Friends of Eren Bali talk about a certain kind of glow that lights up his face when he gets into conversations about solving problems. The soft-spoken co-founder and CEO of Carbon Health, this year's second-fastest-growing company on the Inc. 5000, has what longtime investor and friend Paul Lee describes as "a weird, quiet confidence about him. He has a calm demeanor, but also this deep curiosity."
Lee, who, like Bali, has a degree in mathematics, recognizes a mathematician's way of thinking. "Math is not about throwing a bunch of formulas at something. It's about solving problems in a very thoughtful, logical way," he says. "And I think that's the fundamental thing that Eren brings to being a founder: He falls in love with problems and breaks down those problems, and then attacks them with solutions."
Bali's college classmate Erbil Karaman saw those tendencies early on, while the two attended the elite Middle East Technical University, in Ankara, Turkey. "In everything he did, he wanted to learn the very deepest levels of it, like what it is and how it's done, and how to do it the best way," recalls Karaman. "We would get into these very deep discussions about minute details." Karaman and Bali are still close, and these days the conversations revolve around not just math or computer concepts, but also chess, parenting, or the various social areas, like health care, that Bali feels passionately are unfair or inadequate. "He can go on forever if you hit on one of his topics," Karaman says.
Carbon Health, which grew 39,734 percent over the past three years and brought in more than $45 million in revenue in 2020, aims to solve one of the knottiest problems in America today: to fix not some specific aspect of health care, but rather the whole broken system. The spiraling costs that force workers and employers to swallow double-digit annual percentage increases and some small businesses to drop coverage entirely; the lack of transparency that leads to exorbitant and indecipherable bills; the stark disparities in access and outcomes for people of color. The list goes on.
The company, based in San Francisco, is one of several that have risen in recent years to combine brick-and-mortar clinics with app-based telehealth. Forward and One Medical offer subscription-based care as a supplement to health insurance. Walmart and CVS are building chains of in-store clinics with retail-like pricing. Many regional providers offer virtual appointments now, a trend that has accelerated across the industry during the Covid-19 pandemic. But few, if any, have the overarching vision of Carbon Health, which Bali describes as "a full-stack, omnichannel primary care provider with an obsession for inclusion and being accessible to everyone." Translation: cheap health care delivered however and wherever are most convenient for you. As of late July, there were 81 Carbon Health clinics in 11 states, with 1,500 more planned by the end of 2025 -- an ambitious growth target intended to sway the industry toward Bali's vision of expanded access.
Whether Bali can pull off such a large trick is impossible to say, of course, but it's worth noting that he's tried before to reinvent an industry that's core to a functioning society and ended up creating an innovative company worth billions. That would be Udemy, the world's largest online education platform, which Bali co-founded in 2010 and which is widely expected to IPO this year. (He was CEO until 2014, and chairman until earlier this year.)
Carbon Health is also planning an IPO -- possibly next year -- and its most recent round of funding, in July, valued it at more than $3 billion. That number vaults Bali into the rare pantheon of founders who have created multiple multibillion-dollar businesses. Call it the league of double unicorns. "I tell him all the time, 'You're among a handful of people on this planet who have done that,' " says Lee.
"I believe that Eren is up there with Elon Musk and Steve Jobs in terms of his entrepreneurial vision," says Karaman, himself a tech executive who has held high-level roles at Facebook and Lyft, among other companies. "But Eren isn't ego-driven. He has these passions and truths that are built into him -- like that people should have access to good education and good health care. They're just core beliefs, and everything in his work comes back to those first principles."
What forces shape an entrepreneur with the audacity to do something as seemingly foolhardy as rebuilding American health care? That's where the story of Eren Bali and Carbon Health gets interesting. And it begins not in a Harvard dorm room or on a whiteboard in some Silicon Valley incubator -- but in a conflict-torn Turkish apricot-farming village near the Iraqi border in the 1980s.
In the years following the 1980 military coup in Turkey, services such as health care and education were in short supply in the mostly Kurdish southeastern village of Durulova. Few doctors and teachers wanted to work amid the tension between the Kurds and Turkish nationalists. Eren Bali's Kurdish parents, both educators, took the opposite view: They moved back to Durulova precisely to fill that gap. At Bali's one-room primary school, his mother was the sole teacher and rotated between the five grades. Somehow that worked, and, as Bali tells it, many students went on to some of the country's top universities. "My mom was a very idealistic teacher," he says, "and I think she injected this idealism into a lot of students." (His father, meanwhile, was banned from teaching after the coup because of his activism.)
When the family got a computer in 1998, Bali's world opened up. He'd been drawn to math as a student, and suddenly he found himself exploring advanced concepts on the internet. That led him to the Turkish National Mathematical Olympiad, where he won a gold medal, and eventually to the U.S., where he took silver at the 2001 International Mathematical Olympiad in Washington, D.C. That was his big ticket, and he began studying at Middle East Technical University the next year.
It was at METU where Bali met a group of other math geeks who hung around the computer science labs, and they started building various online services in their off time -- a music player, a news aggregator -- and talking about problems they might solve. "What he cared about from very early on," Karaman remembers, "was turning anything we learned about in school into things he could play with and other people could play with."
Entrepreneurship was unheard of in Bali's family, but the three intellectual threads of his life -- deep-seated idealism, a drive to understand things all the way down, and a yen for building stuff -- combined to create a sense that he could have the greatest impact on the world via capitalism. "A lot of the people I grew up with became political idealists," he remembers. They went on to pursue journalism or education or, like his sister, medicine. (She practices in a city near Durulova.) "But there is also commercial idealism," he says. "You can start a company and actually affect more people. And it's more sustainable."
Among Bali's first acts after college, when he was still in Turkey, was co-founding an education-focused social network called Knowband that allowed users to share their expertise. It was an idea he came back to several years later, after Karaman took an internship in Silicon Valley and invited Bali to share a house there. Along with his Knowband partner Oktay Caglar and another friend, Gagan Biyani, Bali co-founded Udemy in 2010. Despite being rejected by dozens of investors dubious about a team of starry-eyed unknowns, they bootstrapped a platform that, within months, attracted more than a thousand instructors and 10,000 students.
Lee first invested in Bali the following year, as part of a $3 million Series A funding round that Udemy scratched together. "One of the concerns we had was just how big that mission was," Lee remembers. "I was recently reviewing some of my underwriting notes from back then, and one of the things Eren literally said was, 'I want to overhaul education for the masses.' "
"He really wanted other people to have that access to education that could change their lives as it had for him," says Claire Hough, who spent five years as Udemy's CTO and early this year joined Carbon Health in the same capacity. "That was our north star at Udemy for everything we did. I'm also an immigrant, and I also think education enabled me to do what I do. I think that's how I ended up choosing Udemy, even though it was at the time only a 35-person company."
And then, in 2014, with online education booming and Udemy on track to becoming the industry leader it is today, Bali handed the CEO reins to a more experienced operator, his COO, and stayed on to head product and strategy. He recently had spent time back in Durulova, had an epiphany, and had begun training his focus on another huge industry with overwhelming disparities in access and quality. As he told Lee one day: "I want to build the world's largest hospital system."
In 2013, while Bali was still running Udemy day to day, his mother began suffering from chronic abdominal and back pain. A parade of doctors failed to diagnose the problem, and eventually she suffered a stroke that left her entire body paralyzed. Bali flew back home to Turkey from the Bay Area and for three months teamed up with his physician sister to find his mother help. Each doctor they saw, Bali noticed, had to navigate a disorganized mess of notes, images, and reports from previous doctors. His sister compiled and collated all the files about their mother's care, and eventually they found a doctor who nailed the diagnosis (a rare disease called neurosarcoidosis). In the process, Bali saw a need for someone to build a new system in the U.S. for medical records, one centered on patients rather than providers.
When he returned to the States, he began designing just such a framework in his spare time, thinking that it could be the foundation for the reinvented health care system he'd been dreaming about. Not wanting to tackle the whole industry at once, he was looking for a sort of gateway problem. "And the first observation I made was that health care services are probably the single most complex service industry," he says now. "It's far more complicated than food or transportation -- and yet the tooling that we gave doctors was worse than in those industries. Essentially, the most complex operational industry had the worst tooling." Just the kind of thing to give an ambitious tech entrepreneur a foothold.
Two years later, when Carbon Health was born as an actual company, its name was inspired by the structure of the software system Bali and a small team ended up building -- its central node (the patient) and satellite nodes (health care providers) resemble a carbon molecule. The scope of its work quickly broadened into providing a full-service tech platform for clinics -- first a supplement to electronic health records, then a full-blown EHR system, and then telehealth tools, prescription fulfillment, payments, and scheduling.
The business model started to look viable -- optimal even, for a venture capital-backed company. Without having to spend a bunch of money on real estate and doctors, Carbon Health could take a piece of clinics' revenue and essentially run their operations. The clinics would belong to someone else, technically, but Bali's software would be behind the scenes running the operations.
The system more or less worked like that, but the team began to realize an unintended consequence: Whereas they'd hoped to increase clinics' efficiency in order to start nudging down the cost of care and increasing accessibility, medical practices were instead seeing the improved software as a premium innovation and a way to nudge prices up.
Trickier still, Bali's team was finding it difficult to roll out big changes to the way clinics operated without getting hospitals to sign off. That not only posed a challenge to growth but kept affordability out of reach as well. "To make things more affordable for people," Bali reflects now, "you can't just bet on making the components more efficient. You have to bet on scale. But a lot of health care providers have just one or two locations, and they're not interested in scale."
There was one client, a chain of seven urgent-care clinics in the Bay Area called Direct Urgent Care, that stood out as an exception. The company's mission aligned well with Carbon Health's, and as the two groups shared patient and operational data, they began to see better results, such as a nearly 300 percent boost in patient retention. Bali decided to buy the chain and turn those locations into Carbon Health clinics -- and then build more. "We just said, you know what, screw it, we're going to own the clinics," he says. "We're going to own the brand. We're going to own the services. We will own every piece of it."
It was late 2018, about three years into Carbon Health's life, and Bali had learned a hard lesson about the health care industry: It's a mess -- and the difficulty of bringing about broad change in it leads many to focus on a narrow slice they can conceivably control. Hence the splintered landscape of regional chains, the tendency for healthtech startups to focus on serving other tech people, and so on. As his parents did when they chose to become teachers in Durulova, Bali took an opposite view. The only way to fix the system, he decided, was to grapple with the whole thing.
"We can do anything here," says Fletcher Munksgard, Carbon Health's East Bay clinician manager, on a recent Tuesday at the Telegraph Avenue clinic in Berkeley. Munksgard is a skinny guy with a bushy beard who's wearing a T-shirt that reads "Into the Storm," which he explains has been his mindset for dealing with Covid-19: Don't run away -- run into the storm.
The Telegraph clinic, which opened in 2013 as a Direct Urgent Care and was rebranded in 2019, has six rooms that serve both primary and urgent care patients. At the height of the pandemic, the clinic saw as many as 120 patients in a day, almost all of them for Covid testing and treatment. Now they see maybe 60 patients per day, for everything from Covid tests to women's health to basic checkups. Other than the nearly complete absence of paper anywhere (doctors carry iPads and can throw images over to the wall-mounted flatscreen in each exam room), the space feels more or less like you'd expect: clean and sparse and modern, as if Ikea had designed it.
For patients paying out of pocket, there's a simple list of prices: $145 for an in-person visit, plus an additional $19 for a strep screening, $175 to stitch up a wound, and so on. (The base is $69 for a telehealth visit.) For those paying with insurance, well, it gets a little more complicated with co-pays, co-insurance, and deductibles. Bali admits frustration that the company can't offer more transparency for those patients, and he blames insurance companies for obfuscating their own calculations. (One possibility the company has mulled is offering insured patients capped prices per procedure based on an educated guess of what insurers will charge -- with Carbon eating the difference if there is one.)
Acquiring clinics. Building more of them. Offering guaranteed prices based on guesstimates of how insurance companies will act. It all costs more money than just building software. The trouble is, it has been hard to persuade venture investors to get on board with the broadest vision of Carbon Health. Despite Bali's track record with Udemy, he says, "investors really kind of rejected the idea that we needed to rethink the entire health care stack. They were actually surprised that I would try to do some of these things. They thought it was stupid. There were a couple of times we almost ran out of money, when we had less than 10 days of capital left."
"People like me, VCs, we don't have imagination," says Lee, who followed his original investment in Udemy by investing in Carbon Health -- and then trying to keep Bali's ambitions stuffed into a tidy box. "We say software, software, software; focus, focus, focus. We're too pragmatic, too conservative."
But then came Covid, and Carbon Health's business took off, not only with telehealth appointments but in-person Covid screenings and, later, vaccinations. The company rolled out some of the first mobile testing clinics (those shipping-container test sites that various outfits have plunked down in parking lots all over the country) and eventually created an at-home test kit. Earlier this year, the city of Los Angeles tasked Carbon with running its mass-vaccination site, the country's largest, which at its height was administering some 10,000 shots per day. Revenue grew fourfold in 2020.
All of which gave the company a vastly higher profile and helped make it possible to raise $350 million in July -- which will go to the goal of 1,500 clinics by 2025, many of them in underserved areas that Bali terms "health care deserts."
"Our business model demands that we grow as fast as possible," Bali says -- meaning that the company's only hope of reaching profitability and maintaining low, transparent prices is by getting big enough to pressure the rest of the industry. "If we put this much investment in R&D and opening clinics, we are going to be a horribly unprofitable company forever -- unless we get to scale. The more size you have, the more you can leverage innovation. I want to pressure the competitor. I want to pressure the U.S. health care market, so that other providers have to become more efficient."
And what could help other providers do that? Carbon Health, of course. In the early days, the company had hoped its software would take hold in enough clinics to pull prices down industrywide through increased efficiency. Now the company hopes to achieve that scale with its own clinics and push prices down through competitive pressure -- thus opening a need for others to use the software. That is to say: Carbon Health's early plan to sell enterprise software could wind up being part of the endgame.
Meanwhile, CTO Hough and new chief strategy officer Myoung Cha, who most recently was Apple Health's head of strategic initiatives, are focused on building out all the ways Carbon Health can provide care beyond basic telehealth and in-person clinics. They see one big opportunity in providing in-home specialty care, the model followed by Steady Health, a tech-enabled diabetes care company that Carbon Health acquired in June to lay the groundwork for expansion into the continuous care of other chronic conditions. And as more people wear Apple Watches and use other smart devices in the home, Cha believes, the ability to use the data they generate for preventive care will be vital: "This kind of data allows doctors to have eyes and ears on biometrics that they just traditionally haven't had access to in episodic care."
It's enough to make Lee marvel at the all-encompassing version of Carbon Health that's emerging now, despite his and others' efforts to rein it in along the way. "I would argue, the very first vision that Eren had is what it is today," he says. Then he pauses, chuckling at the audacity of what Bali is doing -- trying to fly a moon-shot idea all the way to the moon. "Like, he actually wants to build the world's largest hospital system."