Antonio Moraes, the grandson of a late Brazilian billionaire, had no interest in joining the family conglomerate of construction companies and banks. Shortly after graduating from college, he founded one of Brazil's first impact funds, investing primarily in companies that make health care more accessible and affordable.
But while attending Stanford University, where he earned a master's degree in business administration and health policy, Moraes realized that rather than investing in impact companies, he wanted to start his own.
As part of an entrepreneurship class, Moraes and co-founder James Wong, a graduate engineering student, visited eyeglass factories in China. They found that designer frames that would cost $600 in the U.S. cost just $10 to make. “We knew there was something big wrong with these price hikes,” Moraes told TechCrunch.
Because vision care and glasses are expensive, many employees purchase frames through vision insurance, but Moraes said the insurance benefits usually don't cover the entire cost. “With vision insurance, people expect to pay nothing, but then they end up walking away from the optician with a $300 copay.”
Moraes and Wong founded XP Health in late 2018, but during the pandemic they shifted the startup's focus to a digital-first, AI-driven platform that offers eye exams and eyeglasses benefits to employees at a significantly lower cost than existing vision insurance plans.
XP Health on Thursday announced a $33.2 million Series B led by QED Investors with participation from Canvas Ventures, American Family Ventures, HC9 Ventures, Valor Capital Group and Manchester Story. The round comes less than two years after XP Health's $17.1 million Series A.
XP Health members can save up to 69% off retail prices by buying glasses virtually, Moraes says. The company claims it doesn't mark up prices on frames and lenses, which it sources directly from factories in Asia. Instead, XP Health makes money through recurring membership fees.
“In many cases, our members pay for high-quality designer frames with premium lenses and a complimentary eye exam,” Moraes said.
XP Health’s AI-powered platform uses facial recognition to recommend glasses that suit members’ style and face shape.
While members can purchase glasses at discounted prices at brick-and-mortar opticians, Moraes emphasized that they can get similar frames for two to three times cheaper if they purchase them through the company's online platform.
Over the past two years, the company has grown its list of business clients from 30 to more than 3,000, including Docusign, Navistar, Chegg and Sequoia Consulting, which offer XP Health as an employee benefit. XP Health also has strategic partnerships with insurance companies, such as Guardian Life Insurance, which provides vision insurance to small businesses.
Of course, XP Health isn't the only company cutting out the middleman in the eyewear industry; it's an already crowded market. Warby Parker sells direct to consumers, as do several other companies, including Eyebuydirect, Firmoo, Pair Eyewear and Zenni. But Moraes argues that XP Health is the only startup taking on incumbent vision insurance providers in a market dominated by VSP and EyeMed Vision Care.
But XP Health doesn't think of itself as an insurance company, because what these companies offer isn't insurance in the traditional sense. “There's no real risk,” Moraes says. “It's corporate profit.”