Zephyr AI: Bringing AI and machine learning to new tools in health care

Editor’s note: At the start of the year, we look at which young companies have caught our eye for hitting a milestone, bringing in funding or growing its revenue base. This company has made our list of our Startups to Watch for 2023. See them all here.

Want proof that machine learning and artificial intelligence are still hot commodities in the venture capital market? Take a look at the $18.5 million seed round last March — yes, seed — for Zephyr AI.

The McLean company was founded in 2021 by investment and incubation firm Red Cell Partners, with Yisroel Brumer as CEO, Jeff Sherman as chief technology officer and Grant Verstandig as executive chairman. Last year, David Morgan filled in the CEO role, with Brumer acting as executive vice chairman. They built Zephyr AI to use medical data, like clinical research or hospital patient data, to develop tools and insights for medical providers to improve outcomes in patient care and research.

This breaks down into two products now under development, one that uses AI and real-world data for better drug discovery or finding new applications for existing drugs. The other, Insights, offers predictive analytics for patients with chronic conditions to determine if they are more likely to improve or decline, and if a medical intervention could help.

After last year’s colossal seed round, led by Lerner Group Investments LLC and M-Cor Holdings, Zephyr AI is now pursuing a Series A raise between $50 million and $100 million to push the products into sales mode. It’s raised $20 million so far from investors keen on the health care industry, some cancer survivors among them, Morgan said.

“We have plenty of money, oversubscribed on our seed,” Morgan said. “So we were looking, as most, to not raise money in 2023, given some of the economic headwinds. But by virtue of our reputation and some of the progress we’ve made, luckily, we were approached about an investment. And it exceeds probably where we thought we would be, even given the current economic conditions.”

If successful, that Series A could help double or triple Zephyr’s size to 100 employees by 2024 or 2025, Morgan said, adding though that he’s not looking to “throw people at the problem.” In the last year, its seed funding has gone toward automation that allows its product to scale without adding more workers.

In early 2022, to help further its drug discovery technology, Zephyr AI announced a strategic partnership in immuno-oncology with Gaithersburg biotech NexImmune, which creates synthetic dendritic cells that produce white blood cells to help fight cancer. Then in November, Zephyr inked another partnership, with MedStar Health, to use the latter’s anonymized patient care data to help build out its Insights product.

Such datasets help hone Zephyr’s AI, but the company acknowledged the technology’s use in the medical field is still rather new — and leaves little room for failure when real lives are at stake. Zephyr said it invests in peer-reviewed studies and research to help support its work.

“AI sometimes gets a bad rap, that it’s a black box,” Morgan said. “So the way that we’ve designed all of our AI is very transparent.”

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