XP Health raises $32M to bring more affordable vision care to employees

The grandson of a prominent Brazilian billionaire, the late Antonio Moraes, never had any interest in joining a family-owned group of construction companies and a bank. Shortly after graduating from college, he founded one of Brazil’s first impact funds, which invested primarily in companies that made healthcare more accessible and affordable.

But while studying at Stanford University, where Moraes received a master’s degree in business administration and healthcare policy, he realized that instead of investing in influential companies, he wanted to start his own company.

As part of an entrepreneurship class, Moraes and his co-founder, James Wong, an engineering graduate student, visited several eyeglass manufacturing factories in China. They discovered that designer frames that sell for up to $600 in the U.S. cost as little as $10 to make. “We felt there was something very wrong with these markups,” Moraes told TechCrunch.

Because vision care and eyeglasses are expensive, many workers buy frames with their vision insurance, but the benefits usually don’t cover all the costs, Moraes said. “With vision insurance, people expect not to pay anything, but then they walk out of the optician’s office with a $300 bill.”

Moraes and Wong started XP Health in late 2018, but during the pandemic, they shifted the startup’s focus to a digital-first, AI-powered platform that offers employees eye exams and eyewear benefits at a significantly lower cost than existing vision insurance plans.

On Thursday, XP Health 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 who buy glasses virtually can get up to 69% off the retail price, Moraes said. The company claims it doesn’t charge any extra fees on frames or lenses purchased directly from factories in Asia. Instead, XP Health generates its revenue through recurring membership fees.

“In many cases, our members pay zero dollars for a pair of high-quality designer frames with best-in-class lenses, as well as an eye exam,” Moraes said.

XP Health’s AI-powered platform uses facial recognition to recommend glasses that suit members’ style and face shape.

Members can also purchase glasses at a discount from physical eyeglass retailers, but Moores emphasized that the same frames can cost two to three times less if purchased from the company’s online platform.

Over the past two years, the company has grown its number of business clients from 30 to more than 3,000, including DocuSign, Navistar, Chegg, and Sequoia Consulting, which offer XP Health as a benefit to their employees. XP Health also has strategic partnerships with insurance providers such as Guardian Life Insurance, which offers vision benefits to small businesses.

Of course, XP Health isn’t the only company removing the middlemen in eyewear. It’s already a crowded market. Warby Parker sells directly to consumers, as do a few other options like EyeBuyDirect, Firmoo, Pair Eyewear, and Zenni. But Moores claims XP Health is the only startup taking on incumbent vision insurance providers, a market dominated by VSP and EyeMed Vision Care.

Still, XP Health doesn’t consider itself an insurance company. That’s because what these companies offer isn’t insurance in the traditional sense. “There’s no real risk involved,” Moores said. “It’s a corporate benefit.”