We had a good feeling about Zenda the first time we met the founding team.

As we’ve written here before, we invest in founders who are using data in novel ways to solve big problems; we see healthcare as ripe for data disruption; and we especially like companies building data moats.

The Zenda team scored well on all of these fronts. 

The trio is harnessing the power of AI to simplify healthcare spending for the 20 million Americans who use health savings accounts (HSAs).

$20 billion problem/opportunity

When we met to discuss funding a seed round, they identified the problem: “HSAs are leaking $20B per year,” read an intro slide of their pitch deck. 

If people could better manage their HSA accounts — plan the right amount to save, identify all qualified expenses, collect and submit receipts, etc. — they’d save an average of $750 a year. What’s more, employers would save an average of $200 a year per employee, opening up an ideal sales channel for Zenda’s consumer-oriented service. (Companies generally like HSAs because they reduce overall healthcare costs, allowing companies to return savings to employees.)

AI addresses pain points

The company’s analytics platform solves the three main obstacles employees face managing an HSA:

• Spending friction — Employees must know which expenses qualify (and the rules are constantly changing). They must also properly plan how much they’ll spend ahead of time. And then they must keep receipts and report them to the IRS. Zenda’s system automates each of these steps, significantly reducing spending friction.
• Card confusion — Under the old way employees carried different credit cards for qualified and unqualified HSA expenses. Because Zenda functions as a normal debit card, users can charge any type of expense on the card and the system automatically sorts out the qualified expenses.
• Education — Other systems require employees to attend webinars or read lengthy instructions. Zenda’s app and intuitive design allow users to get started right away using the Zenda Visa card like any other card in their wallet.  

Data moat

The company was also building a data moat: unification across health and finance. If Zenda delivers a superior experience to consumers managing HSA plans, the company’s technology could be harnessed to manage other health expenses in the future. By delivering results in a specific area of spending, Zenda can begin to own the mind share around the $2.3 trillion consumer health market.

Domain and startup experience

As we’re written before, we look for a mix of domain expertise and startup experience in our founding teams. Again, the Zenda team scored well.

CEO Waqar Hasan and head of technology Brij Singh are prior founders who worked together at Visa, a key partner to the company. In fact, Hasan helped develop the technology at Visa that allows companies like Zenda to create their own smart payment cards. Hasan also managed analytics platforms at Oracle. And Bruce Sattley has deep experience in product management, engineering, and UX. 

Tech-enabled approach

We also liked the competitive landscape. The Zenda team showed that it’s among the first to take advantage of modern APIs and AI to create a seamless experience for consumers. Competitors are on legacy mainframe platforms and focused on growing deposits. Zenda is using cutting edge technology to help optimize how consumers spend their healthcare dollars. It’s a completely novel approach to a decades-old headache — and one that’s costing people and their employers money. 

A ‘why now’

We also look for proof that now is the moment for the opportunity. We noted that HSA spending has seen a steady increase since their introduction in 2003 and annual updates to the list of qualified expenses, adding more confusion for consumers.

Due to the pandemic, healthcare spending is a critical area to address, as people are drawing down their accounts for routine expenses rather than saving money for unexpected expenses down the road. Zenda’s system gives consumers additional healthcare spending power at a time when many need it the most.