Why We Invested: Kyros
Kyros is a first-of-its-kind digital platform for people and organizations within the recovery community. It harnesses the power of technology to increase positive recovery outcomes for the more than 30 million people affected by substance use disorder.
Recovery is a $43B industry that is poised to grow $10B in the next few years, with additional funding coming in from recent opioid settlements. There is an enormous need for innovative solutions in the recovery industry, but it’s by and large been a late adopter of technology.
Rally Ventures led Kyros’ $4.4M seed round because we believe it has the potential to transform the recovery space, and the team has already made great progress. Since Kyros began offering digital support in September of 2021, it’s seen 90–100 percent revenue growth quarter over quarter.
Justin Kaufenberg, Managing Director of Rally Ventures: Let’s get right into it. What is Kyros?
Daniel Larson, Founder and CEO of Kyros: Kyros is a marketplace technology platform that expands the reach of substance use disorder and mental health providers. The marketplace connects clients with providers, facilitating both in-person and online interactions. Kyros then bills insurance directly to reimburse providers, which keeps services free-of-charge for clients.
Kyros also connects organizations to additional services and capacities, so they can more effectively battle the opioid epidemic and increased substance use issues we’re facing today.
Justin: Why did you start Kyros?
Daniel: I went through my own personal recovery journey in 2019, and I’ve had several friends and family members battle addiction. As I got closer to the recovery community, I got to know a group of people who are completely underserved by technology.
I have a technology background, and I saw that many of the problems facing the recovery industry have already been solved in other industries. There are existing solutions to help automate processes, save administrative time and give way more capacity to service providers.
Justin: When you were going through your own recovery journey and starting to notice this lack of resources, what clicked for you and made you think this solution could be a business?
Daniel: I previously worked for Field Nation, which connects businesses with a nationwide network of contract IT technicians. Field Nation is essentially a fee for service business that deploys technicians for an hourly rate. The business model is built around efficiency and optimizing the workforce.
When you look at Kyros through an abstract lens, it’s also basically a fee for a service. Recovery specialists get paid to help people. And the more time you have to help people — as opposed to doing admin work — the more people you can help and the more you remain a billable resource for insurance purposes. I saw that I could add this functionality to an industry that has underdeveloped processes and efficiencies.
Justin: The recovery industry has been around for a long time, and we know that there are an enormous amount of people going through recovery at any given time. But it seems like it’s been a late adopter of technology. Why do you think that is?
Daniel: There are three main reasons for this. First, if you look at the conversation around substance use disorder, it’s been a neglected industry because it’s a problem that people historically haven’t wanted to talk about. It’s very personal, often stigmatized and people just haven’t been as open to talking about the challenges and successes. This is starting to change, but it’s been slow to transform.
Second, if you think about this industry as a whole, people are intensely under-resourced and working in a near constant crisis environment. There is very little space to innovate when you’re working under those circumstances.
The third reason is the regulatory red tape. One of the main things Kyros offers is the infrastructure to deal with licensing, regulations, insurance, etc. That back office infrastructure means that people no longer have to spend so much time on the tedious and administrative parts of their job. You’re putting a tremendous amount of time back into the workforce, which can be used to innovate and think critically about how things might change and improve.
Justin: Kyros is about 15 months old and you’ve grown very quickly: from zero to multiple millions in ARR. When you’re building a company, the hardest thing is often the first thing: the first launch, the first dollar, the first customer. Tell me more about your first customer.
Daniel: Kyros pivoted because of our first customer. We demoed our first prototype to hundreds of re-entry clients who were previously incarcerated for nonviolent drug offenses. We were showing them a prototype of how to record their achievements, so they could advocate for themselves in their reentry process. We got great feedback about the app itself, but they told us things like “I would love to use this if I don’t go back to jail for the rest of my life” and “I would use this if I don’t lose my kids.” It became clear that any solution we produced needed a human element to help solve those deeper problems.
That prison was where the marketplace model was born. We worked with a partner organization to connect that group of incarcerated individuals to peer recovery specialists who could help them through those deeper problems.
Kyros provided a huge value proposition to the partner organization. They needed a ton of help that they weren’t getting, and our marketplace solution provided the human capital they needed — which is all reimbursed by insurance so it cost them nothing. Together, we’ve been able to help 80% of the people who participated in that first demo.
We’ve grown quickly from that initial partnership because we are approaching this with a heart of wanting to help people who need it. Once the marketplace solution clicked, the sales came quickly and the ramp has been astronomical.
Justin: On the other side of the marketplace are the people who are supporting those in their recovery journey: the peer recovery specialists. How is that group of people identified, trained and certified?
Daniel: When you take the approach of all hands on deck with this opioid epidemic, you’re forced to think differently. There is a severe shortage of peer recovery specialists and mental health professionals, and the current certification process is expensive and cumbersome. Building a more accessible pathway for people to become trained and certified as peer recovery specialists was one of our early hurdles to overcome, and it became our first service line.
Kyros created a 46 hour training that is recognized by the state of Minnesota. Specialists are required to have at least a year in recovery and pass a test that is run by the Minnesota Certification Board, which is the same board that oversees tests for professions like nursing and mental health. We worked hand-in-hand with the Board to develop our own curriculum, and we now offer it free-of-charge to remove the cost barrier.
Peer recovery specialists have all been through recovery themselves. Now, they’re in a position to help others who are just starting out on that journey. And, as clients move forward on their recovery journeys, many will be great candidates to become peer recovery specialists themselves, which allows us to perpetuate the great network effects that you want to cultivate in a marketplace.
Justin: This must be an incredibly rewarding way to make a living. For a person to have gone through recovery, and now they’re able to support themselves by helping others.
Daniel: I wish I had time to tell you all the stories of people who never thought they would have their own apartment, hold down a job or see their kids again. Our model takes people who typically tax the government system and turns them into someone who is now making a living wage and contributing to the community.
The biggest question for a person in recovery is what’s next. What does my tomorrow look like? What does next month look like? We can give them a roadmap and show them what their next two years could look like. And it looks like someone who is helping people for a living, staying engaged in their own recovery and making a living wage to rebuild their life.
Justin: When we first met and started talking about the business model for Kyros, one of the things that made us so excited from an investment perspective was how every single constituent is better off for having interacted with Kyros. The individual in recovery is receiving critical services, the person administering support is receiving an income and doing meaningful work, and the state and federal programs are less taxed.
Daniel: Justin, I know you’re an economics guy. The Pareto superior outcome refers to making something as efficient as possible without someone getting hurt in the process. This is how we think about solving problems. Recovery is a $43B industry that is poised to grow $10B in the next few years. And opioid settlements will add an additional $32B. We don’t need more money or new legislation or even different programs — the industry just needs to be reorganized.
One example of how we make the system more efficient is by giving providers an expandable workforce. In a traditional setting, the peer recovery workforce has about one peer recovery specialist per 50 clients. Kyros maintains about one peer recovery specialist per 15 clients. We can do this because we can expand and contract with the need.
Kyros allows organizations to add or remove resources as their needs ebb and flow. It’s beneficial to the organization and to the peer recovery specialists, because they can work with the number of clients that’s manageable to them, on a schedule that works for them. It’s highly customizable and hugely beneficial to managing burnout.
Justin: Kyros is one of the fastest growing companies we’ve seen in some time. What do the next few years look like for you?
Daniel: One big, urgent goal we have is to identify all the lines of service Kyros can offer. It doesn’t help to be able to serve people one way super fast, but then have delays or no help in other areas. Mental health, medically assisted treatment and aftercare are three big program expansion goals. We’re also focused on geographical expansion. Kyros launched in Minnesota, and now we’re looking at other states with comparable methodologies where we can grow.
Additionally, Kyros manages a tremendous amount of complex services, skill sets and regulatory relationships. We’ve built proprietary technology to manage a marketplace that will eventually have millions of interactions per month. The technologies we’re building are custom designed for the recovery industry, and we eventually plan to spin them out as stand-alone products. Businesses in our industry currently have to adapt programs which aren’t built for them — and the result is often clunky, inefficient and expensive.
And then there’s the data component. In 5–10 years, we’re going to have meaningful data sets that will show insights into how we can best serve those in recovery, based on their background, use history, legal situation and any number of other factors.
Justin: Kyros fits squarely into this concept we have around responsible innovation. We believe that markets should be changed and upended, but they should be done so in a way that considers their social and environmental impacts. You’re building a business that is incredibly easy to get behind, and we’re excited to see it grow.
Last question. What do you do when you’re not at work?
Daniel: The pandemic and my own recovery journey forced me to slow down and figure out how to be more balanced and connected to my family and community. I like to work with underserved populations doing things like food distribution and education around entrepreneurship. I believe there’s a responsibility to leave things better than how you found them.
I also have a philosophy of work-life integration. I want to work on the things I’m passionate about, so work doesn’t seem so much like work because I get to blur the lines and do what makes me feel good every day.