Despite the fact that the company had only $13 million in revenue (not profit) last year, the IPO valued the company at about $1.4 billion! This for a company that currently loses money on relatively paltry revenues. Growth prospects, many investors are saying with their precious investment capital, are sky-high.
Of course, we've seen this before with potentially disruptive technology companies. Many don't deliver on their promise. But Castlight is not alone. Other early-stage tech companies also have stratospheric valuations that may or may not ultimately be realized.
This is an underserved niche and smart investors think if a company can figure out how to peer through the opacity and complexity behind healthcare pricing, there's big money to be made.
Patients increasingly don't need much pushing to use these tools. At least for those insured by their employers, the share of their healthcare costs that is coming out of their own pocket is growing and will continue to grow, so they're as eager to lower their own costs as their employers are.
What Castlight is doing has the investment community extremely excited, perhaps irrationally so. But that one example shows how eager employers are to get a handle on one of their most variable and unpredictable cost vectors—healthcare spending.