AI startup OpenEvidence is raising a fresh round of capital from Sequoia to scale its chatbot for doctors.
The new $75 million cash injection, which has not been previously reported, values OpenEvidence at $1 billion, the two companies told CNBC.
OpenEvidence, based in Cambridge, Massachusetts, was founded by Daniel Nadler. He previously built Kensho Technologies, a Wall Street-focused artificial intelligence firm that sold to Standard & Poor’s for $700 million in 2018.
Nadler’s newest AI venture is a chatbot for physicians that helps them make better decisions at the point of care. The company claims it’s already being used by a quarter of doctors in the U.S.
Following his sale of Kensho, Nadler self-funded OpenEvidence in 2021 before raising a friends and family round in 2023. The funding from Sequoia represents the first round led by an institutional investor and brings the company’s total amount raised to more than $100 million.
The company will also use the funding to forge strategic content partnerships, OpenEvidence said. In addition to the funding, OpenEvidence announced that The New England Journal of Medicine has become a content partner, meaning clinicians using OpenEvidence can benefit from content sourced from NEJM Group journals.
The founder describes OpenEvidence as an AI copilot. While the experience may feel similar to ChatGPT, OpenEvidence is a “very different organism” due to the data it was trained on, Nadler said.
“Trust matters in medicine, and the fact that it’s trained on The New England Journal of Medicine, the fact that it’s built from the ground up for doctors — the result is a black-and-white difference in terms of accuracy,” Nadler told CNBC.
The company has licensing agreements with peer-reviewed medical journals, and OpenEvidence’s model was not connected to the public internet while trained, Nadler said. Using tailored data helped OpenEvidence avoid the pitfalls of “hallucination,” which is a phenomenon where AI will generate inaccurate, sometimes nonsensical answers to a query.
OpenEvidence offers its chatbot for free and makes money off of advertising. The product has grown organically thanks to word of mouth between doctors, Nadler said.
“Doctors work very close quarters with one another, especially on the floor in hospitals,” he said. “When one doctor pulls out their iPhone and looks at something, other doctors can see that. Their natural question is, ‘What’s that?'”
That level of organic growth was an alluring factor for Sequoia partner Pat Grady, who led the firm’s investment. Sequoia is best known for early investments in Nvidia, Apple, YouTube, Stripe, SpaceX and Airbnb.
This is a consumer internet company masquerading as a health-care business,” Grady told CNBC, saying OpenEvidence is easy for doctors to adopt. “When they have a couple of good experiences with it, it sticks. There aren’t a lot of products in health care that get adopted the way that a consumer internet company might.”
OpenEvidence is the latest in a flood of Silicon Valley artificial intelligence deals.
The booming sector accounted for 1 in 4 venture dollars raised by startups last year, according to CB Insights. Health care has stood out as a high-potential area for the application of AI. Investors and founders have seen the technology’s ability to sift through large amounts of data, and its potential to transform everything from drug discovery to medical imaging.
“There are a lot of great ideas in health care, but it is such a complex system,” Grady said. “It’s really hard to cut through layer upon layer upon layer.”
While AI has the potential for health-care breakthroughs, there are also worries about the risks. Industry leaders have voiced concern about a “doomsday” scenario where the technology leads to a catastrophic outcome for humanity, and on the smaller scale, others worry about job displacement.
OpenEvidence’s Nadler said he thinks the health-care use cases are the antidote, and represent the upside potential of AI. He highlighted doctor burnout and projections of an almost 100,000 physician shortfall by the end of the decade.
“There’s this big question that’s on everybody’s mind right now, is AI actually going to be good for humanity or not?” Nadler said. “I think it is, inarguably, going to be good.”
