Two years ago, a little-known Lithuanian healthtech was revealed to be Europe’s second-fastest growing company. At the time, Kilo Health’s compound annual growth rate was estimated at 450% for the previous three years, according to the Financial Times — and it had achieved that without taking any external funding.
But since then, Kilo Health has had a bumpy ride. Its growth slowed down significantly, the company fired more than 100 people and shook up its management by removing the company’s cofounder, Tadas Burgaila, from the CEO position.
“2023 was the first year when we slowed down and we understood that we are in a different stage. […] Right now we should stop hiring, we should remaster all the company and we should prepare for another sustainable growth stage, because you can explode the company if you just press the pedal all the time,” Burgaila, who is now the company’s head of growth, tells Sifted.
But it doesn’t mean he’s stopped being ambitious: he is focused on a new goal to reach $1bn of annual revenue with a 10% profit margin in the next three to five years.
“When we founded Kilo Health in 2017, the idea of reaching $1bn in revenue seemed like a distant dream — a number scribbled on a whiteboard, filled with hope and ambition,” he says. “But today, what once felt like a lofty goal is becoming a tangible reality.”
24 startup ideas per year
Kilo Health is nothing like a traditional startup: it’s more like a venture studio that develops innovative products in the health and wellness sector. These are mostly apps, but also health supplements and cosmetics.
“The idea was to build a company which could build other companies. I think ‘the venture builder’ is the right definition,” says Burgaila.
There are currently more than 30 products in Kilo’s portfolio. New ideas are constantly developed within the company, and later turned into independent startups (where Kilo holds a majority stake). The CEOs for startups are hired internally or externally; Kilo runs a “co-found” programme which recruits and trains wannabe CEOs for new ventures.
Not all of those startups are around for very long, though. “Success rate is not that every second company is successful,” Burgaila says.
The maths is simple: the target is to have 24 new ideas every year, kill half of them in the first three months, kill half of the rest in the first year and then kill another half at later stages. “The goal is to launch three [or] four new successful companies per year,” he adds.
Portfolio companies include Keto Cycle, an app that helps to follow a ketogenic lifestyle; DoFasting, an intermittent fasting assistant app; and Sensa Health, a mental health app.
Kilo also buys majority stakes in other healthtech startups — and is currently in acquisition talks with three other European companies.
“We made a few acquisitions and right now we are still waiting for the results in terms of return on investment. [Acquisitions] are a great way to grow faster [rather] than trying to create everything by ourselves from scratch. I think that is the way to go. We are putting in more and more investments, we’re researching more and more fields and countries where we can acquire startups. It’s one of the best times in the market to do that — sometimes you can find a really beautiful product with a beautiful founder, but without the marketing skill sets [or] business development skill set. In that case, we can reverse such companies very fast.”
Burgaila says that it’s difficult to say why certain products are successful and some are not. “It’s quite hard to tell where the magic is. I think in business, we underestimate the timing. And I think the timing is one of the biggest parts of the possible success. We were quite lucky with the timing with the exact product, exact needs and the exact marketing and skill sets.”
One rule Burgaila has: all of Kilo’s new startups must launch in the US straight away, even if they don’t have a team there.
“I think it was one of the most important decisions: just go to big markets,” he says; Lithuania’s population is 100 times smaller than America’s. “In my opinion, you need a similar effort to launch in another country [than your own], but the reward could be 100 times higher.”
That doesn’t make it easy. “You launch the updates, go to sleep, and then you wake up and you see results and then, when the people in the US are asleep, you work to fix the problem,” he says.
Bootstrap story
Like many other startups in central eastern Europe — and specifically in Lithuania — back in 2013 when it launched for the first time, Kilo couldn’t really count on external financial backing as there were hardly any VCs in the region. To succeed, it had to bootstrap.
“We had never, ever experienced the VC funds before. So our mindset was like ‘just do the business, and the business should earn money.’ We understood that we don’t have money, so we need fast success,” says Burgaila. From 2017 onwards, the idea was to start one new product every month. The first success, and profitability, came with the fourth: the keto diet app.
But it doesn’t mean that he never considered taking money from investors. In the years of the crazy growth that followed, he got “hundreds” of calls and emails from different VCs. Kilo decided to meet a few of them, including some of the biggest players in the world, like SoftBank and General Atlantic. The startup didn’t need money, but the founders, Burgaila and Vytautas Krutulis (who left the company last year), thought that if they closed at least one round they could get a sought-after unicorn valuation.
But there was one big problem: the founders realised they didn’t know what to do with so much money.
“I remember the question from one person from SoftBank: he was asking if we were to, [hypothetically], receive €500m next week, what would we do with that? I remember I couldn’t sleep that night and was thinking, woke up and understood that we don’t know how to make a billion out of €500m… We know how to make a million from €800k, we know how to make maybe €5m from €4.5m. But if you talk about that amount, we have no fucking clue.”
The offers they got from the VCs also didn’t quite give them the unicorn status — so they passed. Instead, Kilo did several smaller secondary rounds.
Burgaila doesn’t want to reveal the company’s valuation at that round. “It was like a unicorn with half of a horn,” he jokes.
Sustainable growth
2023 put an end to the company’s “crazy growth” period; largely a consequence of the general economic downturn in the startup ecosystem, as well as some internal missteps, says Burgaila — the company grew by 7%.
“We had a problem with efficiency,” Burgaila says. “That’s why we slowed down a bit and just pressed the pause button that we needed to rebuild the infrastructure. Because at that time, we were not ready to survive the crisis.” He says the company’s strategy in some areas was failing; an idea to have a B2B sales department in the US and some investment-intensive high tech products didn’t work out as planned.
“It was not a big crisis — it was the first small crisis we saw in the history of the company. Then we understood that we’re not ready for that. Our structure is not ready. Because all the time [before] it was like being onboard a big yacht, with champagne, with the sun shining. But then the sun goes down, the waves go up, and then people don’t know how to deal with that.”
Kilo changed its leadership team — Burgaila was replaced as CEO by Žygimantas Surintas, a seasoned manager, and became the head of growth. He now says for him it wasn’t a step down, but rather a way up.
“I was missing a hands-on job. I learned a lot of things being CEO and now I have enough of a skillset to provide more value. Because, in my opinion, I’m not the best manager. I’m not that guy who is excited about the Excel meetings, presentations and the reporting — it’s boring for me. I just love the moment when the whiteboard is empty and after a meeting is full, and that moment is magic for me. Then you get that purpose that your day was not just about the meetings. You created something.”
Earlier this year, the company also had to let more than 100 people go. There are now around 550 employees at Kilo.
Right after the layoffs, Burgaila published an emotional post on LinkedIn, where he blamed himself for the situation and stressed that all the fired employees were great talent and should quickly find a new job on the market. He engaged Kilo’s HR department to help the laid-off people find a new job, and made a promise to potential new employers that he would cover the costs of hiring the former employees if they weren’t to pass their probation.
“I think it was one of the best decisions I ever made,” he says now, even though many people told him at that time not to publish the post. “Here, in Lithuania, we still want to show only the bright side. We are a bit bad at communicating the true, honest stuff. I don’t know why companies still try to hide these things or say half of the truth. We fired more than 100 people — why should we be quiet here? They’re the best talents in the market. It’s not their fault, they’re still the best guys.”
He says he was happy to see that some of the people got better jobs, promotions and higher salaries.
What’s next
Now, Burgaila has a new goal to achieve: Kilo hopes to reach $1bn in consolidated annual revenue with a 10% profit margin, in the next three to five years. He recognises that’s “ambitious” — last year, Kilo’s revenue reached €233.9m, while EBITDA was €24.1m.
It will mean growing 30-35% year-on-year, but Burgaila is convinced that the team restructuring will help achieve that goal. “I’m very happy because all these changes are having a big impact, and now we see how fucking lame we were in terms of efficiency, to be honest.”
“Our journey has always been about more than just numbers. It’s about pushing boundaries, exploring new markets, and making a difference to people’s lives through innovative health solutions,” he says. “To reach this milestone, we know we need to go further — expanding our current business into new countries, embracing new languages, and continuing to develop products that truly resonate with our users.”
He wouldn’t rule out an exit in the next few years, either. “Of course, we were talking about different scenarios: IPO or pre-IPO stages… or if we would be a good target for someone, let’s talk. But right now we’re just focusing on growing.”
He’s also not likely to seek funding.
“I saw a lot of companies who were jumping [from one round to another]. It’s like the presidential election: you win the post, and then you’re trying to prepare for another election. I think all their focus should be on the business.”
Read the orginal article: https://sifted.eu/articles/kilo-health-lithuania/
