Antonio Moraes, the grandson of the late Brazilian billionaire, had no interest in joining his family’s conglomerate of construction companies and banks. Right out of college, he founded one of Brazil’s first impact funds, which invested primarily in companies that make healthcare more accessible and affordable.
But while earning his master's degree in business administration and health policy from Stanford University, Moraes realized he wanted to build his own company rather than invest in influential companies.
As part of their entrepreneurship class, Moraes and his co-founder, James Wong, an engineering graduate student, visited several eyeglass manufacturing plants in China. They found that it cost about $10 to produce a designer frame that sold for $600 in the U.S. “We thought there was something very wrong with that markup,” Moraes told TechCrunch.
Because eye care and glasses are expensive, many employees buy frames with their vision insurance, but the benefits typically don’t cover all the costs, Moraes said. “With vision insurance, people expect to pay nothing, but then they walk out of the optician’s office with a $300 deductible.”
Moraes and Wong launched XP Health in late 2018, but the pandemic shifted the startup’s focus to a digital-first, AI-powered platform that provides employees with eye exams and eyeglasses at a fraction of the cost of traditional 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 round.
Moraes said XP Health members who buy glasses virtually can save up to 69 percent off retail prices. The company claims it doesn’t mark up frames or lenses, which it sources directly from factories in Asia. Instead, XP Health makes money through regular membership fees.
“In many cases, our members pay $0 for a pair of high-quality designer frames with best-in-class lenses and an eye exam,” Moraes said.
XP Health’s AI-powered platform uses facial recognition to recommend glasses that match a member’s style and face shape.
While members can still buy glasses at discounted prices in offline optical stores, Moraes emphasized that similar frames can cost up to two to three times less if purchased through the company's online platform.
In the past two years, the company has grown its business client list from 30 to more than 3,000. These include Docusign, Navistar, Chegg, and Sequoia Consulting, which offer XP Health as a benefit to their employees. XP Health has also formed 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 trying to cut out the middleman in the eyewear market, which is already saturated. Warby Parker sells directly to consumers, as do several other options, including Eyebuydirect, Firmoo, Pair Eyewear, and Zenni. But Moraes argues that XP Health is the only startup challenging the traditional vision insurance providers, a market dominated by VSP and EyeMed Vision Care.
But XP Health doesn't think of itself as an insurance company, because what it offers isn't insurance in the traditional sense. “There's no real risk,” Moraes said. “It's a corporate benefit.”
