what works best for them.
That might mean using the full allowance on a low-deductible Platinum plan if you’re older or expect to have kids that year, or it might mean getting a high-deductible Bronze plan and spending the balance on qualified medical expenses, anything from glasses to LASIK to therapy, if you’re young and healthy.
ICHRAs, done right, seem like the Holy Grail of health insurance. So what, I asked Bruce Johnson, Thatch’s Head of Policy, took them so long?
“We didn’t even have an individual market that was affordable until the ACA (Affordable Care Act) in 2010,” he told me. “In the scheme of policy, and in the face of 80 years of doing things one way - group plans - ICHRA came very fast.”
While HRAs (Health Reimbursement Accounts), which let employers set up a tax-advantaged arrangement to reimburse employees for qualified medical expenses and health insurance premiums, have been around since an IRS ruling formalized them in 2002, no one really used them. In the beginning, employees didn’t have many good options to spend their HRA dollars on: the individual health insurance marketplace in most states was a mess, and the plans that were offered had all sorts of issues. Insurers could deny coverage or charge exorbitant premiums based on a person’s pre-existing conditions. There was no guarantee of coverage, and plans often had limited benefits.
The Affordable Care Act of 2010 both set out to create a robust individual marketplace and effectively killed HRAs.
The ACA did create an individual insurance marketplace with new rules that prohibited pre-existing condition discrimination, standardized benefits, and offered subsidies, delivered through a shiny new website (remember the Healthcare.gov debacle)?
At the same time, its market reforms required all health plans to cover a list of “essential health benefits” and prohibited annual dollar limits on those benefits. HRAs, by their very design, have annual dollar limits (the fixed amount the employer contributes). This put standalone HRAs in direct violation of ACA regulations. As a result, most HRAs had to be “integrated” with a traditional group health plan, meaning they could only be used for out-of-pocket expenses like copays and deductibles, not for paying for an individual health plan. This took away their primary advantage as an alternative to traditional employer-sponsored insurance.
In response to these limitations, the 21st Century Cures Act of 2016 created the Qualified Small Employer HRA (QSEHRA), a limited form of HRA specifically for small businesses. It was a step in the right direction, but with significant limitations. It was only for small businesses, and came with an annual contribution cap. Uptake, therefore, was limited.
But the idea was good, and it was one that found rare bipartisan support.
That is a minor miracle. Almost as soon as he entered office, President Trump set to work trying to “repeal and replace” the ACA. That effort failed when John McCain gave it the thumbs down, while Mitch McConnell looked on, shell-shocked.
With repeal off the table, the Trump administration worked to weaken the ACA. It removed the individual mandate penalty in the 2017 tax bill. It shortened open enrollment periods and slashed marketing budgets for ACA marketplaces.
But later that year, that same administration began the process that led to ICHRA, which fundamentally depends on and strengthens the individual insurance markets that the ACA created.
In October 2017, Trump issued Executive Order 13813, Promoting Healthcare Choice and Competition Across the United States, instructing the Secretaries of Treasury, Labor, and Health and Human Services, to develop regulation that would expand the use and availability of HRAs. By October of 2018, they proposed regulation to allow two new types of HRAs:
Excepted Benefit HRA: Employers can contribute up to $1,800 in conjunction with group plans to cover out-of-pocket costs and certain premiums.
HRAs Integrated with Individual Insurance Coverage: This is what would become ICHRA.
The HRA rule was finalized in June 2019, including both the EBHRA and the newly named ICHRA, which went into effect on January 1, 2020.
The timing seemed catastrophic, at the time.
Just weeks later, COVID-19 shut the world down. Employers laid off millions of employees; it was so bad out there that one of my first Not Boring essays, Schumpeter’s Gale, was an attempt to make the optimistic case for unemployment. The last thing on HR departments’ minds was switching their remaining employees onto new and untested health plans, and the healthcare industry was in crisis mode itself. Insurers, brokers, and hospital systems were triaging and surviving. Meanwhile, the individual insurance marketplaces ICHRA depends on were themselves in chaos; no one knew what COVID would do to risk pools or pricing.
The timing could not have been better, in retrospect.
COVID exposed the weaknesses of employer-sponsored insurance with brutal clarity. Millions of Americans lost health insurance right when they needed it most.
Personally, I’d quit my job in late 2019 and had just run out of COBRA when I got COVID in March 2020; unemployed and uninsured, I rode it out in our small Brooklyn apartment at a time when we had no idea how serious COVID could be instead of risking uncovered hospital bills. The absurdity of tying healthcare to employment had never been more apparent, to me or to the country.
The pandemic was terrible for insurers, too.
“COVID messed everything up and we’re still dealing with the fallout,” a16z’s Julie Yoo told me. “Carriers continue to not be able to predict utilization rates across the system. People who didn’t get surgeries are doing it now. People who didn’t get screened for cancer during COVID are dealing with more advanced cancer now.”
Perfect timing for something new.
Still, Julie was honest about the fact that “every five years or so, there’s another wave of ‘This is unaffordable! Costs keep growing!’ But the fix never actually happens.”
Mario at Oscar Health, which I wrote about in January 2022, expressed caution, as well: “We’ve been here before. ACA, private exchanges. The US healthcare system has shown remarkable inertia.”
But Julie, Mario, and everyone else I’ve spoken to, believe that ICHRA really will be different.
“It all ties to: how practical are the solutions?” Mario explained. “Private exchanges were impractical because employees had to go to carriers and make deals. ICHRA is more practical.”
Julie, too, is optimistic. “There’s really been this two to five year confluence of factors that have broken the wall,” she said, “and now we’re starting to see true innovation happen.”
Enter Thatch.
When Will Manidis first introduced me to Chris and Adam, and when Not Boring Capital invested in Thatch, they were building a way for patients to access precision oncology trials.
The problem was personal to them, as both Chris and Adam had lost parents to cancer, and their experience working in cancer research, biotech, healthcare, and fintech made them uniquely well-suited to solve the problem.
As Chris recounted on the Pear Healthcare Playbook podcast, though, speaking with cancer patients, they realized that most actually weren’t looking for new clinical tools. They liked their oncologists. What they kept saying was that paying for care was frustrating and expensive. For a team experienced in healthcare and fintech, that seemed like a problem they might be able to solve. So they started talking to people again.
At one point that September, they asked me to share what they were working on on Twitter so they could find more people to speak with. I’ve never been more flooded with requests. Clearly, they’d hit on something.
Not clinical trials, then. Something to do with healthcare payments.
While they were figuring out what exactly that something was, Chris and Adam were also doing all of the administrative stuff any new company needs to do to get itself up and running, like insuring its growing employee base.
Experience shapes awareness. Awareness shapes reality.
Millions of people have gone through the experience of setting up insurance for their companies. Practically all of them have found it painful in one way or another. The percentage of them that have tried to do something about it rounds to zero.
“For employers, healthcare spend is one of the top five budget line items, they can’t control it, and it always goes up,” former Google Chief Human Resources Officer (CHRO) Laszlo Bock, one of the architects of modern Silicon Valley people practices, told me. “Every year, Aetna sends an email and says, ‘Premiums are going up 8% or 12% this year.’ Startups are always cash constrained, and healthcare is the one lever they have zero control over.”
Thanks to their unique set of experiences, though, Chris and Adam realized they might be able to exert some control.
The first thing that makes Chris and Adam unique is their almost irreverent belief that healthcare can be fixed. Having seen at a young age that the healthcare system doesn’t always work, they don’t view it with the same religious awe that others might. While modern medicine is a miracle, the system we’ve built around it can and should be improved.
“I actually think we don’t have as many entrepreneurs in healthcare today because how could you want to disrupt something you venerate or hold in such high esteem?,” Chris said on the Pear podcast. “Sometimes, having a bad experience early on opens up a window to question the things we take for granted.”
This belief is why Chris and Adam went into healthcare in the first place, and why they decided to start a company together to improve the system.
Then, there was a bit of lucky coincidence, or synchronicity, in the form of well-timed terrible experiences with health insurance.
The week that Chris left his job to start Thatch, he tore his achilles. After surgery, he showed up to physical therapy and was turned away because his insurance company had clawed back charges for his treatment and said that he owed $20,000. Dealing with insurance was almost as painful as tearing the tendon that connected his calf to his heel.
Limping and unable to do physical therapy, Chris still had a company to run, which meant hiring people and giving them insurance. From the beginning, founded when it was in the middle of a pandemic, Thatch has been a remote company, which added complexity to an already complex process.
Originally, Thatch selected an insurance plan based in Austin, where Chris lives, but the plan didn’t work for everyone on even a small early team. One employee wanted to keep using Kaiser, which he’d used and loved in a past job (Kaiser is one of the rare examples of a health system people love; both a health system and an insurer, its incentives are aligned with those of its patients). Another employee, based in New York, found that the plan didn’t cover any of her doctors, including the primary care physician he’d seen for years. One-size-fits-all plans fit almost no one on the team.
So they switched plans, and in the process, while on a long-anticipated and rare vacation with his mother to Japan, Chris got texts from his employees complaining that they couldn’t see their doctors or pick up prescriptions. Coverage had lapsed during the transition. On the other side of the world, Chris woke up at 3am Tokyo time to call the insurer and get the coverage reinstated (he couldn’t, of course, just do it online).
They kept looking for something that would work for their employees, an annoying back-office distraction while they spoke to customers to figure out exactly what Thatch should be building.
That’s when Chris and Adam learned about ICHRA.
Here was a regulation that solved exactly the problems they’d just suffered through - the one-size-fits-none coverage, the lapsed transitions, the employees who couldn’t keep their doctors – and the problems with cost unpredictability that they would inevitably face if their company grew.
But ICHRA was so complex to implement that even they, with deep healthcare and fintech experience, struggled to make it work. If they couldn’t figure it out easily, a normal business wouldn’t stand a chance.
With awareness earned through experience, Chris and Adam could see that ICHRA’s time had come, and that they could pull it forward.
I am a simple man. I think that the most important question when evaluating a startup is “Why Now?” As I wrote in Better Tools, Bigger Companies:
People are smart. We’ve solved most of the challenges that are possible to solve given the tools currently at our disposal, give or take a little given the fact that we’re also good at getting in our own way. So we build new tools to tackle new challenges.
That’s why investors like to ask, “Why now?” What new technology (or regulation or societal shift, but mainly technology) makes it possible for you to solve this now better than anyone else in all of human history has been able to?
In that essay, I was dismissive of regulation and societal shifts, because the vast majority of large startup outcomes come as a result of a technological shift. This is why I’ve been so focused on Vertical Integrators and hard tech companies; the cost of the technologies in the Electric Stack continue to drop, and their performance continues to improve, making it possible to build companies on products that are better, faster, and cheaper than what the incumbents offer. We’ve had software and the internet for a while; most of the biggest problems that can be solved with software, have been.
Every once in a while, though, changing regulation and societal shifts create the conditions to build something truly massive and societally important with existing technology.
I believe that ICHRA, and our breaking healthcare system, is one of those opportunities. I will lay out the Why Now for ICHRA and then cover how Thatch is both seizing and accelerating the rare opportunity to transform a multi-trillion dollar system.
First, we need to understand why something like this hasn’t happened yet, why, as Mario said, “The US healthcare system has shown remarkable inertia.” Why, specifically, most companies haven’t switched from group insurance to individual.
When I asked Chris and Adam this question, Chris gave me a simple way to think about it. “The switching costs of moving to a new type of insurance plan are really high,” he said, “so companies don’t switch unless their insurance costs are rising even faster.”
This insight is really useful in thinking about who will switch to ICHRA, and when. For most businesses, the decision of which health insurance plan to offer employees is based on how much it will cost them per employee per month to provide a certain level of coverage.
That graph is obviously dramatically oversimplified. In reality, are so many variables that I have to put them in a footnote1 to maintain the flow, and even in the footnote, I probably captured ~5% of the complexity.
All of which is to say, that graph is not entirely accurate because it’s impossible to make a single graph both comprehensible and accurate. But it’s a useful model that roughly represents the state of play today:
The higher the group premiums relative to individual premiums, and the easier it is to navigate ICHRA, the more likely it is a company will switch.
ICHRA makes a lot of sense for small businesses.
It’s starting to make sense for mid-market businesses.
It doesn’t yet make sense for large businesses.
From this simple model, we can start to play with different variables and understand “Why Now?” for ICHRA, or more specifically, when ICHRA will make sense for which types of businesses.
The biggest Why Now for ICHRA is simply that insuring employees is getting increasingly expensive, and unpredictably so, for employers.
From about 2010-2024, Chris said, we were in a low background inflation environment. Because healthcare costs normally increase at 2-3% higher than inflation, companies had been seeing their costs rise 6-7%, right in line with the 2025 Milliman Medical Index average.
Today, however, group insurance is getting so expensive that it is overcoming switching costs.
In early September, the Wall Street Journal published an article, Health Insurance Costs for Businesses to Rise by Most in 15 Years, that shared benefits consultants’ surveys which found that employers expect their healthcare costs to rise 9.2-9.5% in 2026.
Those are averages. Chris told me that some smaller companies are seeing their healthcare costs rise as much as 30% in one year. The WSJ spoke with Troy Morris, the CEO of 20-person Kall Morris Inc., who said that the cost of his company’s health plan grew 20% for the year starting August 1st, after a 9% increase last year.
There are many commonly-cited reasons costs are going up faster now than before:
Inflation: Healthcare costs are super-inflationary, so when inflation grows, healthcare costs grow even faster.
COVID Overhang: As discussed, the healthcare system is still dealing with the fallout from COVID. People are undergoing treatments that they delayed, and dealing with health issues stemming from delayed treatments, like increased cancer rates among the working-age population.
GLP-1s: Even though most employers don’t cover GLP-1s for weight loss, the drug’s popularity and high cost is overwhelming those who do offer it for weight loss, and for eligible conditions like diabetes and obesity, which is a big number! According to KFF, “Over 2 in 5 (42%) adults under 65 with private insurance could be eligible for GLP-1 drugs, based on current Food and Drug Administration (FDA) indications.”
Administrative Costs: There’s that chart that we discussed in our latest Deep Dive on Ramp, that shows that the growth in the number of healthcare administrators has far outpaced the growth in the number of physicians since 2010.
It’s only gotten worse since. According to Physicians for a National Health Program, “Since managed care went into effect in 1970, the number of doctors in America has risen approximately 200%. But the number of healthcare managers (administrators) has risen over 3,800%... There are now 10 administrators for every physician in the United States.” Stuff like pre-approvals, meant to keep costs down, inflated the number of people needed to manage stuff like pre-approvals instead.
Then there’s AI, which, hopefully, at some point, will help solve some of these problems, but for now, is mainly making life more expensive for insurers. Julie at a16z pointed out that, “All of a sudden, because of AI, providers are really good at submitting claims and getting paid.”
Companies like Abridge, which offers “enterprise-grade AI for clinical conversations,” are marketing on the idea that they make doctors lives easier, but they’re selling on the idea that if AI is listening to all of a provider’s conversations, it can catch everything that the provider should be billing for and code it appropriately.
V Bento, the founder of Sword Health, explained that healthcare solutions only achieve widespread adoption when they align with the economic realities that the healthcare world faces. “Either they unlock new revenue streams or lower costs,” he said, “and they have to do that without compromising quality of care. That’s the only way solutions get adopted.”
“In earnings calls, healthcare company executives are talking about providers getting better at claim submission, basically admitting that people were getting underpaid,” Julie told me. “It will break the healthcare system in its current form if they have to actually pay out claims.”
“All of these weird esoteric things are creating this total breaking point that calls for the redesign of insurance,” she continued, citing risk-adjustment corrections in Medicare, and their associated abuse, and the same thing happening in Medicaid. It’s all very in the weeds. Her simple takeaway was this:
“Everything [in the incumbent healthcare system] is breaking.”
What does breaking look like?
It looks like higher premiums and an increased willingness to look for alternatives.
In response to such insane increases, the WSJ writes, a “WTW [Willis Towers Watson] survey, which was performed this summer and largely focused on bigger employers, found that 60% were planning to look at replacing their health insurer or pharmacy-benefit manager in the next few years. It also found that nearly a third of employers surveyed are giving priority to new plan designs that could include changes such as limits on access to certain doctors or hospitals.”
To Chris’ point, the rise in healthcare costs are overwhelming switching costs. Six out of ten large employers plan to switch in the next few years. At the same time, employers are looking to limit their plans to decrease costs, a rerun of the HMO playbook. When employees inevitably get mad about limited provider access, they should demand plans that give them choice.
Over time, this becomes a virtuous cycle, or a vicious one, depending on which side you’re on.
So Why Now?
First, there is regulation. ICHRA provides a much-needed alternative to group plans that didn’t exist until five years ago.
Then, there are societal shifts.
COVID, AI, GLP-1s, administrative bloat… all of the biggest buzzwords of this decade have combined to jack up healthcare costs faster than they’ve risen in the last two decades, providing the force necessary to overcome corporate inertia.
And on top of all of that, outcomes are still bad and incentives are still misaligned! Insurers don’t want to pay for GLP-1s because they won’t get the benefit of healthier members in a decade. They don’t want to pay for cancer screenings because another insurer will profit from the life they paid to save. All that money, and it’s not even well-spent on keeping us healthy.
That’s why, Jonathan at Function Health said, “This is not a trend. This is an evolution. For the first time, people are getting agency over their health. It’s a transformation happening in politics, government, and culture.”
“The fact is,” he said, “this is a cultural movement. It’s as much a cultural as a technological thing.”
But another fact is that ICHRA has challenges, too. It is incredibly complex to administer, and that complexity is more than most businesses are able to manage on their own.
This is what Chris and Adam realized when they first tried to implement ICHRA for Thatch, which is why they decided to put Thatch to work on making ICHRA work.
The simplest way to think about Thatch is as infrastructure for ICHRA.
The beauty of ICHRA lies in the choice it provides.
The complexity of ICHRA lies in the choice it provides.
To start, ICHRA lets employers give their employees tax-free dollars to spend on any individual insurance plan they choose. There are hundreds of carriers, though, and without software to simplify the process, figuring out which to choose would go something like this.
Employer tells employee they have $1,000 per month to spend on healthcare.
Employee goes to each individual insurance carrier website individually to get information on each plan.
Employee builds a spreadsheet or something to compare plans.
Employee picks a plan and pays for the premium on their own credit card, fronting hundreds of dollars each month.
Employee submits receipt for reimbursement each month.
Employers enter receipts into the payroll system for reimbursement.
Employee, if aware, keeps track of how much they have left after premiums to spend on other covered healthcare services, figures out exactly what is covered, pays for any of those services on their own credit card, and submits receipts.
Employer determines whether those costs were actually covered, and if so, reimburses employee.
Employer manages the ongoing reporting and compliance necessary to offer ICHRA.
When Chris and Adam began looking at offering ICHRA to their team, they looked at other companies that existed to make sense of the process, like TakeCommand and Remodel. Both companies were founded in the mid-2010s to help companies manage earlier HRAs and QSEHRAs, but neither, Chris and Adam realized, had built the infrastructure to make the process seamless. In most cases, they were an Excel-based in-between for brokers, carriers, and employers; better than nothing, but not right for Thatch. Given the high manual costs to serve customers, they ignored the sub-20 employee segment of the market in which Thatch lived in its early days.
Jahanvi at Index had been on the lookout for an ICHRA play ever since Mario at Oscar had told her about it in the very early days. She hadn’t found anything worth backing.
“Early ICHRA companies were very hairy services plays, only focused on cost savings,” she said. “Cost savings weren’t the only thing that mattered. I’d talk to brokers and they’d tell me that even when they found good savings with ICHRA, it was too tough to manage, especially with payroll and expecting employees to float premiums.”
“We tried to offer ICHRA to our own employees,” Adam said, “and realized that it was totally broken.”
Crucially, though, they noticed that it was broken not in some “healthcare is broken what’re ya gonna do” kind of way, but in a way that they were familiar with. It was broken in the way that financial services were broken when Adam got to Stripe in 2015, but a little worse, or like the way healthcare software was when he left Humana a decade ago after four years in enterprise information security.
“When I came to Stripe,” he said, “I used to think that financial services and healthcare were similarly shitty, that both had really shitty APIs.” That was too kind to healthcare. “Healthcare usually doesn’t even have APIs.”
He asked me to imagine a spectrum on which all of the different institutions you might interact with live. On one end are “extremely promiscuous” companies with open APIs with which anyone can integrate. Crypto might be the extreme example here. Financial institutions are in the middle; their codebase may be in COBOL, but they’re open to integrating. On the other end are companies that design systems that are impossible to integrate with without speaking with a human and even inking an enterprise agreement. Healthcare lives here.
Having spent the past seven years tackling “very complicated” financial services integrations at Stripe, why not go after “nearly-impossible” healthcare integrations?
After a year of speaking to customers and dealing with their own insurance headaches, that’s what Chris and Adam decided to do. Instead of rushing to market with a duct-taped solution, they spent over a year in the guts of the system, rewiring everything to talk to each other.
“My thesis on ICHRA was: this is really a product problem, and market timing really matters,” Jahanvi told me. Those two ideas - product and timing - are related, and explain Thatch’s strategy, which goes a little something like this.
The main benefit of ICHRA is choice. Employers at thousands of companies can choose the insurance plans and healthcare benefits that work best for them from among hundreds of options.
That means that ICHRA demands a neutral platform that connects to all of the parties involved in the system.
The largest opportunity in ICHRA, and, if ICHRA proves as important as I think it will, maybe in all of healthcare, is to build the ICHRA Aggregator.
In Defining Aggregators, Ben Thompson describes the three levels of Aggregators, plus a fourth Super Aggregator classification.
All Aggregators have the following three characteristics:
A Direct Relationship with Users
Zero Marginal Costs for Serving Users
Demand-driven Multi-sided Networks with Decreasing Acquisition Costs
“Aggregation is fundamentally about owning the user relationship and being able to scale that relationship,” Thompson writes, “That said, there are different levels of aggregation based on the aggregator’s relationship to suppliers.”
Level 1 Aggregators, like Netflix, acquire their supply. Level 2 Aggregators, like Uber, do not own supply but incur transaction costs in bringing suppliers onto the platform. They “typically operate in industries with significant regulatory concerns that apply to the quality and safety of suppliers.” Level 3 Aggregators, like Google, do not own supply and do not incur transaction costs in acquiring it.
Thatch is a textbook Level 2 Aggregator.
It has a direct relationship with users. Employees and employers interact with Thatch directly through its app, card, and portal to choose and pay for plans and health services.
It has near-zero marginal costs. Thatch’s core product is software and payments rails (APIs, card, automated enrollment/payroll flows), which scale digitally. Each incremental employer and employee adds minimal variable cost relative to the underlying insurance spend borne by carriers and providers.
It has demand-driven multi-sided network effects with decreasing acquisition costs. Thatch aggregates employers and employees on one side and carriers, brokers, and health services (e.g., Sword, Oura, Prenuvo) on the other via its marketplace. As more demand shows up, more suppliers integrate, and offer more products, reinforcing the flywheel.
It is Level 2 specifically because while it doesn’t own its supply - insurance plans, providers, or services - it does incur transaction costs to bring supply onto the network in the form of integrations, often with companies that rarely integrate.
In the short-term, as Thompson writes, “This limits supply growth which ultimately limits demand growth.” In the long-term, however, it makes Thatch more defensible.
For Thatch, that looked like spending a year building integrations with many of the nation’s biggest carriers directly and payroll providers like ADP (and more), not to mention the financial and compliance rails underpinning it all.
Because of the way carriers view integrations, by getting there first, Thatch may be the only, or one of maybe three, platforms with which each carrier integrates. Missing APIs are a pain until they become a moat. The same is true on the payroll side. From a product perspective, it doesn’t make sense for a payroll provider’s website to show 100 healthcare options; they just want to show the best.
“One thing we did differently,” Adam said, “is that we started by building everything self-serve. Any business can come to Thatch, connect their bank and payroll system, set a budget, and get going in less than 10 minutes.”
Because of those early choices, Thatch is able to serve the entire ICHRA market, including the sub-20 person companies that need it most today but are least equipped to manage it themselves and have been ignored by incumbent HRA platforms. Today, 65% of the insurance process is automated, with a line of sight to 90%, so Thatch doesn’t incur the steep costs of serving small customers that others do.
For larger customers – everyone from Jersey Mike’s to mid-market trucking companies to leading AI labs – Thatch’s sales team can help think through all of the intricacies of switching plan types and shifting responsibility to individual employees.
In these early days for both Thatch and ICHRA, the company is almost entirely focused on customer experience. That, they believe, kicks off an Amazon-like flywheel that makes both Thatch and ICHRA inevitable.
Because ICHRA isn’t quite inevitable, yet.
For one thing, while it enjoys support from both Republicans and Democrats, there is always the chance that it can be killed. Healthcare is a divisive political issue, and as Chris put it, “ICHRA’s blessing and its curse is that it’s tied to the ACA.”
It is a blessing because it taps into and shares risk pools with the ACA’s individual markets. It is a curse because the ACA is one of the most heated political issues of this century to date.
More practically and immediately, individual rates are tied to the ACA’s individual markets. As those markets grow, rates should come down; ICHRA is part of the ACA risk pool. At the same time, though, rates are subject to political dealing. As I write this, the US government just entered a shutdown in large part due to Democratic opposition to the Republicans’ plan to end the ACA’s premium tax credits, which could push individual rates up by 2-3%.
Everything in insurance, Thatch’s Gary Daniels told me, is “a matter of volume,” and 2026 could be rough on volumes because of policy uncertainty. If people think rates are going to go up, then individual plans make economic sense for less of the market, which means a smaller risk pool, which means rates actually do go up. “Cost is always the core driver,” Gary said.
That said, it still seems likely that the credits will be extended by the end of the year. A Kalshi prediction market on the extension rose from a low 15% chance in July to a 79% chance pre-shutdown, and remains at 71%.
In fact, it is looking increasingly likely that the government will accelerate ICHRA adoption.
While a provision to turn ICHRA into law as “CHOICE,” and provide employers with a $100 per employee per month tax credit for enrolling in ICHRA, was struck in the late rounds of negotiation on the Big Beautiful Bill, it seems that a standalone CHOICE bill, with the tax credit in place, could hit the floor imminently. Two weeks ago, a separate bill, the Small Business Health Options Awareness Act of 2025, was introduced which would require the SBA to provide more outreach and education on ICHRA to small businesses.
If either or both of these pass, Thatch will be in an enviable position: the government will be marketing ICHRA to small businesses and incentivizing its adoption with tax credits. Because it has spent years building self-serve infrastructure, Thatch will be best positioned to deal with the flood of demand if this happens.
Gary told me that he normally falls asleep pretty quickly at night, but the thing that’s been keeping him up is how to deal with all of that volume without messing up.
When you fuck up and people can’t get enrollment and they have a sick kid and you can’t help them… that’s the worst thing you can do is impact someone negatively when they need care. I remind our people: our #1 priority is to not mess up that experience.
Fortunately, no one else in the industry has built what Adam has built. That we can quote, install, and have an incredible experience with no one being engaged.
That technology will be critical. If a CHOICE bill passes this year, Gary said that 2025 small business volumes could be 4x higher than anticipated, all squeezed into the last couple of months of the year. We have seen what this kind of demand can do to health insurance systems before. Luckily, Adam and the team he’s built are a whole lot better than whoever built the original healthcare.gov.
Volume, whether driven by a Bill or by time, will be the key to solving the other major challenge ICHRA faces: plan quality and coverage limitations.
The individual health insurance market today faces a fundamental adverse selection problem that significantly limits plan quality and coverage options. With approximately 24 million Americans enrolled in ACA marketplace plans as of 2024 (less than 8% of the U.S. population), carriers operate in a constrained risk pool that makes offering comprehensive benefits financially untenable.
This is a real concern. When Mario at Oscar recently asked one innovative HR leader why they don’t yet offer ICHRA, the response was blunt: “All of the ACA plans suck. They’re high-deductible, they don’t cover certain drugs.”
He told me that while there are great plans – Oscar’s whole business is individual market plans – “that’s still a real argument compared to large group plans. Take fertility benefits; there’s not a single ACA plan that offers IVF.”
The economics are straightforward: when any carrier offers enhanced benefits like fertility coverage, they immediately attract a disproportionate share of high-cost members without sufficient healthy enrollees to balance the risk, creating an unsustainable “death spiral” that forces them to either withdraw the benefit or exit the market entirely. “If you’re the one local plan that does offer IVF,” Mario explained, “everyone who needs IVF will go to you and you will go underwater.”
More generally, Mario, who is a strong believer in ICHRA and the one who turned Jahanvi on to it in the first place, is worried that ICHRA could become viewed as “this low-end disruption thing, where it becomes this cheap option for employers.”
There’s no reason that has to be the case, though. When I asked him how he would solve the IVF issue and the cheap plan issue, he pointed to Thatch’s role as an Aggregator.
“Thatch needs to go to employers and say, ‘If you want to offer ICHRA, and you don’t like your local network – the drugs, doctors, etc… - I will go to Oscar and United and whoever and get them to design the plan for you.”
This is a crucial point! The infrastructure matters, but infrastructure can’t fix a broken $5.6 trillion system alone. What matters is how Thatch’s aggregation reshapes supply.
I have been an investor in Thatch for over three years, and it’s one of those companies that I get more excited about every time I talk to the founders.
But this realization - that by aggregating demand and giving individuals choice, they can influence where money flows in healthcare - is the thing that made me believe the investment will be a fund returner and the company will rewire US healthcare.
One of the most powerful attributes of being an Aggregator is that controlling demand allows you to reshape supply.
Uber doesn’t employ its drivers, but its rating system incentivizes drivers to provide a certain level of service. Airbnb doesn’t own its homes, but its rating system incentivizes owners to provide the best experience possible. Google doesn’t own the websites it indexes, but there is an entire industry, search engine optimization, whose job it is to shape websites in a way that will please Google’s algorithm. A similar dynamic exists for each Aggregator.
Similarly, every Aggregator both drives and benefits from scale. The more drivers on Uber, the shorter the wait time, the better the experience, the more demand. The more homes on Airbnb, the more choices in a given market, the better the experience, the more demand. From the driver or homeowner’s perspective, the more customers on Uber or Airbnb, the stronger the signal to come online and provide a better experience.
The core insight behind Thatch is that, with employee-funded individual markets, a similar dynamic can exist in healthcare.
The core issues with the individual market today are size and adverse selection.
The individual market is 24 million members compared to the 154 million people in employee-sponsored group insurance. Many of these 24 million people today are those who can’t get employer coverage because they’re unemployed, gig workers, or between jobs or who have pre-existing conditions and require ACA protection. In short, they are lower-income and more expensive to cover.
This creates a vicious cycle. Carriers price plans defensively because the risk pool skews sick and poor. Higher prices drive away healthy people who have any other option. The risk pool gets worse. Plans get more expensive and offer fewer benefits. The cycle continues.
But ICHRA breaks this cycle by bringing employed, insured people into the individual market.
The math is compelling. If even 10% of the employer market shifts to ICHRA, that’s 15 million people added to the individual risk pool, a 60% increase. More importantly, these are exactly the lives carriers want: employed, with steady income, and critically, with the full spectrum of health needs that makes insurance actuarially sound.
As Thatch explains in an internal strategy memo, “The fundamental principle of insurance is simple: the larger the risk pool, the better the pricing and superior selection due to increased competition.”
Combining this insight with the observation that we made earlier – that ICHRA with Thatch is currently a better option for many small businesses and an increasing number of mid-market businesses – we can understand Thatch as a series of flywheels as it grows the number of members covered.
There is an Amazon-like flywheel that Chris and Adam reference when talking about their business:
The better the customer experience, the faster we grow our employer and member base, which in turn attracts carriers and marketplace partners to the platform, with better and cheaper products. These better and cheaper products (relative to traditional group products) will attract more employers, and their members, perpetuating the flywheel.
There is a bit of a twist, because of how insurance works. Since risk pools are often based on group size, and because pool size influences price and selection, you can think of this flywheel spinning in progressively larger markets, almost capturing enough momentum from one to tackle the next.
This is another critically important thing to understand about Thatch.
Because of the infrastructure that they’ve built, Thatch is able to start with the small end of the market. That is the only way this works. ICHRA didn’t make sense for large employers when the company started, and unless small and medium sized companies joined ICHRA first, it never would.
By starting at the small end of the market, Thatch creates the possibility that it will eventually capture the large end, too.
So if there are 9-10 million members covered under small group plans in the US, and ICHRA is already more affordable and already offers better selection (with more personalized choice) than many small group plans, the first thing that Thatch had to do was just build infrastructure to neutralize ICHRA’s complexity and enable small employers to offer better plans, even if those plans were still more expensive and offered worse selection than those available to medium and large-sized companies.
As ICHRA, through Thatch, pulls more members out of the small group risk pool, which are already shrinking as level-funded products take good risk out of the pools, it will have a dual-effect: it will give ICHRA cheaper prices and better selection, leaving small group plans with more expensive prices and worse selection. That will accelerate the transition from small group plans to ICHRA.
As more small employers switch to ICHRA, prices will continue to fall and selection will continue to rise. This happens because of insurance math, and also because more carriers and health services companies will offer more and better plans via Thatch knowing that the demand is there.
This isn’t theoretical. We can already see early signs of the flywheel spinning. Oscar is designing custom plans for ICHRA populations. Centene, one of the largest health insurers in America, is building ICHRA-specific products and partnered with Thatch and Quickbooks to bring ICHRA to small businesses. Regional Blues are creating dedicated ICHRA teams.
As prices come down and carriers offer more plans, it will make ICHRA competitive with more mid-market group plans, where the next flywheel starts to spin.
As Thatch and ICHRA pull in more members, prices fall and selection improves, and it begins to pull members from large group and self-funded plans, where more than half of the market, 58% according to KFF, lives.
Today, it seems improbable that Thatch will take ICHRA to the large end of the market. The entire ICHRA membership today is smaller than some single large companies.
But it really does come down to cost and coverage (and switching costs, which are higher the bigger a company gets).
If employers can offer plans that offer the same coverage for the same price, or even custom-designed ones at a higher price for better coverage, Thatch believes that it can win on experience. Letting individuals choose how to spend on their own healthcare can solve problems faced by even gold-plated plans today.
Adam would know. Stripe offered as good a healthcare plan as you can find.
“Stripe, which was like 8,000 people, spent all of the money in the world on healthcare. We had a Cigna Platinum PPO option and a Kaiser option, and services like Lyra Health for mental health and Color Genomics for genetic testing.”
Still, he said, “Offering all of these benefits required a team of benefits people stitching them all together, figuring out how to offer all of these therapists in different markets. But if, despite all of that, my therapist still isn’t covered… tough shit.”
Even at large companies, some people will want a certain therapist, others will want GLP-1s, and still others will want Eight Sleeps. Some are young and single; others have families of eight. Designing options that work for all of them top-down is an impossible task. Even accidentally, you might miss something that some people really want.
Google went through this, too. Laszlo said that while he was running the people team there, they made a small change to the reimbursement rate for Tier 4 drugs and upset a lot of employees. This is real arcana, but insurance companies categorize pharmaceuticals into tiers. Tier 1 might be something like flu medication or penicillin: widely used, low cost, and easy to provide. Tiers 2-4 get increasingly expensive with more approvals required.
“Without thinking too much, the benefits team made a change to reimbursement rates for Tier 4 drugs. Not a lot of people were using them, so we increased the copay,” he recalled. “Turns out, one of the Tier 4 drugs was a medication that gay men took prophylactically to lower the odds of contracting AIDS, so that population felt targeted and they were pissed.”
It was a mistake, but one that he wasn’t sure how you could really avoid at Google scale. “I don’t know how you’d figure out what Tier 4 insurance reimbursement is across a bunch of plans,” he said. “What Thatch does is allow employers to say here’s our budget in dollars per employee, and allow employees to say, with the money, for my needs, here’s what’s best for me in my state.”
Mario, too, is excited about the opportunity to bring ICHRA to employers with high per-employee healthcare budgets, which is possible under ICHRA. That, he thinks, is how you address the misconception that ICHRA only works for the low-end of the market.
He told me about the Atria Health and Research Institute, a “mega-high-end clinic in New York that costs something like $50,000 per year.” Atria’s mission is to deliver the world’s best preventative care by working with the best primary care physicians, specialists, and researchers to deliver personalized care plans that prioritize prevention and longevity. Then, they’ll share the data they collect to bring prevention and longevity to the wider population.
Mario said that today, Atria has clients at banks and hedge funds who pay for membership through their employer, after tax. Oscar could design plans that offer Atria as a benefit, using pre-tax dollars from the employer to employee. “It’s expensive,” he said, “but it would work.”
The way the individual marketplace works, say one hedge fund worked with Oscar to build a plan around Atria. That plan would then be offered to everyone in the marketplace. This is true for providers, too.
“There are a number of providers who would benefit from offering their own health plans,” a la Kaiser, Mario said. “Hospitals that serve a local market, like NYU, could start a plan, go to a company like JP Morgan with a lot of New York-based employees and say ‘Slice me in, whoever likes me can buy me,’ and then offer it to everyone in the New York individual marketplace.”
“Ideas like this were impractical before ICHRA because they involved one-on-one negotiation,” he said. “Now they can make sense.”
No matter how good the plan is, though, not every plan will cover everything that’s good for your health. That’s why, earlier this year, Thatch launched Marketplace.
Through Marketplace, Thatch members can find a growing number of health-related products on which they can spend their leftover allowance dollars, and the companies that offer those products can find customers with money to spend.
Marketplace is aggregation in its purest form.
Thatch has a direct relationship with customers who have money they must spend on a certain type of product. The companies that make those products have traditionally faced challenges acquiring customers: products can be expensive for individuals, but selling them to companies means developing an enterprise sales motion and competing for benefits teams’ limited time and resources. Most small businesses don’t even have a benefits team. So Thatch lists the products at practically zero transaction cost, helps demand find supply, and takes both a fee and interchange when members buy the product. It’s actually more like a Level 3 Aggregator within a Level 2 Aggregator.
Taking it a step further, by listing both plans and products on the same platform, Thatch allows members to unbundle the traditional insurance plan and design their own. A young, healthy member can purchase a barebones plan and pay for a GLP-1, improved sleep, and genetic testing with the balance. It’s not a bundle a carrier offers (yet), but it’s a bundle that members can construct with fungible dollars.
“We have operated since World War II under the model that no one knows anything about medicine or their health,” Justin Mares, the founder of TrueMed, which members can pay for with Thatch, told me. “If something happens, go to the doctor, they do ten things, and you’re good. That’s fine for a broken ankle, but for chronic conditions, all of which are lifestyle mediated and high-context, people should be trying small interventions all the time. The average person is unhealthy. The default is obesity with one or more chronic conditions and that you die earlier than your parents. The people who will escape are those who take control for themselves.”
ICHRA allowances and the Thatch Marketplace give people the chance to take control for themselves, and in the process, flow dollars to the things they think will improve their health in the long-term.
More dollars available for health-related products, and fewer dollars spent on marketing those products, might even incentivize the creation of more health-focused companies and products, almost like an advance market commitment. The dollars are there. If you build it, and it’s good enough, they will buy.
This is the promise of ICHRA, and the strategy behind Thatch: by enabling choice and reorienting healthcare around the consumer, America can unleash the forces of competition on the world’s largest broken market.
Everyone knows that the US Healthcare System is very large, some 17 or 18% of GDP. Most people feel that it’s broken, at least relative to what it could be for the money we’re spending.
What most people don’t realize, and that I certainly didn’t, was that if the US Healthcare System were its own economy, it would be the third largest in the world.
The Centers for Medicare and Medicaid Services (CMS) projects that America will spend $5.6 trillion on healthcare in 2025. Only the United States at $30.5 trillion and China at $19.2 trillion produce GDPs larger than that amount.
The United States is the world’s leading free market economy. China is the world’s leading state-directed economy.
US Healthcare is so broken, in part, because it is neither of those two things.
Certainly, American medicine isn’t socialized. Say what you will about socialized medicine, but at least there is one payer incentivized to keep people healthy over the long run.
Neither is it purely capitalist. It is a hybrid model in which government plans like Medicare and Medicaid distort market pricing while covering only select populations, creating massive cost-shifting to private payers. Meanwhile, the private insurance side operates without real competition: patients don’t choose their insurers (employers do), prices are completely opaque, and consumers can’t shop for services during medical emergencies.
The result is a system with all the inefficiencies of government bureaucracy AND all the profit-seeking of private industry, but none of the benefits of either model. Adam Smith and Karl Marx are laughing at us together from wherever you believe they ended up.
Even the commercial side of the market operates as an oligopoly. The “BUCA” carriers - the Blue Cross and Blue Shield system (often represented nationally by Anthem/Elevance), UnitedHealth Group, Cigna, and Aetna - collectively cover in the high-60% range of employee-sponsored members.
That undersells the concentration. Commercial markets are highly local; employees choose from plans in their states. And locally, the American Medical Association (AMA) found that of 381 metropolitan statistical areas, “Under the updated U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) guidelines released Dec. 18, 95% were highly concentrated in 2022. In 48% of MSAs, one health insurer held a market share of at least 50%.”
What this means in practice is that the innovation that allows America to lead in other areas of the economy is lacking in healthcare.
“If you look at the four major US insurers,” Chris said, “none is younger than the internet. 99% of the commercial market in the US is controlled by multi-decade-old companies.”
“Why don’t we see more innovation in care models?” he continued. “Because to sell into employers, you need a national network, and for that, you need infinite money. Which means that you can’t test new models. There is no fertile ground for them to exist until you have individual coverage.”
With ICHRA, Chris and Adam believe, we can begin to unbundle insurance and care delivery more broadly.
A small provider like Harbor Health in Austin, where Chris lives, has figured out a new way to own certain provider networks and direct people to high-quality care at a fraction of the cost. If it works, they can expand to new markets.
Digital health startups that aren’t covered by insurance but that struggle to sell into each employer one-by-one can list their products in Thatch’s Marketplace, where employees can use employer dollars to make their own decisions.
“If you take all the money flowing through the Big Four insurers and give it to startups, you will extract more efficiency in a free market system,” Chris predicts.
There is, of course, a long road between where we are today and the point at which the free market has fixed US Healthcare, with many roadblocks in the way.
There is inertia. The entire system of carriers, benefits teams, pharmacy benefits managers, benefits consultants, brokers, and providers has been built up over 80 years since World War II.
There are cost and coverage. While ICHRA makes sense for a lot of small companies today, providing the same level of coverage as an enterprise group plan still costs more money under ICHRA.
And there are people, specifically HR departments and benefits teams. While they all want to provide the best benefits to their employees at the lowest cost, so much of their identity and responsibility is tied up in selecting plans and allocating budgets. Plus, they’re risk-averse. Laszlo pointed out that whenever they roll out something new, 1% of employees are bound to get mad. At larger companies, 1% is a lot of people yelling at you. And they have been burned before. “What Workday taught every HR buyer is that every new software will take 3x as long, cost 2x as much, and deliver half the promised value,” he said.
All of these are very real challenges, when, added together, make it far from certain that ICHRA will achieve the kind of scale it needs to achieve to really change how American healthcare operates. Large employers are slow to change, and self-funded plans, while they might not be perfect, work. Setting them up is a large part of what benefits teams do, and no team likes to give up ground.
What strikes me about all of these impediments, though, is that each is some form of network effect. And the thing about network effects is that while they are hard to overcome, they can unravel very quickly once they start to come apart.
Take the inertia.
As Laszlo explained to me, most benefits teams don’t do all of their own analysis internally. They hire benefits consultants, many of whom are insurance brokers, like Mercer, Gallagher, Willis Tower Watsons, and Aon to make recommendations. These groups are used to recommending and selling group plans, but, Laszlo said, “Once a bunch of third parties have Thatch as a core offering or recommendation, you get a snowball effect.” Working with this small group of partners, then, Thatch can access a large number of companies.
This is beginning to work. Bruce Johnson, Thatch’s Head of Policy, said that brokers and consultants “want to be able to offer a complete menu of options. Brokers were initially concerned, but they’ve adjusted their business models to incorporate ICHRA, and since then, they’ve become a major player in facilitating access, a key channel for Thatch.”
Jahanvi at Index, who was actually introduced to Chris by a broker who’d sent his largest customer to Thatch, seconded the rapid improvement with brokers. “When we looked at the Series A, they had absolutely no broker motion whatsoever,” she remembered. “We had this whole discussion around, ‘Who would come after you?’ And one was brokers. Will they be made whole? Does this eat into their commission? They have such a hold on the employer market that it would be very challenging without them.”
“Fast-forward a year,” Jahanvi said, “and Mercer, Gallagher, and others are all advising on ICHRA.”
And then there are the carriers themselves.
Surprisingly, they have been among the first to embrace ICHRA because of some very specific attributes of the insurance market. First, as Gary explained to me, “Everyone is getting their ass kicked on earnings. ICHRA is the most amazing opportunity in healthcare, to move self-funded plans into ICHRA.” That’s because in a self-funded plan, the carrier only gets a small fee for administering the plan. With ICHRA, they get the entire premium. And that premium can be higher margin because with large group plans, insurers have to pay out 85% of premiums in claims, whereas in individual plans under the ACA, they only need to pay out 80%.
In short, the groups I would have expected to be ICHRA’s biggest opponents are actually incentivized to support it. And as we know, incentives matter.
Next, take cost and coverage.
We’ve covered this. As more employers, and their employees, join ICHRA, risk pools grow, and prices come down. Carriers are incentivized to offer more plans to meet the specific needs of different customers in different markets. Some will want to pay less and spend more on services directly as-needed, others may be happy to pay $10,000 per month for ultra-premium plans.
Whether this works or not, then, comes down to Thatch’s ability to grow the number of employers and members who adopt ICHRA, which comes down to selling to the teams at companies who control the benefits purse strings.
In the short-term, that means starting with small and mid-market businesses for many of whom ICHRA represents the best opportunity to provide good, affordable, personalized coverage at a predictable cost to the business.
Certainly, if Congress passes ICHRA into law as CHOICE, provides $100 per employee per month in tax credits, and markets ICHRA through the SBA, it will become much easier to sell to this group. Thatch’s partnerships with payroll providers like ADP give them distribution into the long-tail of businesses that make up the American economy, and into startups.
In selling to startups, Thatch is relying on the same realization that brought employer-sponsored insurance into the mainstream eighty years ago: in the war for talent, benefits can be decisive.
“For startups, this is brilliant,” Laszlo said. “If I were Head of HR for a rocketship, I’d sign up for Thatch, and then with the money I save, I’d buy all sorts of cool stuff.” He thinks that because they allocate it to the same things every year, HR people don’t realize how big of a budget they have to work with. By offering Thatch, they can provide employees with better, more personalized coverage, and spend the rest of the money on other perks, or even split it with employees. Soon, if Thatch pulls this off, startup employees will demand choice.
Startups are a good bridge to the large group market. They are small, and therefore fall into smaller and more expensive risk pools, but their employees’ expectations often outpace company size. Providing a great experience to startup employees, then, will push Thatch to expand the plans and marketplace options available on the platform.
The large group and self-funded market is the big prize and the best chance to transform American healthcare for the better. These are long sales cycles with more, and more risk-averse, people involved. Certainly, broker, consultant relationships will help here.
I suspect, though, that by the time that ICHRA makes economic sense for large companies, the transition will be inevitable. Because if Thatch is successful over the next few years, it will not be fighting for the large end of the market by itself.
The opportunity ahead is to build the infrastructure that unleashes the free market on healthcare.
Healthcare feels immovable until you realize that it’s just incentives all the way down.
Incentives are not physical laws. They can be rewritten. And there are a lot of good people within the healthcare system, previously bound by incentives, who want to rewrite them.
This was the story of the 401(k). In 1975, pensions seemed permanent, even though they were broken. By 1995, they were relics. The transition wasn’t smooth, and it took companies like Fidelity and Vanguard to make it happen at scale, but it was inevitable once the incentives shifted.
ICHRA is to healthcare what 401(k)s were to retirement plans.
At scale, with ICHRA, everyone wins.
Employers get predictable (and even falling) healthcare costs.
Employees get to spend on the plans and healthcare that work best for them.
Crucially, by decoupling insurance from employment, and creating plans that stay with members no matter where (or if) they work, the American healthcare system can prioritize the long-term health of Americans while lowering overall system costs.
If insurers are incentivized to prioritize the long-term health of its members, they can design plans and preventative care that helps members stave off the chronic conditions and hospitalizations that weigh so heavily on America’s bank account.
It is insane that we have a system in which telemedicine usage is down because they don’t earn hospitals enough reimbursement, even though telemedicine drives down system costs. This mismatch will get worse as AI improves. The promise of AI in medicine is not simply to let providers bill more. It’s to deliver better care at a lower cost. With ICHRA, the market can design plans that incentivize users to start with a chatbot and route them to the right doctor, maybe even at a discount.
It is insane that we have screenings like Prenuvo and Ezra that can catch cancer earlier, when it’s more easily curable, and that we have miracle drugs like GLP-1 that can help people lose weight and stay healthier, but that insurers don’t cover them because they’ll increase costs in the short-term from which another carrier benefits in the long-term.
With ICHRA, carriers can design plans around cancer screens, GLP-1s, genetic testing, sleep, gene editing, or any number of other health-positive interventions, or people can simply choose to buy those things for themselves.
As much as I love Vertical Integrators, companies using modern technology to build physical things and take on sclerotic incumbents, in healthcare, the thing that will make all of those physical and biological breakthroughs work is a platform that lets us do more with the miracles we already have at our disposal.
Stripe and Arc Institute co-founder Patrick Collison made this point explicitly a few months ago on twitter. In order to take advantage of the incredible advances in biotech, we first need to rewire the financial incentives of the healthcare system.
When Chris and Adam first told me they were pivoting from precision oncology to, essentially, fintech, I’ll admit that I was a little disappointed. I wanted to back them in the quest to cure cancer.
Working with Thatch over the past few years, and writing this piece, what I’ve come to realize is that the best way to fight cancer, and many of the other diseases that ail and kill us, is to rewire incentives so that more people can access the tools, preventative measures, and treatments that exist today, and will be invented rapidly in the coming years.
“Thatch won’t lead to the discovery of a new cancer drug,” Chris admitted. “There’s no science underpinning what we do. But what might happen is that the next breakthrough drug might be less expensive, or our members will be able to screen for cancer a little bit earlier.” They may also be incentivized to develop drugs, like the gene editing ones Collison tweeted about, that currently don’t make financial sense.
When Thatch succeeds, every individual will have thousands of tax-free dollars with which to buy the plans and products that can help them live healthier lives, whether they work for Google or Gugliatti’s Italian Restaurant.
Insurers will compete for those dollars, and as they are forced to do in a free market, differentiate on the merits of their product. They will fight to keep members long-term, knowing that that decision is based on the service they provide and not whether the member switches jobs. They will invest in the long-term health of their members, and make profits when they invest correctly.
Health systems and providers will compete, too, and in much the same way. They will offer services that appeal to specific customers, not the mythical “average” patient around which the current system is designed. More will take on risk themselves, and like carriers but with even more control over outcomes, reap financial rewards for successfully extending healthspans.
And health startups - companies like Function, Sword, Prenuvo, Oura, Eight Sleep, TrueMed, and many existing and yet-to-be-founded others - will build products in the knowledge that their success will be based on the quality of their product, and not their ability to sell into companies. They will even compete for dollars that go to carriers by default today.
Thatch’s vision is “to transform US healthcare into an efficient, fair, free market system worthy of admiration and respect across the globe.”
In some ways, that is a more fantastical and ambitious vision than going to Mars.
It seems almost impossible, given where we’re starting. Today, American healthcare is an inefficient, unfair, quasi-governmental oligopolistic system worthy of pity and quizzical looks across the globe. It drives us deeper into debt and faster to our deaths.
Which means, finally, after eighty years, we have every incentive to get this right.
Thanks to Chris, Adam, Bruce, Gary, Laszlo, Mario, Jahanvi, Julie, Jonathan, Justin, and V for your insights and feedback.
That’s all for today. We’ll be back in your inbox on Friday with a Weekly Dose.
Thanks for reading,
Packy
Understanding how much it costs to cover an employee (and their family) is dramatically, hilariously complex. Small groups, for example, might offer very limited, one-size-fits-all plans. The ACA requires small group plans to use “community rating,” meaning they can only vary prices based on age, location, and tobacco use, not on employees’ health conditions. This protects sick groups but means healthy groups subsidize them, and if anyone in the group gets cancer, the whole risk pool pays. What’s a risk pool? Let’s say you’re a small business in Connecticut that gets your insurance from Aetna. You’re in a “risk pool” with the other small businesses in Connecticut that use Aetna. All of your premiums cover everyone’s bills. Plus, small group employees pay an average of 33% of their premiums out-of-pocket; their employers cover the rest. Mid-market companies are stuck in no man’s land: they’re not covered by the ACA, have very little leverage with the insurers, and are often too small to “self-fund” (fund healthcare costs off their balance sheet). Many are moving to “level-funded” plans, under which they cover their employees’ healthcare costs up to a certain level but buy “stop-loss” insurance over a certain amount. By self-funding a portion, they get around paying broker’s fees and insurers’ margins up to a certain level, while protecting themselves from catastrophic loss if things go really badly. Both small and mid-market businesses face uncertainty and steep cost increases from rising healthcare premiums. Large groups are in the best position; many self-fund. But they still have to hire large benefits teams to orchestrate everything, hire plan administrators to handle all of the plan administration, and may still not cover, say, the particular therapist you worked with before joining the company. For all of them, what happens when you want to cover a whole family? Etc…
2025-09-26 20:58:31
Hi friends 👋 ,
Happy Friday and welcome back to our 163rd Weekly Dose of Optimism. Dan is once again traveling around our great country slinging creatine gummies, so Packy here to fill in and bring you the Dose.
Let’s start with a PSA: don’t use Meta’s new slop machine, Vibes. It’s the company’s attempt to build The Entertainment from Infinite Jest, something that in the book is so entertaining that people can’t stop watching it and die. Take it from the man himself: “Like, at a certain point we’re gonna have to build up some machinery, inside our guts, to help us deal with this. Because the technology is just gonna get better and better and better and better. And it’s gonna get easier and easier, and more and more convenient, and more and more pleasurable, to be alone with images on a screen, given to us by people who do not love us but want our money.”
But the good news is, there’s lots of good news this week to drown it out. We have a lot of Arc, some cryopreservation, American anodes, a potential cure for Huntington’s Disease, a dash of Michael Levin and Anil Seth, and a menu of new psychedelics. Plus, let’s all support Nate the Great in his fight against cancer. What a week for the optimists.
Let’s get to it.
AI is calling. Ring ring. Hello? It’s Bland, the literal voice behind Fortune 500s.
Heard of Bland yet? It’s the world’s most powerful AI phone-calling agent. Chances are, you’ve already spoken to it without even noticing.
Enterprises are using it to handle millions of calls, texts, and webchat interactions 24/7 – all while perfectly representing their brand. From a single dashboard you can:
Build agents with any voice and personality, for any possible use case. Just define guardrails to control its behavior and plug in any of your external tools. Done.
Deploy your brand’s AI across every department from sales to operations to support with a single click. It will dynamically respond to any caller’s language, self-improve, and scale infinitely.
Track performance of campaigns, extract data, and watch it score a higher CSAT than human reps* – all while slashing costs.
Pretty wild, huh? Here, give it a call yourself.
Or Not Boring readers can get exclusive access to an even more advanced version here.
(1) Efficient generation of epitope-targeted de novo antibodies with Germinal
Brian Hie, Xiaojing Gao, and Santiago Mille Fragoso from Stanford and Arc Institute
Germinal centers on solving a fundamental challenge in computational antibody design: how to create molecules that are both binding the intended targets and biologically realistic. Previous approaches using structure prediction alone produced rigid, unnatural interfaces, while sequence-based methods lacked the structural precision needed for specific binding.
Another week, another Arc Institute drop.
Researchers at Arc and Stanford teamed up to release Germinal, a model for AI-designed antibody molecules. As one of the paper’s co-authors, Santiago Mille, wrote, “The ability to design antibodies against any protein of interest has major implications for medicine, biotech, and basic science.”
Germinal uses two machine learning systems - AlphaFold Multimer and IgLM to generate de novo (from scratch) antibodies tailored to bind specific epitopes on proteins. These antibodies are entirely computationally designed.
The team achieved nanomolar binding affinities (a measure of how tightly the antibody binds to its target) that are strong enough to be biologically relevant (used in therapeutics or diagnostics) for several challenging protein targets, including:
Spike protein of SARS-CoV-2: the virus causing COVID-19
PD-L1: a protein involved in immune regulation, often targeted in cancer therapies
VEGFR2: a protein linked to blood vessel growth, relevant in cancer and other diseases
Typically, antibody discovery involves screening thousands of candidates through experiments. Germinal significantly reduces the need for extensive lab-based testing, which can both speed up discovery timelines from months or years to weeks, which can be incredibly important in combating infectious diseases, and expands the universe of researchers able to work on to smaller labs and companies.
This seems to be a consistent pattern in AI for bio: models can dramatically reduce the time and cost it would take to run experiments in the lab. In this case, Germinal or one of its offspring (they’re open sourcing it) might be used to develop new diagnostics and fight infectious diseases and cancer.
Can’t wait to see what Arc does next week.
(jk, ed note: yesterday, Patrick Hsu’s lab at Arc published a paper in Nature showing “that bridge recombinase technology is capable of large-scale genomic rearrangements in human cells.” With CRISPR, a miracle technology itself, scientists can edit fewer than 100 DNA bases at a time. With this technology, they can edit a million bases at a time. Hsu tweeted that “The reason gene editing hasn’t transformed human health is that current gene editing technologies like CRISPR are very limited.” His implication being that bridge recombinase technology will be the thing that lets gene editing transform human health.)
As incredible as Arc’s specific breakthroughs have been, what’s more notable is how many breakthroughs the young organization has made in such a short time. Stripe cofounder Patrick Collison, who cofounded Arc, shared some thoughts on that here.
Can’t wait to see what Arc does later today.
(2) Laura Deming’s Until Labs Raises $58 million for Cryopreservation
reversibly cryopreserve human organs ->
help transplant patients + build sustainable business ->
accelerate R&D for whole body cryo
Just in case progress in biology doesn’t keep up its current torrid pace, we can wait.
Laura Deming realized at age 8 that we were all going to die of a disease called aging. Unlike most eight-year-olds, she started doing something about it almost immediately. At 12, she joined Cynthia Kenyon’s lab at UCSF, where Kenyon had successfully increased the lifespan of C. elegans worms by a factor of ten through genetic engineering. By 14, she was at MIT studying physics. At 17, she dropped out to become an early Thiel Fellow and start the Longevity Fund.
Now, after more than a decade of investing in longevity companies, Deming is building something herself: Until, which just raised a $58M Series A led by Founders Fund.
Until is building a “pause button for biology,” trying to make one of the most foundational sci-fi ideas in the book, cryopreservation, a reality. Practically every space-based sci fi story involves cryo because, even near light-speed, the journeys are so long. Freeze yourself now, wake up fresh on a new world in a millennium or two.
We’re not quite there yet, so Until is starting by tackling more pressing and commercial needs. First, it’s going after organ donation, where most organs remain viable for only hours after procurement: 4-12 for hearts, lungs, and livers, 24-36 for kidneys. Then, it’ll do medical hibernation, giving patients with terminal diseases the option to pause their biological clock until cures are developed.
Even these more modest milestones sound incredibly sci-fi, but Until has already demonstrated recovery of electrical activity in cryopreserved rat brain tissue, the first report of action potentials in cryopreserved and rewarmed acutely resected neural tissue. They’re using a combination of novel cryoprotective agents, custom electromagnetic rewarming systems, and surgical protocols to cool tissue to -196°C (where molecular motion essentially stops) and then bring it back.
The key insight is elegant. The rate of molecular motion and chemical reactions can be controlled with a single knob: temperature. We already do this with embryos for IVF. Until is working to scale the same idea from tiny embryos to whole organs and, eventually, entire organisms.
Here at the Weekly Dose, we love a good long-term Master Plan. Even if this one takes centuries to play out, now we can be there to celebrate when it does.
(3) Huntington’s disease successfully treated for first time
From BBC
One of the cruellest and most devastating diseases – Huntington’s – has been successfully treated for the first time, say doctors.
The disease runs through families, relentlessly kills brain cells and resembles a combination of dementia, Parkinson’s and motor neurone disease.
An emotional research team became tearful as they described how data shows the disease was slowed by 75% in patients.
What a week for biotech!
Huntington’s Disease is one of the worst we humans face. Currently, it’s a long, slow death sentence that impacts 30,000 Americans (with a further 200,000 at risk) and about 5 out of every 100,000 people of European descent. There hasn’t been an effective treatment for the disease. People get it in their 30s or 40s and face a decline over 10-30 years until death.
On Wednesday, though, scientists at a company called uniQure announced incredibly promising results from a study: its gene therapy, paired with brain surgery, slowed the progression by 75% after 36 months in patients who received it. It also slowed decline of functional abilities in patients by 60%. They are hopeful that doing the treatment earlier, before the disease sets in, may eliminate it entirely.
UniQure plans to submit its application to the FDA in 2026, and hope to launch the therapy later next year if successful.
What a miracle, man.
Operations will initially support 2-5 GWh of capacity with the capability to expand up to 250 GWh within five years and become the largest anode production facility in the world. By manufacturing domestically at unprecedented scale, Sila is replacing graphite, a critical mineral overwhelmingly sourced from China, with a higher-performing, American-made alternative at a time when U.S. manufacturers are acutely focused on cutting supply chain vulnerabilities.
In the Electric Slide, we argued that America is lagging in manufacturing the key components of the Electric Stack — batteries, magnets & motors, power electronics, and embedded compute — and that in order to compete in the future, we would need to innovate on new chemistries and materials, and make them here.
On Tuesday, Sila made a step in that direction, announcing that it opened the nation’s first automotive-scale silicon anode plant, producing Si/C instead of graphite anodes.
The company, which is backed by Sutter Hill, 8VC, Mercedes-Benz, In-Q-Tel, the DOE, Coatue, Tiger, Bessemer, BlackRock, Fidelity, T. Rowe Price and… Jared Leto, will start at 2-5 GWh of capacity focused on “customer applications, including electric mobility, consumer electronics, drones, AR/VR, and satellites.” If successful, it has the ability to expand two orders of magnitude to 250 GWh.
250 MWh seems… aggressive, given that it would represent over 8% of global battery manufacturing capacity based on the IEA’s current estimate of 3 TWh, but given the rate that demand for batteries is growing, it will hopefully be the first of many such announcements.
Every new battery chemistry comes with some advantages and disadvantages in the early days. On the pros side, Si/C offers higher specific capacity and energy density, which means more range or smaller packs (~20% better), and may be able to charge up to 2x faster. But Si/C will initially be more difficult to engineer and manufacture, leading to lower yields and higher $/kWh cost.
The question for Sila will be if they can dial in the engineering and manufacturing enough as they scale to move from high-end uses (like Mercedes EVs) to become a mass alternative to Chinese-dominated chemistries. We are rooting for them.
(5) Your Brain Isn’t a Computer and That Changes Everything
Theories of Everything with Curt Jaimungal ft. Anil Seth and Michael Levin
We’ve forgotten that the idea of the brain as a computer is a metaphor and not the thing itself. - Anil Seth
One of my least favorite ideas in the AI discourse is that our brains are merely computers, and therefore, AI will be able to do everything we can.
I railed against it in Modern Magnificenza, focusing on Ilya Sutskever’s University of Toronto Commencement Speech in which he argues:
Slowly but surely - or maybe not so slowly - AI will keep getting better, and the day will come when AI will do all the things that we can do. Not just some of them, but all of them. Anything which I can learn, anything which anyone of you can learn, the AI will do as well.
How do we know this by the way? How can I be so sure of that?
The reason is that all of us have a brain, and the brain is a biological computer. That’s why. We have a brain. The brain is a biological computer. So why can’t a digital computer, a digital brain, do the same things? This is the one sentence summary for why AI will do all of those things. Because we have a brain, and a brain is a biological computer.
If that is the one sentence summary for why AI will replace us, then the notion rests on shaky ground.
In this excellent episode of Theories of Everything, neuroscientist Anil Seth and biologist / bioelectricist Michael Levin agree that the metaphor of brain-as-computer misses the messy, emergent, and context-dependent nature of real minds.
Seth argues that consciousness can’t be separated from the living, biological substrate. The brain isn’t just information processing that can be ported to silicon.
Levin disagrees that consciousness is substrate-dependent, but for a different, and, if I may say so, more beautiful, reason than Sutskever and co. He suggests that with the right interfaces, computers may be able to tap into the same deep, platonic layers of reality that biology does.
Look, anything I’m going to write here is going to mangle what these two geniuses are trying to say, but if you want to expand your mind listening to a conversation on mind (and xenobots, compositional agents, emergence, and much more) throw this one on.
You can read Curt’s thoughts on this topic, and on many of the mind-altering conversations he hosts, on his substack:
(6) A Startup Used AI to Make a Psychedelic Without the Trip
Emily Mullin for WIRED
Mindstate’s idea is to use this “psychedelic tofu” as a base that will be combined with other drugs to achieve precise states of consciousness. For its first combination, DiNardo says, the company is aiming to make a drug that reduces anxiety, increases insight, and upregulates aesthetic perception.
Dan’s OOO. No rules. We’re doing a sixth.
We’ve covered the promise of psychedelics in both treating mental health conditions (and in general) many times here in the Dose and in Not Boring. The world might be a better place if everyone just took a chill pill.
… which sounds like exactly what a startup called Mindstate is developing. Mindstate is one of a number of companies working to create pyschedelics without hallucinations. More people, they believe, would be able to access the benefits of psychedelics if they weren’t scared off by the drugs’ most extreme effects, and the FDA might be more willing to approve drugs that can be tested in double-blind studies. Last year, they rejected MDMA-assisted therapy in part because… if you’re taking MDMA, it’s pretty clear whether you’re in the control group or not.
Mindstate’s first drug candidate, MSD-001, is “a proprietary oral formulation of 5-MeO-MiPT, also known by the street name moxy. In Phase I trial results shared with WIRED, the drug was safe and well tolerated at five different doses in 47 healthy participants.” According to Mindstate CEO Dillan DiNardo:
Our first new “emotion in a bottle”: tranquil insightful beauty. An MSD-001 combo designed to reliably enhance aesthetic perception, without hallucinations. This state occasionally flickers in compounds like DOI, 2C-B, or mescaline. When people experience this effect, they see a new beauty in the everyday world around them. If the effect volume is a little too high, people say things like, “The legs of that chair - how miraculous their tubularity, how supernatural their polished smoothness!” (actual quote)
The goal, he says, is to build many psychoactive effects on top of MSD-001. “If successful,” he tweeted, “psychiatry would gain for mental states what CRISPR gave genetics, what mRNA gave vaccines, and what CAR-T gave immunology: a programmable substrate.”
Dillan, please reply to this email if you’re looking for trial participants.
Note: pairs well with Dan Brown’s new book, The Secret of Secrets.
Bonus: Nate the Great
A couple of weeks ago, Matt, a Not Boring reader from Philly, sent me an email. He wanted to tell me about his son, Nate the Great, and to spread the word about his family’s fight against cancer.
Nate was born on May 2nd. On June 20th, they found out he had a brain tumor.
Thanks to the team at CHOP, Matt said Nate is now doing “remarkably well.” CHOP is awesome - my brother Dan had open heart surgery there when he was a baby.
Nate, Matt, and their family are raising money for CHOP to fight pediatric cancer as part of the Children’s Hospital of Philadelphia Parkway Run & Walk. The run is this Sunday, September 28th, and while Team Nate the Great is already crushing it with nearly $65k in donations, good for 2nd among all teams, I was hoping we could all team up to push them even higher, maybe even into first place.
As a Philly native, parent to two little kids, and brother to a beneficiary of CHOP’s miracle working (whose dad’s birthday is June 20th), I donated, and I would love to help them blow out their goal and help CHOP and others end pediatric cancer for good.
F*ck cancer. Go Nate.
Have a great weekend y’all.
Thanks to Bland for sponsoring. Go get your very own phone-calling agent.
We’ll be back in your inbox with a Deep Dive next week.
Thanks for reading,
Packy + Dan
2025-09-19 21:06:32
Hi friends 👋 ,
Happy Friday and welcome back to our 162nd Weekly Dose of Optimism. Another week, another heavy dose. We got AR hardware and software launches, new Waymo safety numbers that make scaled FSD all but inevitable, record-breaking datacenter buildouts, AI models that can predict health outcomes, and a total of 5 bonus stories. We aim to please here.
Let’s get to it.
Model Context Protocol (MCP) is becoming a standard for connecting tools to LLMs. But how do you securely authorize MCP servers?
OAuth now provides the answer, with five complementary specs for delegation, token exchange, and scoped access.
The WorkOS advantage:
Pre-built infrastructure that saves engineering time.
Enterprise ready security out of the box.
Implement MCP Auth with WorkOS →
(1) The All-In Podcast (minus Jason) Goes to the White House
Just kidding.
(1) Introducing Meta Ray-Ban Display: A Breakthrough Category of AI Glasses
From Meta
Meta Ray-Ban Display glasses are designed to help you look up and stay present. With a quick glance at the in-lens display, you can accomplish everyday tasks—like checking messages, previewing photos, and collaborating with visual Meta AI prompts — all without needing to pull out your phone. It’s technology that keeps you tuned in to the world around you, not distracted from it.
Google Glass walked so that Meta Ray-Ban Display could run. Earlier this week at Connect, Meta’s annual developer conference and product showcase, Zuckerberg revealed the company’s latest generation AR glasses. While the demo itself was spotted with live-demo mishaps, the product itself is genuinely impressive. It looks cool, delivers real world functionality, and is only $799! Zuck, Boz and the boys cooked here frfr.
The Wayfarer-framed glasses hide a full-color, high-res display and pair with the Meta Neural Band, a wrist strap that reads tiny muscle signals so you can swipe, click, or even “type” without touching a screen. The display (which has gotten really strong reviews) can show messages, give turn-by-turn walking directions, live caption convos or videos, and show camera previews. You can also stream your POV, take calls, and listen to music. These land somewhere in between Airpods/previous versions of the Meta AR glasses and the full-on immersive Apple Vision Pro (which is about 5x more expensive.)
The product hits select shelves on September 30th and my guess is that they’ll sell pretty quickly this holiday season. They represent a big step in technology, but look like normal glasses your mom might wear and are at a very accessible price for a gift. I’m already planning on getting them for my dad for Christmas and letting him play with them for a few weeks.
For more on the glasses, check out this analysis from Ben Thompson and the wall-to-wall coverage, including an interview with Zuck, from the fellas at TBPN.
(2) Generating Bigger and Better Worlds
World Labs
At some point, in Zuck’s vision, AR and VR will converge into one set of stylish glasses. And when that time comes, World Labs will be ready with persistent, navigable, and controllable 3D worlds, generated with just a prompt.
The legendary Fei-Fei Li’s company rolled out its latest world model and Marble, which lets people generate their own worlds. You can see a bunch of them on World Labs’ twitter feed.
After a pretty rocky start (few decades?) for VR and the ~metaverse~, it’s cool to see some pretty mindblowing tech starting to emerge all at once. At their event, Meta Reality Labs also rolled out Hyperscapes, which allows people to capture their environments and turn them into 3D models viewable in the Quest headset.
Will this stuff ever replace good ol’ fashioned IRL hangs? I sure hope not. But for the time we’re spending digitally anyway, whether online or watching stuff, it might as well be more beautiful, interactive, and fun.
From Waymo
The data to date indicates the Waymo Driver is already making roads safer in the places where we currently operate. Specifically, the data below demonstrates that the Waymo Driver is better than humans at avoiding crashes that result in injuries — both of any severity and specifically serious ones — as well as those that lead to airbag deployments.
Back in the real world, Waymo is making it a much safer place to be, even if everyone is walking and driving around exploring virtual worlds in their Meta Ray Bans.
This week, Waymo released additional safety data on its vehicles and the results are quite convincing. Waymos experienced ~90% fewer crashes, 80% fewer injury-causing crashes ~78% fewer airbag deployments. That’s pretty wild. From my perspective, humans cause a surprisingly low amount of crashes given the circumstances…we’re all semi-distracted, hurling 5,000lb hunks of metal at 70mph+ speeds down winding and under-maintained roads. But despite the miraculous ease which we all drive everyday, more than 100 people die every day in the US from car crashes. With FSD, we can avoid 9 out of those 10 crashes and reduce the severity of the crashes that do happen.
So with Waymo (and Tesla and some Chinese players) what we have is this technology that makes driving a step-change safer, more convenient, and ultimately will make it much cheaper. It’s a win, win, win. And that win, win, win is starting to become hard to ignore for major cities. SF, Austin, Vegas, Phoenix are already pretty bought in and just this week Waymo and Lyft announced it’ll bring its services to Nashville. Soon, there will not be a single bachelor or bachelorette party that happens outside of a self-driving/robotaxi city.
(4) xAI’s Colossus 2 – First Gigawatt Datacenter In The World
From SemiAnalysis
The Colossus 2 project was kicked off on March 7th, 2025, when xAI acquired a 1m sqft warehouse in Memphis, and two adjacent sites totaling 100 acres. By August 22nd, 2025, we count 119 air-cooled chillers on site, i.e. roughly 200MW of cooling capacity. That’s enough to power roughly 110k GB200 NVL72. And an Elon tweet shows some racks were already installed in July.
xAI built in six months what took 15 months for Oracle, Crusoe and OpenAI!
Big couple of weeks for the great technology hub that is Tennessee. First, Waymo is coming to Nashville. Now, according to SemiAnalysis, xAI is in the process of building the first ever Gigawatt datacenter within The Volunteer State.
xAI’s Colossus 2 is pacing to be world’s first gigawatt-scale AI datacenter, which is more than triple the size of its already record-setting Colossus 1. Colossus 1 was constructed on a famously quick timeline. And Colossus 2 construction is keeping up the breakneck pace. In just six months, xAI converted a Memphis warehouse into a 200 MW facility, outpacing its hyperscaler competitors like Oracle and OpenAI which achieved similar buildouts in a tortoise pace of 15 months.
To make it happen, xAI did have to pull off some classic Elon magic. The company circumvented Tennessee permitting restrictions by using a decommissioned power plant just across state lines in Mississippi to power the data center. A lot more Elon magic is needed to get Colossus 2 fully operational, as the buildout is expected to cost an additional tens of billions of dollars. But if there’s any man who can finance a 11-figure data center, it’s Elon Musk. Welcome back, Elon.
(5) Learning the natural history of human disease with generative transformers
Shmatko et al in Nature
Delphi-2M predicts the rates of more than 1,000 diseases, conditional on each individual’s past disease history, with accuracy comparable to that of existing single-disease models. Delphi-2M’s generative nature also enables sampling of synthetic future health trajectories, providing meaningful estimates of potential disease burden for up to 20 years, and enabling the training of AI models that have never seen actual data.
Remember that movie Big Fish? Ewan McGregor plays the young Edward Bloom, a dying man recounting a lifetime of fantastical tall tales. Well one of those tall tales always stuck with me. Bloom meets a witch who shows him the exact vision of his own death in her glass eye. Knowing when and how he’ll die means Bloom moves through life fearless.
Knowing how you’ll die may be freeing, but predicting the diseases you might endure is more than freeing; it could be lifesaving. Delphi-2M is getting close. The AI model predicts risk for 1,000+ diseases decades ahead using just routine health records.
Trained on 400,000 anonymized UK Biobank participants and tested on 1.9 million Danes, it matched or beat existing single-disease tools like QRisk for heart disease without ever seeing Danish data. The model can map entire health trajectories, revealing how past diagnoses shape future risks, and even generate synthetic patient data to train other AIs without privacy issues. It excels at conditions with steady progression (heart disease, diabetes, sepsis) and can flag population-level disease burdens years in advance, helping systems plan for aging societies.
According to the research team behind the model, it’s still 5-10 years out from clinical use but they are exploring potential commercialization now and adding new data sources like genomic data to make it more accurate.
Bonus: A Cheeky Pint with Ambrook CEO Mackenzie Burnett
John Collison and Mackenzie Burnett
Mackenzie Burnett joins John Collison to talk about American agriculture, labor and immigration challenges, building rural resilience, ERPs, the principle of money movement, and carrying 50lbs of pork on Amtrak.
Packy here. A couple months ago, I spoke with Mackenzie Burnett, the founder and CEO of our portfolio company, Ambrook, for a follow-up to her initial Founder’s Letter. You can watch our conversation here.
This past week, Mackenzie went on Cheeky Pint with Stripe co-founder John Collison to talk about what she and the team are building at Ambrook, and as importantly, why.
Mack has been on a hot streak of my favorite podcasts, first on Dialectic, now on Cheeky Pint. I love to see it. The dream that we write about every week here in the Dose isn’t the American Dream if not everyone who is willing to work hard and contribute can participate.
Ambrook is making it easier for small businesses to build great businesses, starting with farms, and the country will be a better place when they succeed. Getting on the Stripe megaphone should help accelerate the Dream.
DOUBLE TRIPLE QUADRUPLE QUINTUPLE BONUS
It was a big week out there. Sharing a few more for an extra little jolt of optimism:
Valar Atomics broke ground in Utah alongside its partner, Kiewit, at the San Rafael Research Center for its first reactor, Ward250. Big step in the race to criticality by America’s 250th birthday.
Arc Institute released its preprint, “Generative design of novel bacteriophages with genome language models.” The scientists are out there building models that can design entire genomes.
Vast Space has fully welded and will soon begin testing on Haven-1, the world’s first commercial space station. Click to watch the video of that beauty.
Claude - Keep Thinking. Anthropic, the company behind Claude, released a beautifully optimistic ad about the times we live in. There’s never been a better time to do…anything, really.
Have a great weekend y’all.
Thanks to WorkOS for sponsoring. Go securely authorize MCP servers. All the cool kids are doing it.
We’ll be back in your inbox next week.
Thanks for reading,
Packy + Dan
2025-09-12 20:58:39
Hi friends 👋 ,
Happy Friday and welcome back to our 161st Weekly Dose of Optimism.
Packy here. This was a dark week in America.
On Monday and Tuesday, my whole twitter feed was filled with images and video of the murder of Iryna Zarutska. On Wednesday, I was offline for most of the day at Primary’s NYC Summit. When I opened up Twitter in the afternoon, the first tweet I saw was Mike Solana’s: “it can not be like this.” I scrolled for a few seconds before I realized what he was talking about; Charlie Kirk had been shot while speaking at Utah Valley University. He passed away soon after.
The ~36 hours between then and now have been weird, online. On the far left, some people are celebrating the murder, which left two young girls without a dad. On the far right, some people are calling for Civil War. These are the extremes, expressed by a loud minority, but they’ve been amplified to the point that it seems like “the left” is celebrating a murder and “the right” wants War.
Most people, however, don’t hold those extreme views. Most people are sad - about the specific incidents, and about the fact that we keep opening up our feeds to some new tragedy, to the point that it seems like the world is full of darkness and hatred.
Because we experience so much of this through the internet, things get distorted. People cheer, I think, because it feels like a video game. Not real life. But it’s not a video game. What happens online bubbles over into real life. People get radicalized, and they radicalize others, and they take peoples’ real lives.
All of this makes bad outcomes feel inevitable. They are not. As David Foster Wallace said about the internet’s influence nearly 30 years ago, “at a certain point we’re gonna have to build up some machinery, inside our guts, to help us deal with this.”
This is individual machinery. The vast, vast majority of us — those who think that killing innocent people is abhorrent and those who want no part of a Civil War, those who recognize the humanity in other people and who want to see each other be safe, healthy, and happy — need to resist the temptation to see the world the way a tiny handful of very loud voices (and bots) online want us to see it.
This is not to say that we’re not living through a dangerous time. We are. These things can bubble over. And it’s OK to be angry and sad when tragedies happen. Good even, in small doses. We’re human.
But we can’t become hopeless. Because the world is a much better place than it seems online, and it’s worth fighting to keep it that way. What will prevent it from bubbling over is us. Both optimism and pessimism are self-fulfilling prophecies.
So while it feels weird to focus on the good things that happened amidst all the bad this week, that’s what we do here at Not Boring, and that’s what we’ll do every week. Over to Dan for the Dose. Then, all of us, let’s log off for the weekend.
Let’s get to it.
AI is calling. Ring ring. Hello? It's Bland, the literal voice behind Fortune 500s.
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Deploy your brand’s AI across every department from sales to operations to support with a single click. It will dynamically respond to any caller’s language, self-improve, and scale infinitely.
Track performance of campaigns, extract data, and watch it score a higher CSAT than human reps* – all while slashing costs.
Pretty wild, huh? Here, give it a call yourself.
Or Not Boring readers can get exclusive access to an even more advanced version here.
(1) NASA Says Mars Rover Discovered Potential Biosignature Last Year
From NASA
A sample collected by NASA’s Perseverance Mars rover from an ancient dry riverbed in Jezero Crater could preserve evidence of ancient microbial life. Taken from a rock named “Cheyava Falls” last year, the sample, called “Sapphire Canyon,” contains potential biosignatures.
Houston, we have potential biosignatures.
NASA’s Perseverance rover may have found the strongest hint yet of past life on Mars. While drilling into a mudstone called Cheyava Falls, the rover uncovered minerals like vivianite and greigite along with organic carbon and sulfur, all common byproducts of microbial activity on Earth. These “leopard spots” could form without life, but the rock shows no signs of the heat or acidity usually required for that. So we can’t exactly say “life” and we can’t exactly say “signs of life” but we can say “it’d be pretty hard to imagine there wasn’t life.”
The findings, published in Nature, suggest Mars might have remained habitable longer than scientists previously believed. The sample, named Sapphire Canyon, is one of 27 cores waiting to be brought back to Earth, but the Mars Sample Return mission is stalled by rising costs and budget cuts. If only there was a man whose mission was to make getting back and forth between Mars easier and more economical, so easy in fact, that we could colonize the planet…
(2) The Future of Starlink Direct to Cell
From SpaceX
SpaceX has entered into a purchase agreement with EchoStar for 50 MHz of exclusive S-band spectrum in the US as well as global Mobile Satellite Service (MSS) spectrum licenses. This agreement will enable us to develop and deploy our next generation Starlink Direct to Cell constellation which will be capable of providing broadband service to cell phones globally.
Oh yeah, totally forgot about Elon. He’s that guy. He’s him. The Trillion Dollar Man.
And while Elon’s SpaceX tries to make us multi-planetary, the company is funding it’s mission via it’s highly lucrative internet and network provider Starlink. And Starlink is making big moves. In a deal worth $17B, it just locked in exclusive S-band spectrum from EchoStar (great evil company in a movie name btw) to supercharge the next generation of Starlink Direct to Cell. The Direct to Cell project uses Starlink satellites to provide 4G and future 5G service directly to ordinary mobile phones anywhere on Earth. The current network already has more than 600 satellites beaming 4G to over six million users worldwide, letting ordinary LTE phones text, call, and run apps anywhere there’s sky. Built as “cell towers in space,” these satellites sit lower than rivals for a stronger link and tie into Starlink’s 8,000-satellite laser mesh for global reach.
The new spectrum from EchoStar and custom SpaceX silicon will push performance far beyond today’s system. Next-gen satellites will handle thousands of beams, 20 times the throughput, and up to 100 times the total capacity of the first generation, aiming for full 5G speeds on standard phones. SpaceX plans to launch these with Starship’s heavy lift, combining massive bandwidth with seamless integration for carriers like T-Mobile, Rogers, and KDDI.
It’s wild that at this point Elon basically upends entire 12-figure industries, and it’s not even major news. Just another day at the office.
(3) Alterego
From Alterego
Introducing Alterego, the first near-telepathic interface, designed to make technology as intuitive as using your inner voice.
In an age of increasingly impressive launch videos, this was one of the cooler demo videos I have seen. It comes from the startup Alterego, which is developing Silent Sense, a non-invasive device which understands what you intend to say without speaking, allowing you to extend your thinking without the need to type, tap, or talk out loud. I don’t think it’s technically telepathy, but if it walks, talks (or in this case, doesn’t talk) and smells like telepathy…
Alterego’s headset senses the faint electrical signals that fire in your jaw and throat when you silently form words, a process called subvocal speech. It’s like when you read silently and your mouth and throat make tiny movements even though you’re not speaking. Surface electrodes capture these neuromuscular signals and AI models decode the patterns into text or commands in real time. Replies come back through bone-conduction audio, so you hear responses privately without using speakers or earbuds.
Just thinking out loud here, and I know this is just a demo, but a device like Alterego’s could fundamentally change the ways we interact and communicate with everything and everyone around us.
(4) Magnetic field–enhanced vertical integration enables embodied intelligence in untethered soft robots
Li et al in Science
Embodied intelligence in soft robotics offers unprecedented capabilities for operating in uncertain, confined, and fragile environments that challenge conventional technologies. However, achieving true embodied intelligence—which requires continuous environmental sensing, real-time control, and autonomous decision-making—faces challenges in energy management and system integration. We developed deformation-resilient flexible batteries with enhanced performance under magnetic fields inherently present in magnetically actuated soft robots, with capacity retention after 200 cycles improved from 31.3 to 57.3%.
Soft robots have a hard challenge, and a simple telehealth consultation cannot bring them relief. These ultra-flexible machines, designed to slip through tight spaces, struggle to carry reliable onboard power because conventional batteries can’t survive constant bending and twisting without rapidly losing capacity or breaking.
Researchers cracked that by building a manta ray–style soft robot whose own magnetic field both propels it and keeps its flexible zinc-manganese batteries stable, nearly doubling their capacity retention. External magnetic fields push and pull the robot’s magnetized body, creating the forces and torques that make it swim, while the same fields protect its batteries so power keeps flowing as it moves. The result is a robot that can roam untethered for hours, sensing and reacting to its environment, whether underwater or in narrow passages, in real time. It’s a blueprint for soft robots that can explore hard-to-reach places, assist in medical procedures, or power next-generation wearables without being tied to a cord.
(5) We’ve just completed our first Jetson ONE delivery!
Jetson Aero
Palmer Luckey — tech visionary from California — completed ground training in under 50 minutes before confidently taking the controls for his first low-altitude flights. A record demonstrating Palmer’s unique understanding of advanced technologies and just how easy our personal single-seater eVTOL is to fly.
As avowed J. Storrs Hall fans and fellow askers of the question, “Where is my flying car?,” we get all tingly whenever we see developments in personal aviation. We’re also big Palmer Luckey guys; he does billionaire as well as anyone out there.
So we were very happy this week when Jetson Aero delivered its first eVTOL to the Oculus and Anduril founder, who apparently learned how to fly the thing in under an hour.
It’s a little terrifying to see one of the people America is depending on to build hard, crazy things getting up in the air in that little guy, and we’re not sure we’d get in a Jetson ONE quite yet, but it does seem like we’re finally getting much closer to an era of ubiquitous personal flight. Given that batteries, motors, power electronics, and embedded compute keep getting better and cheaper, it’s practically inevitable.
A Jetsons future in which we’re all zipping around in the skies is the future we were promised. Less traffic. Faster commutes. Flying cars and their equivalents will be a sign that we are back on track.
And because people have always tended to commute for the same amount of time, even as our modes of transportation have gotten faster, the second-order effects will be really interesting to watch play out. If it takes as long to get out to the country that it currently takes to get to the exurbs, I bet we’ll see a bunch of interesting development projects like Esmerelda, California Forever, and Proto-Town take off.
For the time being, though, please enjoy watching Palmer Luckey fly.
BONUS: A Big Week for AI Doing Cool Stuff for Humans
Math, Inc. launches Gauss and completes Prime Number Theorem Challenge
“The Math Inc. team is excited to introduce Gauss, a first-of-its-kind autoformalization agent for assisting human expert mathematicians at formal verification. Using Gauss, we have completed a challenge set by Fields Medallist Terence Tao and Alex Kontorovich in January 2024 to formalize the strong Prime Number Theorem (PNT) in Lean (GitHub)…
Our results represent the first steps towards formalization at an unprecedented scale. Gauss will soon dramatically compress the time to complete massive initiatives. With further algorithmic improvements, we aim to increase the sum total of formal code by 2-3 orders of magnitude in the coming 12 months. This will serve as the training ground for a new paradigm — verified superintelligence and the machine polymaths that will power it.”
Introducing Oboe, the easiest way to learn anything, with magical courses made just for you.
“We’re heading toward a future where humans only exist to feed AI. AI gets smarter, we get stupider. But what if AI’s purpose was to feed us? That’s the future we hope Oboe can help nudge us all towards.
Oboe is the world’s first AI-powered generalized learning platform. With a single prompt you can generate a personalized course about anything. From the history of AI to contract law, from ordering wine in France to understanding how mortgages work. And the more you use it, the better it gets at teaching you.”
Replit raises $250 million at $3 billion and launches Agent 3
Packy here. Not Boring Portfolio company and former Deep Dive subject, Replit, announced that it raised a $250 million Series C at a $3 billion valuation, and more importantly, launched Agent 3 - which can run for 200 minutes to build, test, and run full websites. It can even create other agents.
It is really good! I am not an engineer, so I’ve been excited to try new AI coding tools to see if even I can use them to make websites. In The Electric Slide, I used Claude Code to make the Electric Slide website, which was very cool. But when I tried to use Claude Code and OpenAI’s Codex to make me a website for not boring, they inevitably ran into bugs as soon as I asked them to change something from the first version they made. As a non-engineer, even with their help, even using Cursor, it took forever to figure out how to fix the issues, and I just gave up.
Yesterday, I gave Replit’s Agent 3 the same instructions, and it just… worked. We went back and forth on the design for a bit before it started coding, and it got the suggestions I made. Then it designed, coded, and tested for 55 minutes. All while I was writing the intro to the Dose. In a sidebar, it walks you through testing on each of the different pages of the website, so you can see exactly what it did. When it found bugs, it fixed them itself. I even had it design a scratchpad page that could handle things like Spotify embeds on movable cards, and that worked, too.
My prompting was not super specific, so the site is not nearly as good as it would be if I hired an agency to do it (particularly on the design and copy), but given an hour or two on this (which I might spend this weekend), I bet I could make something I’d be happy to publish. Given that I spent all of three minutes on this, that’s wild.
Have a great weekend y’all.
Thanks to Bland for sponsoring. Go build your company a voice!
We’ll be back in your inbox next week.
Thanks for reading,
Packy + Dan
2025-09-09 20:47:18
Welcome to the 1,324 newly Not Boring people who have joined us since our last essay! Join 249,839 smart, curious folks by subscribing here:
Hi friends 👋,
Happy Tuesday!
One of my goals for this newsletter (and Not Boring Capital) is to find a handful of generational companies as early as possible, write their story in chapters over time, and then publish the whole thing as a book when they IPO.
Ramp is the model. I first wrote about the company in December 2020, when it was valued at $300 million and doing something in the single-digit millions in revenue. Even then, it was obvious that something special was happening, and I invested both personally, before I had a fund, and then through Not Boring Capital.
But early hype often fades. What’s been most remarkable in writing about Ramp three times since is that each time, the new reality outruns the old hype.
Ramp is the rare company that gets better and moves faster with time.
Today, Ramp is announcing that it’s crossed $1 billion in annualized gross revenue while doubling year-over-year and generating positive cash flow. In celebration, I’m taking another snapshot in time to look at where the company has been, where it is today, and what it might grow into in the fullness of time.
This is the latest chapter in a story I’ve been writing for years, and plan to keep writing for many years to come.
Let’s get to it.
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A little over four years ago, on April 8, 2021, I wrote about Ramp’s Double-Unicorn Rounds.
At the time, Ramp was just two years old. In the piece, we announced that Ramp had raised not one, but two rounds. D1 led a $65 million financing at a $1.1 billion valuation. Stripe came in with $50 million at $1.6 billion.
I knew that that would seem crazy on its face, a real-time symptom of COVID-era excess: a company that young raising at those valuations in that structure. So I wrote a section in the Deep Dive titled “Has Venture Capital Lost Its Mind?” which argued that no, it hadn’t, or at least, that Ramp’s back-to-back fundraises weren’t proof that it had.
The logic was: growth matters, and it matters more the longer it lasts.
Take two companies, Company A and Company B. Company A reaches $100 million in four years, growing 115%. Company B takes three years, growing at 216%. In year five, Company A will be at $215 million in revenue. Company B will be 5x higher: $1 billion.
Back then, of course, the $1 billion revenue number was hypothetical. I was just making a point that growth trajectory matters.
Today, it is not.
Today, Ramp is announcing that it has crossed $1 billion in annualized gross revenue.
That milestone, achieved in just six years since incorporation, five-and-a-half since product launch, and three-and-a-half since crossing $100 million in annualized gross revenue (annualized revenue), is extraordinary on its own.
That the company is roughly doubling revenue year-over-year crossing the milestone is even more noteworthy. According to an analysis that Founders Fund Partner Amin Mirzadegan shared with me, it puts Ramp among an elite group of companies - Snowflake, AppLovin, CrowdStrike, OpenAI, and Anthropic - that have grown at this pace while crossing both $500 million and $1 billion in revenue.1 The rest of the group sports valuations north of $75 billion.
In the four previous Deep Dives I’ve written on Ramp, a common theme and question has been: “Wow, Ramp is growing really fast! But can they keep it up??”
That is still a question, but each year that they keep it up, the answer becomes more apparent: yes, they can keep it up, even if it seems improbable based on the classical model of business physics.
Now, the much more interesting questions to ask about Ramp are how they continue to grow so fast, and maybe more importantly, what happens to the business as it grows.
We live in an age of hypergrowth. You can’t open up twitter without hearing about a new company that just became the fastest company ever to $100 million in ARR. Each announcement, though, adds to a growing sense of unease: that none of this is sustainable. Companies burn unsustainable amounts of cash growing products with poor unit economics.
Which makes this next announcement all the more notable:
Ramp is generating operating cash flow.
Which makes sense, because Ramp’s value proposition to its customers is that it will make them more efficient. Efficiency is the result of saving time and money. And if Ramp is all about making other companies more efficient, they better be efficient themselves!
Ramp has crossed $1 billion in annualized revenue while doubling revenue in the past year and generating operating cash flow.
Among all the B2B companies who have crossed $1 billion in revenue at any speed while cash flow positive, Ramp has achieved this milestone years faster than anyone else.
I’ve written about a lot of the things that have contributed to putting Ramp in such great company. Counterpositioning against points-happy incumbents. Engineering-led everything. Trajectory and velocity. Owning the transaction layer. Mission, structure, and talent.
More than any company I’ve ever met, though, the Ramp story is really a story about time.
Ramp is a business focused on saving time that gets better with time.
Time is money. This is an old adage, a Ramp marketing tagline, and the truth.
No company is more obsessed with the relationship between time and money than Ramp.
The business started as a brainstorm about time to money. More specifically, as Ramp CEO Eric Glyman shared on My First Million, after he and Ramp CTO Karim Atiyeh sold their first startup, Paribus, to Capital One, and after they put in a year of making sure the acquisition paid off for the acquirer, they started to think about what to do next.
During that process, they set a goal: to build a company that could be worth $1 billion in 18 months.
Never mind that no New York City company had ever done that. Calvin Lee, Ramp’s founding engineer turned Swiss-Army-Knife-If-Swiss-Army-Knives-Included-the-Best-Version-of-Each-Tool, looked it up later and found that no New York City company had ever hit the $1 billion mark within three years, let alone 18 months.
Luckily, Calvin looked it up in 2021, after Ramp was valued at $1 billion at just two-years-old. Sometimes it’s better not to know something’s impossible.
At the time of the double-unicorn rounds in April 2021, Eric told Sam Parr, Ramp was doing something like $10 million in annualized revenue. If you viewed Ramp as a snapshot, at that point or almost any point in its history, its valuation seemed crazy. D1 gave it a 110x revenue multiple. Stripe, the next day, valued it at 160x annualized revenue.
A year later, in March 2022, the 2021 valuation didn’t seem crazy at all. Ramp had crossed $100 million in annualized revenue, which meant it was valued at 16x annualized revenue. Then, Keith Rabois at Founders Fund led a round at a new crazy valuation: $8.1 billion, or an 81x annualized revenue multiple.
The markets tanked soon thereafter, and while most companies tried to hold on to their ZIRP-era valuations for dear life, Ramp was one of the first to take its medicine, raising $300 million at a $5.5 billion valuation in August 2023. A company so relentlessly focused on time can’t hold on to the past; it needs to take stock of the present and once again look forward.
As 49ers Head Coach Bill Walsh wrote, and as Eric and Calvin referenced in our conversations, The Score Takes Care of Itself. Get the inputs right, and the outputs follow, in time.
To that end, market conditions be damned, or even perhaps because the value proposition – saving time and money - was more compelling when cash stopped flowing so freely, Ramp continued to grow. Between its $8.1 billion 2022 round and its $5.5 billion 2023 round, it grew annualized revenue three times, to $300 million.
The revenue multiple compressed: under 18.3x on a trailing basis; on a forward basis, Ramp was practically free. Because it kept growing and growing. By June 2024, its revenue approached half-a-billion American Dollars. Its valuation, in its May 2024 funding led by Khosla and Founders Fund, followed: $7.65 billion, good for an annualized revenue multiple of 15.9x.
Then Ramp, by Ramp standards, went quiet. Heads down, growing.
When it popped back up after ten months in the desert in March 2025 to announce a secondary sale at a $13 billion valuation, Ramp called itself “The Time and Money Company.” It ended that quarter above $700 million in annualized revenue. The tender valued the company at 18x revenue. It also meant that the investors who invested at $7.65 billion a year earlier were now sitting at ~10x annualized revenue.
Ramp has not stayed quiet since.
In June, Ramp announced a new round of funding at $16 billion, led by Founders Fund, at an 18.2x annualized revenue multiple.
The next month, in July, Ramp announced another $500 million of funding at $22.5 billion, led by ICONIQ, at 24x revenue.
Even at this price, my friend Logan Bartlett, a Managing Director at Redpoint who’s led the firm’s investments in Ramp, has no desire to sell. Is there a price at which he would be interested in selling? $200 billion.
The pace at which Ramp raises can seem overwhelming, but it’s deeply rational. Instead of raising dilutive, multi-billion dollar rounds every couple of years, they raise more frequently in smaller chunks.
It’s not how most companies do it, but it’s how you’d do it if you were a Time Company, if you were confident that the growth would continue.
Plus, the fundraising announcements actually contribute to the growth; Eric told me that each raise contributes to an uplift in excitement, which shows up in marketing qualified leads (MQLs) and sales qualified leads (SQLs) and ultimately, in closed won customers (CW). There’s some “efficient frontier of fundraising,” he half-joked, and no company rides it better than Ramp.
Already, with today’s announcement of $1 billion in annualized revenue, the price looks a little cheaper. In time, it will look cheaper still. In fact, last quarter, Ramp had its fastest growth quarter in a year. This quarter is on pace to beat it.
As Amin at Founders Fund put it, “Ramp should exit 2025 growing faster than it did in 2024, at effectively double the scale. That is very, very rare. And they’re generating cash.”
It’s like solar cost curves: even optimistic forecasts prove not to be optimistic enough.
This is hard to grok, even for those whose job it is to analyze and write about these things. Just yesterday, after I’d written the full draft of this Deep Dive, Anita Ramaswamy at The Information wrote an article arguing that because Ramp is a fintech, and not a SaaS company, “investors are at risk of overvaluing” it.
Ramaswamy made some classic mistakes.
First: understanding Ramp’s business model, which is evolving as it adds new products. The company expects to to have over 30% of its contribution profit come from SaaS, Bill Pay, Treasury, Procurement, Travel, and more by the end of the year.
Not all gross revenue is created equal. Because Ramp keeps more of its gross revenue than many other fintechs, and because it has added higher-margin products like Plus and Travel, it generates operating cash flow on its $1 billion in annualized gross revenue.
Second: comparing Ramp’s current revenue multiple to public companies’ next twelve months’ estimated revenue:
Ramp’s latest fundraising implies [Ramp is] hitting those software-like margins. Fortune reported the company’s $1 billion in annualized revenue last week. At Ramp’s latest valuation, that means investors are paying more than 22 times revenue for the company. That is well above the roughly 13 times next 12 months’ estimated revenue that software companies ServiceNow and Rubrik, with 70% gross margins, trade at.
Third (and most classically): underestimating Ramp’s growth:
Still, even assuming Ramp grows at, say, 50%, for another year, it would still be expensive. At the $22.5 billion valuation, its multiple would be around 15 times, higher than Rubrik and ServiceNow.
Ramp does not expect to grow just 50% over the next year, and it certainly doesn’t plan to stop growing after that. If Ramp continues at its current pace, it’s trading at a discount to the 13x NTM revenue multiple investors are paying for Rubrik and ServiceNow, two businesses that have guided towards much lower NTM revenue growth rates: 34% and 20%, respectively.
It made me happy to read that article because it proved that Ramp is still misunderstood, which means I still have a job to do. Today, we will work to understand.
The thing about Ramp is that it continues to grow faster, for longer, than people expect, and the business continues to get stronger and more durable with time.
We talk about time as if it’s one thing, as if it marches on unimpeded, unchangeable, even though we know that that’s not how time works.
As an object moves faster, its time appears to slow down. If I sent you to a distant planet and back on a spaceship flying at 99% of the speed of light, and you experienced ten years on the ship, I would be dead by the time you got back. From my perspective, your 10-year journey would have taken 70 years. Einstein grokked this.
Carlo Rovelli, in The Order of Time, goes even further. He argues that time as we experience it is not fundamental to the universe's structure; it emerges from more basic physical processes and our particular perspective as observers within the system. “The idea that a well-defined now exists throughout the universe is an illusion,” he writes, “an illegitimate extrapolation of our own experience.”
Less trippily, but perhaps more immediately alarmingly, Gurwinder wrote in a recent substack, How Social Media Shortens Your Life, that spending time on social media speeds up our sense of time and effectively shortens our lives.
Time is more malleable than most of us normally consider.
Ramp, more than any other company I know, considers time’s malleability. Its recipe is a blend of three flavors of time:
Saving Time
Compounding Over Time
Fighting Time
It builds products that save customers time. These products compound over time, and strengthen each other. And as an organization, Ramp is designed to fight the entropy that normally comes with time.
Understanding those three flavors of time, then, is the best way I’ve found to understand Ramp.
One of the reasons that Ramp has been able to grow so fast for so long, as Eric will readily admit, is that it is playing in an almost bottomlessly large market.
Even after all of the growth to date, “98.5% of businesses in America don’t use Ramp’s core product,” Eric is happy to point out, “and that number is misleading, because nearly 100% don’t use the additional products Ramp is building. So our real market share is closer to 0%.”
There are roughly 15 million businesses in the United States, 3.5 million of which have five or more full-time employees, 2.8 million of which use cards. Ramp serves just north of 45,000 of them. Visa estimates that businesses in the US spend >$40 trillion per year, of which $2.1 trillion is spent on cards.
According to Visa, there is $145 trillion of annual business spend up for grabs globally. Money itself is the largest TAM there is. Visa, relevantly, wrote, “In the $145 trillion of B2B, go spend time with like the function inside your company that is doing buyer supplier payments, and you will just, you might be surprised at how much manual work is still going on there.”
But entering an existing market that large is a double-edged sword.
On the one hand, it is large. There is room for growth, and for many winners.
On the other hand, it is competitive. There are many competitors chasing that growth. AmEx is a $230 billion business. JPMorgan Chase, the country’s largest bank, is an $835 billion business. Other startups are fighting for that growth, too.
As Ramp investor Peter Thiel famously wrote in Zero to One, “Competition is for losers.”
And yet…
As we’ve covered since the beginning, when Eric and Karim set out to figure out what to build next, they realized that while the corporate card market seemed saturated, there were two wide open attack vectors:
Saving Customers Money. This was classic counter-positioning. Since card companies make more money the more money their customers spend, they’re all incentivized to get customers to spend more, so they offer points and rewards. But businesses do better if they spend more efficiently, so what if you built a business that helped them do that?
Saving Customers Time. Existing card companies, even startups, were sales and marketing-driven. There was an opportunity to build a product and engineering-driven financial software company, starting with a card, whose products helped companies get back the one thing they can’t buy more of: time.
Those vectors are related. Plowing interchange revenue (the ~2% card companies make when you use their card to pay) back into better software instead of points and rewards meant that Ramp could use the card as a wedge into all sorts of products that help save time and money, which, as a product and engineering-company, they were best-positioned to build.
This is a surprisingly deep insight.
One of my favorite ways to spot an exceptional founder is to see how deep down all of their industry’s rabbit holes they’re able to go. Sometimes, when you talk to Eric, or hear him speak on a podcast, because he’s so nice, you can forget how sharp he is.
But when we were chatting the other day, and I asked him what he’s been able to learn from AmEx about building a brand, he went deep. If you’ll allow me the slight digression, I think it’s a useful glimpse into how Eric and Ramp think.
In a 2007 speech at the Economic Club, former AmEx CEO (and current Ramp investor) Ken Chenault shared an important idea that Eric has taken to heart: great companies understand that their product and their brand are separate things. The products you sell work in service of the brand you promise.
“Many once-great companies lost to time” - there it is again - “thought they were selling products and things – and you do want to sell amazing things that work well and make peoples’ lives better - but the once-great got lost in the form factor, in being the finest horse and buggy manufacturer when the car came,” Eric said.
AmEx has been around for nearly 170 years and started as a pony express.
“What does horse-driven delivery have to do with cards and points?” he asked.
“They weren’t selling spots on the back of a horse-drawn carriage. They were selling trust.”
The thing that you wanted to transport, or the money that you wanted to move, was going to get there. You could count on American Express to deliver it for you.
Then came travelers' cheques. Even in a strange, foreign land, you could trust that with AmEx, your money would work.
Then came credit cards. Anywhere you go, AmEx will make sure your money works.
Now it’s worth 60x what it was four decades ago, because it’s evolved its products to meet the standard of its brand.
“Think about the brand over time,” he said. “In the ‘80s, ‘Membership has its privileges.’”
“Today, ‘Powerful Backing.’ There’s always been this element of trust, and of ego. Wherever you are, you know that AmEx has got your back, that membership matters, and that you can always count on AmEx.”
Think about the experience of calling AmEx as a member since 1997.
“You’ll call, and you won’t wait, and someone will be on the other end of the line, and they’ll say, ‘Hello, Mr. McCormick. Thank you for being a member since 1997.’ That’s cachet.”
The idea that “you matter more here,” he said, is a big part of the AmEx brand.
AmEx’s is an ‘80s idea of luxury: “The Bentley, the Platinum Card. Of course they pick up your call, get you the best table, get you cool tickets. It’s almost an old-world luxury, Mad Men luxury.”
“But I would argue,” and I had not yet realized that this was going to be an essay on time, or, therefore obviously, discussed it with Eric, “this idea is sort of stuck in time.”
What Ramp realized, and AmEx didn’t, is that time changes, and time is different now than it was in the 1980s.
“What’s changed,” Eric said, “is that now there’s a constant assault on your time.”
On a Saturday morning in the ‘80s, no one could call your cell phone – you didn’t have one. Now they can. Emails can get you. Notifications on social media can get you. Work is always there with you, in your pocket.
Things just keep piling up, and people want things that help them fight back.
“It was luxurious back then to be able to call and have AmEx solve a problem for you. Now, it’s more luxurious not to have to call in the first place.”
“Not having to do an expense report, having the tedious stuff done for you so you can actually live your life. Trust and luxury are good, but you need to understand what luxury actually is today. Luxury today is time.”
Since Ramp was founded in 2019, though, AmEx’s stock has tripled, even though if you look at the AmEx website in the Wayback Machine, and look at the products and cards they were selling then, they’re the same as when Ramp was founded.
What happened was that AmEx got serious about consumer rewards and lost focus on business customers: Resy reservations, CLEAR, WalMart+, hotel credits, live events. They upped their annual membership fee from $540 to $695 and … practically no one left. The money just dropped to their bottom line. Today, they’re booking millions of tables per week. If you want to go to the US Open in style, or to Carbone, you need AmEx Platinum. They reinvented themselves as a consumer membership company, refocused on who they were, and it turned out incredibly well.
Practically, for Ramp, this means they entered a seemingly crowded Corporate Card market, but what they found was a large market with no one else focused on the new luxury that is time.
And if you look at the other categories that Ramp has expanded into, the same thing is true. In expense management, SAP bought Concur in 2009 and left it somewhere near the bottom of the priority stack. If you’ve used Concur, it is not focused on saving you time. In Bill Pay, you know how I feel about bill.com, and my sentiment is not, “Wow, these guys save me a lot of time.” There are countless other companies in these categories owned by PE and more focused on near-term bottom line than on saving customers time.
With trillions of dollars of market cap and tens of trillions of dollars of spend on the line, Ramp keeps finding markets surprisingly bereft of competitors focused on the thing they believed matters most to businesses: time.
Enduring companies don’t confuse the product with the brand. They build products in service of the brand promise. Ramp’s brand promise is that it will save businesses time. So they build products to do just that.
When we spoke recently, Karim reiterated this point. It was the first thing he said:
“For every product we build, and everything we do, the goal is always, ‘How can we save more time for customers?’”
“Even in very early Ramp, when we built our mobile app…” he said, “think about mobile apps built at the time. They were all about trying to get MAUs and DAUs. That might be right for social media, but we had the totally opposite metric: how can people spend as little time as possible in the app? When someone clicks in the app, what are they trying to do, and how can we make that faster?”
Diego Zaks, Ramp’s VP of Design, says that the company’s goal remains for its customers to NOT spend time on Ramp. They benchmark against this internally: how much time are customers spending on the platform and how can we consistently make that go down over time? The goal is that the more powerful Ramp becomes, the less time you spend on it. This is where AI comes in and is why they’re so focused on agentic work.
“This is true for all of the new products we build,” Karim went on.
It started with Card and Expense Management. If your expense management software was tied to your card, could see each transaction, you can turn “a complicated guessing problem into a simpler matching problem” and save hours of back and forth. As a result of that and many improvements since, Ramp can reduce the time it takes to submit an expense report by 98%.
Today, Ramp’s Policy Agents can proactively review expenses based on a company’s expense policy and merchant details, and either make recommendations to human approvers or approve all of the in-policy expenses and only elevate questionable ones to humans. So far they can eliminate human review for 85-90% of them, and the product just launched two months ago.
These seem like small things, but if you’ve had to submit or approve expense reports, or god forbid had to chase down employees to submit receipts, you know how much time this stuff takes - both directly and indirectly, in lost focus. This is an issue for everyone, at every level, even for very expensive people.
Susan Li, Meta’s CFO, told John Collison on a recent episode of Cheeky Pint that the company is looking into ways to automate rote operational work, “and I say this as a person who is like a very expensive machine learning model for approving expenses. I'm not certain that when I approve expenses I'm really adding a lot of deep human intelligence to this process. I'm scanning for a fairly checklistable set of things. And yet I get multiple expenses every day.”
Susan Li’s reported total compensation in 2024 was $27.2 million. Assuming she works something like 70 hours per week, each hour she spends doing expenses costs the company north of $7,000. More importantly, she makes that money because she’s one of the best in the world at doing the non-expense-report-approval parts of her job. Every hour she spends doing an expense report is an hour that she is not spending on more strategic work, on decisions that could move the $2 trillion company’s market cap by tens of billions of dollars.
Then there is the strife, which we have talked about since the beginning of Ramp, caused by the finance team needing to chase down employees to submit their expenses. This is so prevalent that Ramp focused on receipt chasing in its first non-Super Bowl national TV commercial:
And as an Eagles fan, Lord knows I don’t want to pull Saquon Barkley off the field to do expense reports.
These commercials are resonating for the simple reason that Eric and Karim were right: people care a lot more about saving time than other card and expense management companies appreciated.
It is telling that Bryan Johnson, the man behind the Don’t Die movement, runs his company Blueprint on Ramp. Even the man who plans to live forever doesn’t want to waste time filing receipts.
But card and expense management weren’t the only timesucks in the finance org, so next, Ramp added Bill Pay, then Procurement, then Travel, then Treasury. Ramp’s mid-market and enterprise software solution, Plus, adds more power and automation to each of these products, through traditional software features that enterprises need, and increasingly through Agents.
I’ve written about these products before, in Ramping Up, and about how building AI into their workflows will move from saving time to just doing the work, in Ramp & the AI Opportunity. I’ll tell you how those business lines are doing in the next section, but the point for now is that each one saves companies time and money, and they save even more time and money when used together.
Bill Pay can process invoices with 99% accuracy from an email forward, collect approvals, pay right from Card, Treasury, or external accounts, and sync them with your accounting software.
Travel lets employees book flights or hotels that are within policy for their specific level (the CEO might be able to fly first class, the analyst premium economy), can stop out-of-policy bookings on the Card before they ever go through, and then turn everything spent on the card during the trip into one Expense Report.
Karim told me that Ramp can take expense, AP, travel, and procurement policies from customers in whatever written form they’re in, automatically map them into the Ramp system, and start doing things like evaluating every invoice for whether it’s in-policy nearly immediately. This means that companies don’t just save time once Ramp is up and running; they start saving time during implementation.
I asked Google Gemini to “Analyze data from G2, Capterra, and implementation partner reports on the average setup and implementation time for SAP Concur, Coupa, and NetSuite versus Ramp. Express the difference in business days and required personnel,” in a fresh chat, with no mention that I was writing about Ramp. I tried to make it rough but unbiased. This is what it came back with:
The upshot is that by maniacally focusing on saving businesses time and money, Ramp has been successful in saving businesses time and money. Per the company, to date, it has saved businesses $10 billion and 27.5 million hours.
That brings us to one last thing that’s important to note, on the subject of Saving Time, which will bridge us into our second flavor, Compounding Over Time.
Those $10 billion and 27.5 million hour numbers are so large in aggregate as to be hard to pin meaning to. But they’re an aggregate of the time and money savings of many individual companies, each of which Ramp has data on, and each of which Ramp is focused on saving more time and money for.
What that data means is that Ramp can use what it’s learned to sell to new accounts and expand within existing ones.
For new accounts, by understanding how many credit cards the company would use, how much money it might spend, and how many expense reports it might submit, it can walk in the door knowing how much time and money it could save the company with just card and expense management.
Next-generation card controls that “surgically and automatically block non-compliant, out-of-policy transactions at the point of purchase, prior to payment” save customers anywhere from 3.5-8.8% in prevented spend. If you’re spending $10 million per year, that’s $350-880k saved.
Spend request workflows that decide who can spend and how much, set default limits for each employee, and approve new funds on a per-request basis reduce spend another 1.7-4.6%, for $170-460k.
Expense automations that reduce time spent on expense reports by 98% can save a company that submits 10,000 expense reports per year over 3,000 hours, or more than an employee and a half’s worth of time.
From the jump, the ROI is clear: save $500k - $1.4 million, and 1.5 employees’ time, per year.
This is true for expansion within existing accounts, too. Karim told me, because Ramp has so much data on how each of its customers spends and operates, and on how all of its customers spend and operate, its Account Managers can go to their accounts and say, “We know you process this many bills and spend this much time on procurement, but if you started using Ramp this way, or set up this feature, this is how much time you’d save. And your time is valuable, so the ROI is there.”
For a product that lands with a card, which makes money on interchange, provides software for free, and demonstrates such clear savings once it gets to work, adding other Ramp products becomes a no-brainer.
Roy Luo, a General Partner at ICONIQ, which led Ramp’s last $500 million round at a $22.5 billion valuation, told me that the resonance of this value proposition is one of the things that jumped out to him in talking to Ramp’s customers.
“I can’t tell you the number of times customers would say, ‘I can’t believe this stuff is free,” he said. “I loved Ramp because they’re an application and AI platform monetizing through a card, but the card was never really the product. It’s genius, super smart; it reduces a lot of barriers to sell and win.”
But the card is just the entry point. In my first Deep Dive on Ramp, I wrote, “The corporate card, then, is a Trojan Horse directly into a company’s finances.”
The idea that time is the new luxury, that you could build a really big business really quickly by saving companies time and money, is an excellent starting point and strong counter-positioning. But translating that idea into a web of specific products, people, go-to-market motions, and implementations is how you compound over time.
That Ramp has grown incredibly fast to this point is not up for debate. It is growing at a speed for its scale that very few companies ever have.
But it’s hard to look at the landscape of early stage venture-backed companies today and believe that growth is invariably good, or that it will inevitably last. In many instances, although it’s never fully clear which until after the fact, investors pay high prices for growth that has already occurred, when the very pace of that growth contains the seeds of its deceleration.
This is the question that I wanted to discuss with Eric when we spoke about doing this piece: the durability of Ramp’s growth.
I come into all of these Ramp Deep Dives excited about the company. That’s why I’ve written so many of them. Ramp is a special one, and it moves so fast that I learn something new each time.
There is also a point in the process of writing each of these at which I get even more excited about the company. Something clicks. In Ramp’s Double-Unicorn Rounds, it was the company’s velocity and trajectory, the realization I opened this essay with, that if a company is growing fast enough, seemingly insane valuations soon become sane. In Ramping Up, it was that transactions are jumping off points for new applications; that, for example, when companies spend on Travel on the card, it puts Ramp in position to build a better Travel product. In Ramp & the AI Opportunity, it was that a company built to save time and money was perfectly positioned to take advantage of incorporating AI into its workflows; built well, and paired with the ability to pay, AI could just do a lot of the work.
This time, what’s clicked for me is Ramp’s unusual combination of velocity and durability, that the business is built to compound at high speeds for a long time.
What’s amazed me across these opportunities to study Ramp is just how consistent and fruitful the core idea has been, and how each passing year adds new layers and S-Curves that move in that same direction.
John Coogan, the co-host of TBPN and long-time Ramp supporter, told me that one of the most underappreciated things about Ramp is that they’ve avoided “launching slop product extensions by basically trusting how big that one core thing can be.” That means that instead of wasting energy on short-term shiny new things, Ramp can focus all of its energy in one direction, on compounding on the core.
When I asked Calvin how they’ve managed to be so consistent, he brought up a word that I’ve never heard a company use to describe itself: correctness.
“The founders and leaders and Ramp are still paranoid about quality and velocity, and also about correctness,” he said.
I asked him to tell me more, because correctness seems like something that every company just kind of automatically wants. If a value is only useful if someone else might hold the opposite value, it’s hard to imagine a company valuing incorrectness. What makes correctness practical at Ramp?
“Everyone wants to be correct, but not everyone is smart enough to be correct,” Calvin explained. “But there’s a process version of this”:
For example, there’s a bad version of move fast and break things where you just spasm. It’s important to think before you code. We have a core principle around scoping: a short but decisive process to make sure you build something that a customer actually wants to use. To waste all of that engineering time would be downright tragic. So we try to avoid those sorts of things.
Avoiding stupidity is a lot easier than seeking brilliance. We are good at calling out when things are idiotic. Karim is particularly good at this. We have a good culture of internal debate.
It comes down to having smart people who care and work hard. You can be more correct by doing more work. Also, just caring. When people are bold and wrong once, we respect it a little. But you keep it up and we’re just going to remember you were wrong.
Talking to Calvin and starting to write this section, I realized that one of the reasons I’m so drawn to Ramp, and one of the reasons I keep writing about it, is that it is the perfect real-time case study of the argument I made in In Defense of Strategy.
I wrote In Defense of Strategy in July 2023, when AI companies were starting to grow really fast out of the gate, and when a sentiment started to grow alongside them: that strategy was for wimps, and that speed of execution was the only thing that mattered.
I disagreed, arguing that “companies that are the best at execution are precisely the ones for which strategy is most important. They’re the only ones that have a shot.”
“The better you are at execution,” I wrote, “the faster you can run in any direction. A good strategy helps you run fast in the right direction.”
Plenty of companies have executed their way into a good strategy - they got a bunch of smart people in a room, tried a lot of things, listened to customers, learned, and iterated towards the right strategy, against which they then executed.
That can work, although executing without a strategy means that you are forced to make a trade-off: either you can grow fast and then realize what you’ve built is not defensible, obliterating the value of your startup, or you can bounce around more slowly until you get to something that can grow fast, defensibly.
But you can’t do what Ramp has done – grow both fast and durably, from Day 1 – without both forming a clear strategy and executing against it at high velocity.
In that same Strategy essay, I tried to show why strategy - a diagnosis (there is an opening for a financial software company that helps customers save time and money), a guiding policy (“For every product we build, and everything we do, the goal is always, ‘How can we save more time for customers?’”), and coherent actions (all of the specific things Ramp does to save customers time and money) - means bigger, more durable companies, faster.
Startups have an “uncertainty window” - a period during which what they’re doing is uncertain enough that others won’t copy - which can be extended by what Hamilton Helmer calls counter-positioning, “the practice of developing your business model such that incumbents have conflicting incentives preventing them to compete effectively.” For Ramp, that was saving time and money instead of offering points and rewards.
During this uncertainty window, they can either use a limited set of coherent actions to aimlessly execute – the “bad version of move fast and break things where you just spasm” - or use them strategically, in one direction, such that they compound: “A good diagnosis and guiding policy channels and coordinates those limited actions so that they can compound on each other.”
Execution and velocity are important. By moving fast, Ramp earned more actions during its uncertainty window, and earns more actions in any given time period now that it’s moved outside of the uncertainty window. But it is the fact that these actions are coherent, guided by correctness, that lets them compound into a business that gets more durable with time.
It is unsurprising that Ramp, a company that counts the days since its founding (today is Day 2,367), understands this better than anyone.
Which is an easy claim to make, but I understand if you won’t simply believe me without the numbers.
The best way to think about Ramp’s business is as a series of S-Curves, each of which compounds on the others and, because Ramp has focused on releasing core, non-slop products, each of which enhances the others.
As I wrote in Ramping Up, “A typical S-Curve describes the idea that a product’s growth normally starts slow, accelerates for a period of time, and inevitably slows down at maturity once it’s saturated the market. It looks something like this.”
Card is Ramp’s first S-Curve, and it is still in the growth phase. By picking the competitive but massive corporate card market as its first market, Ramp picked a market in which it could grow for a very long time.
As of July, Card had over 45,000 active customers and is growing through both new customers and through increased spend among existing customers. It is an impressive and compounding business in its own right.
But in that same March 2022 Deep Dive, I wrote that “as Ramp’s first major non-card product, Bill Pay has the potential to build the next S-Curve for the business.”
Bill Pay has realized that potential. It is the next S-Curve.
Roy at ICONIQ, who has studied and invested in this space for over a decade, told me that what Ramp has been able to do with Bill Pay is very rare.
“In the world of Office of the CFO tech,” he explained, “there are very few companies that have truly captured lightning in a bottle twice organically. Everyone else bought their way into the next act. But Bill Pay is very special. To have the success that product has had, you would have had to study the space for a decade to appreciate how hard it is to do this twice, organically.”
Over the past year, Bill Pay’s TPV has tripled and is now higher than Card.
Across Bill Pay and Card, Ramp is now at $100 billion in TPV, almost double where they were in March ($55 billion) and 10x higher than the $10 billion in TPV the company reached in January 2023. Put another way, in the over two years from January 2023 to March 2025, Ramp grew TPV by $40 billion. They increased TPV by more than that - $45 billion - in the past six months.
It makes sense that Bill Pay is growing faster, and getting bigger, than Card. Recall that of the greater than $40 trillion businesses in America spend, only $2.1 trillion, well under 10%, is spent on cards. Money moves through invoices.
Within Ramp specifically, Bill Pay also benefits from Ramp’s existing customer relationships. “Bill Pay and Card are both on the payables side, they’re expense related” Roy pointed out. “So there are natural synergies to the budget, wallet, people, and champions you sell into. If the guy down the hall loves the Card product, it makes selling Bill Pay more natural.”
This is one of the sneaky advantages to Coogan’s point about focusing on the core. It means you are often talking to the same buyer, who already loves the product they use with you. It means Ramp’s Account Managers already have trust when they say, “If you start using Bill Pay in this way, we can save you this many million dollars and this many hundred hours.”
That shows up in the attach rates. Bill Pay specifically is used by one in three Ramp Card customers, and that number is both beating plan and growing. Roy called Bill Pay’s attach rates “absolutely insane,” when something like 10-15% attach rates would be very good.
This is how S-Curves compound.
And Ramp keeps adding S-Curves.
Ramp Plus is a natural fit with Card and Bill Pay. It provides software that gives customers more of the functionality they need to save time and money, including many of the agentic products that Ramp is rolling out.
Launched in July 2023, Ramp Plus is newer than Card and Bill Pay, and it is growing even faster. It is an early proof point of the company’s thesis, which Eric expressed in our last Deep Dive, that being in the business of making other businesses more profitable can be very valuable.
Plus also makes Ramp’s business stronger and more diverse. It is the first Ramp product that looks like a traditional software product: recurring revenue, software gross margins.
Even newer and faster-growing are Treasury and Travel.
Treasury, launched January 2025, has already exceeded $1.5 billion in assets under management.
With Treasury, Ramp has “woven cash management into your AP workflow, so every dollar you’re not spending is earning — automatically.” The bet is that companies will want to keep at least some of their cash where they spend it, so that Ramp can maximize the time that it’s earning yield and customers can save time making money.
And Ramp can also help companies spend that money smarter.
Travel, launched in June 2024, has grown booking volume 6x YoY. Ramp monetizes this volume through commissions, like traditional online travel agencies (OTAs), with OTA-like margins.
With Procurement, as more Ramp customers spend through Ramp, it can help them spend smarter by applying what they’ve learned about what companies are paying for products, and by streamlining workflows.
On top of all of these S-Curves, Ramp is adding in agentic AI to the AI that has powered the products behind the scenes.
The goal is to understand the work being done, and have multiple agents get to work on it in parallel to get it done faster.
We will discuss this further in “Fighting Time” below, but it hints to another way that Ramp compounds: the more customers it has using more products, the better it can understand their business and the more actions it can take on the business’ behalf, which means more time and money saved. That means more revenue, contribution profit, and cash flow, and it also means stickier customers.
All told, over 50% of Ramp’s customers now use two or more Ramp products, and multi-product adoption is ramping faster, too.
This has all sorts of implications for the durability, scale, and speed of Ramp’s business.
First, and most simply, customers who use multiple products are stickier. This is true for most businesses; what makes Ramp unique is just how quickly customers adopt multiple products.
Second, if you believe Ramp’s premise that saving customers time and money creates healthier customers, then customers that use multiple Ramp products will stay in business longer and grow faster, which lowers churn and increases LTV.
Third, when customers use more products, their LTV increases, which means you can spend more to acquire them, which means you grow faster and beat point solutions.
Eric explained the logic:
Take a customer in any product category: Card and Expense Management, Bill Pay, Travel. If you think you will be able to cross-sell, then you can outspend any point solution to acquire them. It is totally rational to pay $3k to acquire a customer that a point solution can only spend $2k to acquire. That’s when the flywheel really starts getting going.
When you combine fast-growing maturing S-Curves with faster-growing new S-Curves, you can maintain high growth at scale.
“If you look at our TPV YoY growth, a year ago, we were growing 2.4x,” Eric said. “This year, we are growing 2.4x. At any point in time, we’re growing just as fast off a much larger base.”
As the business grows, its mix does, too, and the business gets stronger. At the end of 2023, less than 5% of Ramp’s run rate contribution profit (RR CP) was non-Card, at the end of 2024, roughly 20% was non-Card, and the company expects that roughly a third of RR CP will be non-Card at the end of this year.
If there’s one thing people remember from Thiel’s Zero to One, it’s that idea that “Competition is for losers.” Ramp has shown that competition can be fine; if you’re competing on the right dimension in a large enough market, it can actually be a good thing. People are familiar with cards. That makes them an easier entry point. From there, by proving that it’s able to save time and money, Ramp can expand to new products, making the business stronger as it grows.
Instead, Eric said, there are two important ideas from Zero to One, although most people focus on the first part. Since the value of a company is based on the present value of things that will happen many years in the future:
Growth is more important than most people think, even though people think growth is important.
Growth is conditioned on the durability of it.
As Thiel wrote:
The overwhelming importance of future profits is counterintuitive, even in Silicon Valley. For a company to be valuable it must grow and endure [emphasis Thiel’s], but many entrepreneurs focus only on short-term growth. They have an excuse: growth is easy to measure, but durability isn’t. Those who succumb to measurement mania obsess about weekly active user statistics, monthly revenue targets, and quarterly earnings reports. However, you can hit those numbers and still overlook deeper, harder-to-measure problems that threaten the durability of your business.
If you focus on near-term growth above all else, you miss the most important question you should be asking: will this business still be around a decade from now?
In its sixth year, Ramp is proving that it is both fast-growing and durable. That all comes back to saving time.
“On the surface, it looks like Ramp is selling money,” Eric said. “But Ramp sells time. Books that close themselves, expenses that do themselves, money that flows to higher yield. Money is a great way to make money, but it’s hard to sell. It’s better to sell time. It’s bad to have your best salesperson doing expense reports. It’s cheaper to hire Ramp to do it.”
“What’s core for Ramp is: do you love the product? If you do, and we get more of your spend, we get a natural take: store more funds, move more money, enable more software actions on it. We can monetize through software, or through your next business trip, take a little interchange and a commission.”
If Ramp saves customers time, then over time, it wins more of their business. Counterintuitively, that means that it can grow faster, and do even more for each customer, which spins the flywheel faster. This is how you build a business that compounds over time by saving customers time.
On its current trajectory, it seems that Ramp will still be around a decade from now, and that it will be a much bigger business than it is today.
But Ramp itself is growing. It has over 1,200 employees now. And while time allows for compounding, it also invites sclerosis.
In order for time to work with you, you have to fight to ensure it doesn’t work against you.
There is a tension that comes with time, one that comes for all companies: time creates entropy. Companies get bigger. They hire more people. They have more to lose. So they respond with bureaucracy. More meetings. More stringent approval processes. Those things compound, too. And as a result, they get slower. They lose the thing that got them there in the first place. They become a Big Company.
This is a well-known phenomenon that, despite the fact that excellent startups with phenomenal leaders are aware of it and actively try to fight it, still comes for the best companies.
The core essay in Fred Brooks’ 1975 The Mythical Man-Month explains Brook’s Law: adding people to late software projects makes them even later, because communication overhead grows exponentially with team size. I remember Ben Nevile, Breather’s CTO, drawing these graphs with a Sharpie to demonstrate the point.
My friend Alex Komoroske made a presentation titled Coordination Headwind: How Organizations Are Like Slime Mold while working as Head of Corporate Strategy at Stripe after spending thirteen years at Google. Two companies that, at their founding, would be two of the companies you would have bet would avoid the scaling sclerosis, and yet, from the inside, he said, “This happens in every successful organization over time.”
It’s worth flipping through the 160 slide presentation (it’s quick). It shows that even with the most well-intentioned, talented, and team-oriented people, the math just works against a project’s success the bigger it gets.
That Ramp, at 1,200 people and $1 billion in annualized revenue across multiple product lines, seems to have avoided this fate thus far, then, is remarkable and worthy of study.
When you do, it actually makes a lot of sense: Ramp is entirely focused on saving companies time and money, and it applies many of the things that it does in service of that goal to Ramp itself.
There is a bit of a chicken-and-egg here: is Ramp so intensely focused on making itself more efficient because its mission is to make other companies more efficient, or do both come from the same egg, Eric and Karim’s obsession with saving time and money, first for consumers, then for businesses, and for Ramp itself?
Whichever way you resolve the paradox, Ramp wants to make an example of Ramp. In a recent company all-hands, Ramp reminded the team of a goal it set for itself in January:
And they reminded them of what that would look like:
How Ramp runs itself, then, optimistically, is a preview of what well-run companies might look like in the future, if things go right: more productive big companies behaving like small companies.
So how do they do it?
When I spoke to Karim, I asked him this question explicitly: “How do you avoid getting slow and bureaucratic as you get bigger?”
His answer was simple: “By reducing the cost of coordination as much as possible.”
Then he gave me a hypothetical example.
When you think about the procurement workflow at a lot of companies, you have this chain of jobs that needs to get done to achieve an outcome. Step 1: fill out this form. Step 2: legal review. Step 3: IT review. Etc…
The problem is that the IT person might be on vacation, or legal only finds out about the form two days later. Time is wasted because chaining is inherently slow. This rhymes with a point that Komoroske makes in Coordination Headwinds: each step in the chain reduces the project’s overall probability of success, because people are human. “But of course humans aren’t robots,” he wrote, pre-ChatGPT.
The reason, Karim said, that you don’t just run all of these processes in parallel – legal review, IT review, etc… – is that peoples’ time is very expensive. You don’t want to run an IT review on something that ends up failing legal review. It’s a waste of time and money.
But what about agents? If the marginal cost of an agent’s time is practically zero, why not just have six different agents run the process immediately and in parallel? Then, something that took weeks could take minutes. These time savings compound, too.
That was a hypothetical example. Then, he gave me three real ones.
Ramp’s product and engineering teams, which we talk about in every piece because of their absurd shipping velocity, have gotten even faster with agents. Today, Ramp’s engineers are more than 50% more productive than they were in 2024, as measured by commits per engineer.
Coding has been AI’s breakout use case in the enterprise. Just yesterday, Cognition announced a new $10.2 billion valuation. It is unsurprising that Ramp is taking advantage of engineering productivity gains.
What is more remarkable, and speaks to Ramp’s potential to make entire organizations more efficient, is that Ramp has been able to bring these efficiency gains to its entire organization.
Take marketing, which now reports into Karim. “Before I jumped into marketing,” he said, “I applied the Elon algorithm (1. Make requirements less dumb, 2. Delete the part or process, 3. Simplify and optimize, 4. Accelerate cycle time, and 5. Automate.) What are the different steps?”
Take briefs, he said. When people wanted brand or creative work, the brand team had one interface: write me a brief. They all had the same format, they were reviewed once a week by the team, and during that review, 1-2 people would decide how to allocate the team’s limited resources.
“No matter what you wanted to do in marketing, anything at all,” he recalled, “it would take a week, even if it takes less time to do the thing than write the brief.”
Say you’re on the SEO team, generating a lot of articles…
It’s crazy that you need to write a brief for each one. What if you took the process the brand team follows and turned it into software, a tool that you give to everyone in marketing, so when anyone wants to generate an image, video, colors, fonts, etc… they can do that on their own? So we built that. If something reaches a certain level of virality, great, humans can go and polish the last 20%. But basic assets are completely unblocked.
Then he gave me my favorite example, about a lunch.
A couple of months ago, Karim was trying to book a lunch for the Applied AI team. He asked his EA to set it up, and two days later, when he hadn’t heard anything, he asked what was going on. His EA said she was waiting on legal review. He asked, “Reviewing what?”
Turns out, because the booking was over a certain size, the restaurant sent over a legal contract. “It was very basic, and my mind immediately went to, ‘This is ridiculous. Why are we doing this?’”
So he worked with the legal team, and now for things like this, Ramp just auto-signs and sends an addendum to the counterparty, puts the ball back in their court. “Most people just say: this is fine, we just had to do the contract, we’re not going to argue on the details.”
This is a little example, but in a growing company, there are thousands of these little examples, and not only do they add up, they compound. If the legal team is working on the restaurant contract, they’re not working on something more important. If marketing is waiting on a brief, they’re not acquiring that next customer, wasting precious days until that customer signs up for a Card, then Bill Pay, then, with 99% probability, becomes a customer for a long time.
Technology can help. AI, specifically, can help, by doing a bunch of the routine work that a lot of people end up doing because they have to but don’t love doing, like briefs and lunch contracts, like expense reports.
But knowing where to apply AI in the first place takes people who are obsessed with this.
“I don’t know if we’d want to put this in the piece,” Calvin told me, making me really want to put it in the piece, “but Karim has a hobby of huddling the teams at 2am. When we need to get something done, Eric calls me on the weekends, and we make it happen. They still care about the outcomes; that’s the most fundamental thing.”
Ramp cares more about the outcomes than the things that big companies typically care about, like looking good to others in the industry, or doing things “the right way.” Being wrong is OK, as long as you’re wrong fast. “The secret to building great products faster,” Eric said, “is to reduce cycle time.” Diego says it well here:
In each one of these pieces, I ask Redpoint MD Logan Bartlett for his take. Normally, they’re outlandish, like “I don’t want to be quoted saying Ramp is the perfect B2B company because that’s ridiculous… but it is” or “I won’t sell for less than $200b” (although, respect).
This time, though, he was also more serious. He shared why he thinks Ramp has been able to avoid the ravages of time:
As companies get bigger, there’s more and more of a need to get things right when they ship a product. The expectations are higher than that of a start-up and so are the stakes. You have brand credibility associated with this new thing and so you want so badly to get it right because you don’t want to dilute how you’re perceived. Elements of the classic innovators dilemma.. and yet Ramp doesn’t care? Or hasn’t fallen victim to it?
They hire people who care about excellence but they’re willing to try and fail on stuff which allows them to succeed. This coupled with entrepreneurially hiring and autonomy seem to me to be the secret sauce of acting like a small disruptor at scale for Ramp.
This is why, for example, when he was already running one of the fastest-shipping product and engineering teams in tech, Karim stepped in and added marketing to his plate.
This is one of the most surprising changes since the last time I wrote about Ramp. When I was talking to Eric about sponsoring Not Boring last year, he looped in… Calvin, who I was not expecting to see on the marketing team.
Calvin was a founding engineer at Ramp, whose resumé, according to this tweet from Eric, included:
Admitted into MIT at age 16
Code running on the International Space Station
Top 20 in the country in the Putnam Math Competition
And here he was negotiating a small newsletter sponsorship deal.
When I asked Calvin what he was doing in marketing, he said that good marketing looks a lot like product building, structure-wise. “It has the same tripartite structure: Performance Marketing is Engineering, Brand Marketing is Design, and Product Marketing is… Product.”
When you put really great engineers in marketing, he continued, there’s a lot they can do.
In Ramp’s case, he said, “We have implemented AI everywhere we can: videos and good looking static content, without a drop in quality. We’ve really optimized targeting across channels. We run experiments day in and day out, with more rigor on the experimental side.”
When I asked Karim a similar question - why put engineers on marketing? - he cited “pragmatic problem solving.”
“One thing that’s really different now (with AI) is that the value of skill and subject matter expertise is now relatively lower than the value of will. It’s a lot easier to learn to do something now. If you really like an ad, you can write your new ad in the same style. Really, in marketing, we’re now a lot more focused on: you have an idea, you want to bring it to life, how do you do that as fast as possible? On the creative side, you can learn a lot from history if you’re more focused on results than on winning awards.”
One tangible outcome of this pragmatic approach is that Ramp’s marketing team is now much more focused on marketing to companies that don’t look like Ramp, the millions of non-venture-backed-fast-growing-tech-companies that drive a huge portion of the economy.
This is something that Amin at Founders Fund noted in our conversation.
“People in Silicon Valley are pretty obsessed with selling to other tech companies,” he said. “Ramp zagged, and said, ‘Let’s sell to people who don’t traditionally get this kind of love.’ Energy, education, home services, sports - areas that traditional Silicon Valley go-to-market (GTM) says, ‘Don’t focus on these areas.’”
And when Ramp goes in, Amin said, they go all-in. “Ramp has quintessential adaptability - adapt or die - where they see opportunity present itself and focus their bazooka of talent on seizing it.”
This is how, for example, Ramp made a Super Bowl ad in just seven days:
Targeting non-Silicon Valley companies means going all-in on non-Silicon Valley tactics, too.
Calvin calls this a “counterpositioning philosophy. If everyone is shifting their marketing to AI, think about the things that are going to stand out, the things that can’t be done with AI.”
Of course, Ramp’s engineering-led marketing team uses AI too, probably more heavily than most marketing teams. “Both extremes are good,” Calvin said. “Go heavy into AI, or into the things that AI will never replace.”
Targeting the non-tech market early is a way of fighting time, too. It’s an effort to get ahead of the fact that early adopters eventually dry up, that at some point, you need to cross the chasm. Ramp is leaping over it. With success in those harder-to-reach but larger markets, the compounding will continue more smoothly than it otherwise would.
All of this is true. Fighting time internally means that Ramp can continue to move fast long past the time when most companies begin to slow down. Fighting time externally - by understanding that even the most successful startups tend to briefly sputter out at $10 billion in revenue, once they’ve run out of the usual targets - means that Ramp can continue compounding far longer than most companies do.
But I think there’s something more going on here: Ramp actually just cares about saving time and money, about eliminating the bloat that weighs down companies, and weighs the economy down with them.
A few minutes after I got off my call with Karim the other day, he texted me a link to this tweet.
This is the kind of shit that drives him nuts.
On our call, he mentioned a different but related chart, this one that’s familiar to a lot of people in tech, a symbol for the idea that anything on which tech is allowed to work its magic gets cheaper over time, while every industry that lets bureaucracy win gets more and more expensive.
The chart he texted me afterwards was the “why.”
“Education and healthcare outcomes haven’t gotten better in the past twenty years. What are we spending on?” he asked. And answered: “Very little money is going to educators and doctors, but a lot is going to administrative bullshit.”
This is what time does, left to its own devices. It makes organizations grow. And as they grow, their coordination costs grow exponentially, and suddenly, the number of administrators in the healthcare system has grown 30x more than the number of physicians. More people to do more work created by having more people, ad infinitum. It is clearly unsustainable.
“This is really where we’re applying a lot of our expertise and product building,” Karim said. “How do we get 80-90% of the bullshit work to go down so that organizations can do the thing that they exist to do?”
Ramp, then, is a laboratory for the change that it wants to prosecute across the economy, from Silicon Valley to Dallas, Texas, in all of the big cities and small towns where bloat drags us down.
“I don’t think Ramp is going to shrink as a company,” he said. “We will just be able to do a lot more, faster. It won’t take another 140 years to build AmEx. We can do it faster, with fewer people, doing more than AmEx is able to do.”
Similarly, applying tools like Ramp, he believes, “won’t make organizations not want to grow; but it will make the productivity of each additional person a lot higher.”
If Ramp can keep fighting time within Ramp and winning, the plan is to ship products at high velocity to help all of the other companies, and the whole economy, fight time and win, too.
Financial success compounds. We have seen that throughout this Deep Dive. It is how we started the Deep Dive. Two companies, growing at different rates, end up in vastly different places over time. Ramp is a real-time case study.
I think the gap is even wider than it appears, and that that will become evident in the months and years ahead.
The reason is that capabilities compound, too. Ramp has built, and continues to build, a suite of products that save customers time and money. It is the company’s founding bet, its raison d’etre.
And now, as it incorporates AI into more and more of its products, it is in the right place and right time to save companies so much time and money that it would be fiduciarily irresponsible not to use Ramp.
One reason is obvious: if Ramp continues to save companies more time and more money, not using Ramp is like lighting time and money on fire. It’s even worse if your competitors are using Ramp. Ramp wants to do to them what it’s doing to itself: using software and talented people to make them incredibly productive at any scale.
The other reason is less obvious, and it has to do with the nature of time.
Time, Einstein tells us, is not absolute. It is relative.
Time was a different thing in the 1980s. On a Saturday morning in the ‘80s, no one could call you. Time was different even five years ago.
“Most businesses don’t have real-time visibility into their finances,” Karim told me, when I asked him when it will become ridiculously irresponsible for companies not to use Ramp. They’ve been OK waiting for month-end close to understand their financials. “They’ve gotten away with it because the world moved a little more slowly. A view of finances that’s a month or two old has been fine, because it’s taken three to six months to change something anyway.”
“Now,” he said, “the world is moving faster and faster. Switching costs are going down. Coordination costs are going down. If your business moves like a massive cruise ship, that was fine in the old world. It’s not anymore.”
“If you want a real-time, to-the-minute view of your finances, the only way to do that is by using Ramp, and generating live balance sheets and cash flow statements.”
That sounds like exactly the type of thing a co-founder of a company would say about his company’s product, but it’s also how he’s running his own company. Karim is as paranoid about this stuff as he believes others should be.
I asked the other people I spoke with a similar question: when does it become irresponsible not to use Ramp?
There are things that the company needs to build.
Calvin pointed to improvements coming in procurement for non-tech businesses.
Eric said that Ramp will need to keep expanding internationally. “Ramp works basically everywhere. We have more than eighty countries with Ramp cardholders, and every month people are spending with Ramp in every country except sanctioned ones,” he said. “We’ve started issuing cards in other currencies, and we’re onboarding Canadian companies.”
To serve multinational companies, and uninational companies in the world’s many markets, to begin to add to its near-zero international market share, it will need to grow its footprint as rapidly as its product suite.
But, maybe predictably at this point in the Deep Dive, the most common answer I heard is that it’s already a no-brainer; that actually doing the legwork to sign up all of the customers who could benefit from switching to Ramp, many of whom are under long contracts with other card companies, will just take time.
“One enterprise wanted to sign a fifteen year agreement with us,” Eric said, “which leads me to believe that they’re used to fifteen year agreements with other companies. Some of our adoption will just come from waiting for those fifteen year agreements to expire.”
“The biggest thing we’re fighting right now,” he said, “is inertia. Our win rate in head-to-head deals when a customer makes a switch is high. When we lose, it’s most often due to a ‘no decision’ or ‘seems cool, we’ll come back when we’re ready to switch.’”
Ramp needs to grow awareness. More direct mailers, events, TV ads, Deep Dives, and, most importantly, word-of-mouth. These things take time.
Ramp still isn’t in every conversation when large companies are thinking about going with the brands they’ve used forever, like AmEx and Chase. But for newer vintages, the percentage of companies talking to Ramp is growing.
“If you win 20% of new cohorts, it might not look obvious to people how much of this is happening,” Eric said. “It takes years to show up.”
All of which is to say, at this point in Ramp’s journey, getting really big, doing $1 billion of revenue in a month, and then in a week, and then maybe even faster, is just a matter of time.
Job’s not finished.
Thanks to Eric, Karim, Calvin, Lindsay, Fax, Will, Amin, Logan, Roy, John, and the Ramp team for your time and insights.
That’s all for today. We’ll be back in your inbox on Friday with a Weekly Dose.
Thanks for reading,
Packy
B2B company list consists of ~100 public companies in the Meritech Software index. Ramp, Crowdstrike and Snowflake using run-rate revenue; Applovin using both LTM revenue and FY revenue from publicly available financials, with FF extrapolation. Criteria for inclusion on page - crossing both $500M and $1B revenue thresholds with at least 70% y/y growth rate, with minimum 25% revenue CAGR from 2022-2025E (to control for anomalous Covid growth pull-forward)
