The quest to develop a new generation of healthcare applications aimed at replacing outdated hospital management systems has intensified, as many of these systems have gone without updates for years or even decades. A startup based in Munich, Germany, known as Avelios, aims to create a comprehensive administrative framework that utilizes cutting-edge tools, including AI and cloud technology. Recently, the company announced a successful €30 million ($31 million) Series A funding round, signaling its growing traction in the market.
The funding round is led by Sequoia, originating from its London office, with participation from previous backers like High-Tech Gründerfonds, Revent, and other individual investors.
While Avelios has not disclosed its valuation, this funding round follows impressive growth fueled by just €5 million in earlier investments. So far, Avelios has secured 12 clients in Germany, including notable institutions such as Sana Kliniken AG, Ludwig-Maximilians-University Hospital in Munich, and Hannover Medical School.
“We believe we’ve operated with notable efficiency,” stated CEO Christian Albrecht in a conversation with TechCrunch. “We have a strong engineering team and a group of 11 medical doctors on board.”
Co-founded by Albrecht alongside CTO Nicolas Jakob and Chief Medical Officer Sebastian Krammer, the company plans to employ this funding to further enhance its system and expand into additional markets, including ongoing discussions with a hospital network in Spain, as well as exploration efforts in France and the U.K.
Origins During COVID-19
Avelios adopts a foundational approach in developing healthcare systems, targeting a sector long dominated by fragmented solutions that serve distinct needs but require complex integration, often resulting in suboptimal performance.
However, similar to a health condition that can start small and escalate, Avelios initially did not recognize the full potential and demands of its project.
As Albrecht (depicted above left, alongside Jakob and Krammer) recounted, Krammer, while working as a doctor during the COVID-19 pandemic, witnessed firsthand the inefficiencies plaguing the German healthcare system.
“He spent countless hours in hospitals manually counting patients and reporting those numbers to the authorities,” recalled Albrecht. This prompted Krammer to approach Jakob, whom he had known previously, about the potential to build a system that could enhance reporting and provide insights into emerging trends.
“Nico [Jakob] is a software engineer with expertise in deep learning,” Albrecht noted. “They began some promising AI research; however, they soon realized that hospitals’ antiquated systems lacked the data necessary for their AI solutions to function effectively.”
Because Albrecht had previously collaborated with Jakob on another enterprise, he was brought into the fold to help streamline their efforts. They soon recognized that correcting one issue would necessitate addressing several others, reflecting the complexities of managing a health crisis.
“We faced a crucial decision,” he recalled. “Should we merely address the ‘symptoms’ by crafting a point solution on top of the existing chaos within the current IT frameworks, or should we tackle the fundamental problems by creating a completely new hospital information system?”
Ultimately, they made the significant choice to pursue the latter option, fully aware that it would be more challenging and require more time, but believing it was essential to address the root issues. This would position them to effectively implement advanced AI capabilities on top of a more structured and integrated data environment.
After several years of development, Avelios successfully built an all-encompassing administrative system that includes electronic health records (EHR), billing, clinical records, lab results, and a patient portal, as well as collaborative environments for researchers and interdisciplinary teams.
In addition to the impetus provided by COVID-19— which itself led to increased government funding for system upgrades—Avelios has benefited from other significant industry changes that have opened doors for partnerships and contracts with healthcare entities.
One notable shift is the strategic realignment of SAP, a major player in the traditional healthcare IT market. The company, which has a $30 billion enterprise resource planning (ERP) business, is moving towards a cloud services architecture, drawing away from the long-standing commitment to providing point-specific solutions, including for healthcare sectors.
Consequently, over 1,000 hospitals currently relying on SAP’s legacy systems will be compelled to seek out new providers upon upgrading. (SAP endorses Avelios, among others, as potential transition partners, and Albrecht mentioned they are aiming to secure a leading position in that recommendation process.)
The second significant factor driving demand is the growing emphasis on AI in healthcare. Like many other fields, healthcare is not only being directed towards AI solutions but is actively seeking them. However, effective AI applications cannot progress without data that is structured and interoperable—characteristics that legacy systems frequently lack. This creates further motivation for modernization.
Investor Focus on Practical Solutions
Sequoia’s interest in Avelios was sparked through an introduction facilitated by Revent, one of the company’s early investors.
“Avelios was operating under the radar as it developed this system for four years,” stated Anas Biad, a partner at Sequoia overseeing the investment. He expressed surprise upon discovering the extent of Avelios’s customer base despite their low profile. “They successfully secured contracts with some of the largest private and public hospitals in Germany. We were quite impressed and quickly moved to engage with them.”
Although Avelios is making bold, ambitious strides, it does so with a significant degree of pragmatism, as emphasized by their investor. Hospitals are typically not in a position to entirely overhaul their systems for upgrades due to operational continuities and associated costs.
Indeed, a 2022 cybersecurity report from the Healthcare Information and Management Systems Society revealed that approximately 73% of surveyed hospitals categorized their systems as “legacy.” Notably, 35% reported using Windows Server 2008, while 34% were on Windows 7, and 20% remained on Windows XP. This raises serious concerns about the ongoing reliance on outdated technology.
“Some healthcare organizations may not be actively planning for the obsolescence of these operating systems,” HIMSS noted in its findings. “Every asset has a finite lifespan, making it crucial for organizations to proactively strategize for end-of-life scenarios.”
In response, Avelios has adopted a modular approach to its solutions.
“We can engage modularly with our clients,” said Albrecht. This might involve initially delivering software for documentation management, followed by billing, patient portals, or in a different sequence. “Existing legacy providers can’t offer this flexibility; they would replace one comprehensive system with another, and often, that leads to disastrous outcomes.”
Compiled by Techarena.au.
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