In early 2023, Daniel Ek, the founder of Spotify, announced his new initiative — Neko Health. Several months later, Neko raised €60 million to provide preventative healthcare through full-body scans. Here’s what people are missing about Neko.
For decades, a holy grail has been to make healthcare more like dentistry. That is, to create an annual checkup that is preventative, convenient, non-invasive, and low-cost.
It has to be annual, to create a new behaviour. It has to be preventative, to make it worthwhile. It has to be convenient, because convenience drives action. It has to be non-invasive, to ensure safety. And it has to be low-cost, to reach the whole population. All of these things matter.
To date, no one has succeeded. MRIs tried but they were too expensive and time-consuming — they weren’t built for this use case.
That’s where Neko comes in.
Neko’s key insight is that AI makes it possible to create a new class of diagnostic technology. AI allows for multi-modal deep learning to identify early disease. Neko’s method is non-invasive, low-cost, and takes only 15 minutes. This makes it possible to create a new behaviour: an annual Neko health check.
If 1 billion people do this, Neko makes $250 billion. So the question is “What’s required for 1 billion people to do this?”
The answer is simple. Neko’s technology has to actually prevent disease. And Neko is running four clinical trials to find out.
In this article I’ll step through:
Neko’s unique insight is that preventative healthcare requires a new type of hardware and software, and that AI opens the door to a new class of medical devices. Daniel Ek is a strategic mastermind and Neko demonstrates true first-principles thinking.
Neko is running clinical studies to assess its technology. Neko brilliantly gets people to pay for clinical trials versus Neko paying for clinical trials. This inverts the typical way to run a longitudinal clinical study which is to pay several million. Instead, patients pay Neko to visit the clinic and sign a waiver that their visit is part of a clinical study.
I’ve summarized the clinical studies, explained how the hardware works, and translated the waivers in my notes here, if you’re interested.
Neko’s branding is well-executed. The futuristic design is humanized with medium-saturation colours. The typeface echoes this feel — futuristic yet human, classic yet contemporary. It’s hard to capture paradoxes in a brand, but Neko does so expertly. And Neko continues this with the photography and physical space design. The pastel shades give a sense of humanity and serenity, yet the brushed metal, high-gloss surfaces, and diffused reeded glass create a futuristic feel.
The brand is polarizing, but necessarily so to attract early adopters. It’s distinctive, which drives memorability. The dot motif gives a feeling of personalization and data-driven insights.
If I were to critique, I’d say that the colours might get dated quickly. And it’s hard to execute with the palette Neko has chosen. It’s great if you have a talented design team, but it’s harder when you need to implement it in practice. Some will also find the brand too polarizing and futuristic, but I’d contend that since you must first target early adopters, being polarizing is a feature, not a bug.
I’ve chatted with over 100 patients about their healthcare experience. A recurring ‘job to be done’ (JTBD) for patients is “make sure nothing is wrong with me”. In other words, make sure my biomarkers are in range and I don’t have cancer, or heart disease, or any other problem.
Neko positions around this JTBD. The landing page leads with “Try the Neko Body Scan, get instant results, and let us monitor your health — so you don’t have to”. A lot is communicated quickly. A ‘body scan’ suggests prevention. ‘Instant results’ suggests easy. ‘Let us … so you don’t have to’ suggests convenience.
The historical dogma has been that prevention doesn’t sell. I agree and disagree. I agree that preventative interventions like exercise or diets don’t sell. But a low-effort annual body scan with instant results? Now that sells. From first principles, it’s not that prevention doesn’t sell full stop; rather each preventative intervention needs to be assessed individually — a body scan is different from an exercise plan.
Now, the market isn’t going to be huge initially. Neko will start with the innovators and early adopters before crossing the proverbial chasm to the majority. But that’s always the case when creating a new market.
Every line on Neko’s website demonstrates a deep understanding of its customers.
“Doctors make all the decisions during the analysis”
Neko addresses concerns about the trustworthiness of autopilot AI.
“Our methods are cheap, fast and non-invasive which makes it easy to redo measurements a couple of times if positive”
Neko addresses the common criticism that preventative screening increases false positives.
“Your body is constantly changing. By measuring, analyzing, and following millions of data points, we create an individually tailored overview of your health.”
Neko empathizes with customers’ frustration with one-size-fits-all healthcare. I hear customers say things like “why does my son have the same blood test bands as me”. Customers want personalization.
“Do a full-body examination of your skin spots and birthmarks and monitor changes.”
Survey data shows that AI skin cancer screening is a huge selling point. Customers don’t think the human eye cuts it. Neko is smart to lead with its skin cancer device.
“Our systems are developed to be continuously improved with the help of AI technology so that you always have access to the best possible care at every visit.”
To VCs, this implies “Neko has an accumulating advantage with scale”
To customers, this communicates “You should come back often since we are better every time.”
The reason Neko understands customers so well is that they operated a health clinic, Atrium, for several years prior to launch. In fact, they tested out the Neko device inside of Atrium.
I suspect that, at some stage, Neko considered launching a more traditional clinic, with the Neko device inside. But I suspect that what they realized is that this would get fewer signups than positioning as just the hardware device. It’s easier to be known for one thing than multiple things. Neko with fewer features is more appealing than Neko with more features. And from an operational perspective, fewer features is far easier to execute against.
The problem with most healthcare testing products is that they are commoditized. There is little defensibility in providing more blood tests like InsideTracker or MRIs like Prenuvo. Someone else can come along and offer the same because (a) these companies don’t own their tech stack, and (b) the data advantage isn’t that useful in the margin.
Neko, on the other hand, has defensibility built into the product in three ways.
First, Neko’s devices are proprietary and unique. There is process power to Neko’s method.
Second, Neko builds an n-of-1 model of a patient, with results based on 50 million data points of an individual, tracked longitudinally. The longitudinal nature of this tracking means that individuals continue to get better care, the longer they stay with Neko.
Finally, and most importantly, Neko’s multi-modal imaging continues to get better over time as they get more data. And only Neko is collecting this sort of data.
Neko is also setting itself up for brand moats, and the hardware component of the business lends towards economies of scale. It truly is a fascinating business model.
The primary critique of Neko is that increased screening increases healthcare costs, especially because false positives result in costly follow-up investigations. This is partly true, but I have three comments.
First, Neko allows patients to redo measurements several times if positive. This is possible because their scan is cheap, fast, and non-invasive.
Second, if everyone in the US pays $100 for a Neko screen per year, that’s $35b in costs on $4.3 trillion in healthcare expenditure. A drop in the ocean. 0.8% to be more precise.
Third, there will always be individuals who pay for preventative screening, and Neko might replace $2,000 MRIs and $1,000 blood test panels.
That said, I agree with health insiders that Neko might not make sense from a health economist population-level expected value perspective. What I mean by this, is that a $200 Neko screen might not avert $200 in downstream costs. But this misses the forest for the trees in two ways.
One, patients think in terms of individual-level expected utility, not population-level expected value, and therefore this product improves utility for those with the willingness to pay.
Two, the Neko game isn’t being played over two years, it’s a bet on building out a powerful technology for the next 20 years and beyond. The bet isn’t that Neko can prove financial ROI today, instead, it’s that there’s a chance these devices prove ROI over the next 10 years. Health insider skepticism tends to be short-termist, which is why healthcare struggles to innovate.
Neko is one of the only healthcare companies I have seen that has the potential to be a $100 billion company — or far larger. That’s what happens when you have an accumulating advantage with scale.
Whether Neko gets there depends primarily on whether the technology actually predicts diseases and allows for early intervention that reduces downstream costs. The base case is that it doesn’t (which is why Neko isn’t valued at $100 billion today), but there is a future reality in which Neko ushers in an age of preventative healthcare. And that potential is why venture capital exists. It’s why innovators are necessary. Because that future could, perhaps, change the world.
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1 February, 2023
Length: 9 min
Decision-making; Startups
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