New Investments: Updata made two new investments over the last six months in markets serving the online customer satisfaction measurement and health and human services management sectors...read more>>
ForeSee Results, a leading provider of online customer satisfaction measurement solutions, secured $20 million...read more>>
Harmony Information Systems, a leading provider of Web-based, business process and case management software solutions for the health and human services industry, completed a $7.5 million ... read more>>
Portfolio Company Exits:
Softek Storage Solutions was acquired by IBM … read more>>
Secure Software was acquired by Fortify Software … read more>>
Sector Focus: Healthcare IT
Faced with macro-trends in the US economy—rising healthcare costs, nurse shortages, government legislation, and the aging of the population—healthcare providers are spending more of their budget on information technology than ever before... read more>>
New Team Members
Jon Seeber, Associate: He comes to Updata from IBM Global Services Business Development, where he managed… read more>>
Joe Ghory, Analyst: Ghory joined Updata after earning a Bachelors degree from the University of California, Berkeley... read more>>
PORTFOLIO UPDATE
New Investments
ForeSee Results -- April 4, 2007; Ann Arbor, Michigan -- ForeSee Results, a leading provider of online customer satisfaction measurement solutions, secured $20 million in funding led by Updata Partners with Investor Growth Capital as co-lead, joining existing investor CFI Group. Proceeds from the financing were used to re-purchase a common stock position held by Compuware, Inc. and to provide working capital to accelerate growth.
“…[We are] focused on identifying investment opportunities in the ecommerce sector, and we're excited to back the market leader in online customer satisfaction measurement, an increasingly critical, strategic solution adding insight that traditional web analytics cannot deliver," said Barry Goldsmith, General Partner at Updata Partners. “We anticipate that Foresee's robust, on-demand business model will continue to generate loyalty among their fast-growing client base, driving significant growth.”
ForeSee's solutions use proprietary intellectual property initially developed at the University of Michigan associated with the leading index for measuring customer satisfaction, the American Consumer Satisfaction Index ("the ACSI"). Its service is delivered to customers on-demand, via a Software-as-a-Service (SaaS) model. Based out of Ann Arbor, Michigan, Foresee currently conducts more than 450 measures for clients including 3M, Best Buy, Borders, Cingular, Comcast, DuPont, Forbes.com, Home Depot, Intuit, the IRS, Kellogg’s, NASA, the NHL, Sprint, TIAA-CREF, Weather.com, and Whirlpool.
Harmony Information Systems – December 22, 2006; Reston, Virginia –- Harmony Information Systems, Inc, a leading provider of Web-based, business process and case management software solutions for the health and human services industry, completed a $7.5 million first round of institutional equity financing from JMI Equity and Updata Partners. The investment will be used to accelerate development and marketing of Harmony’s award-winning applications for state and local government and private human services organizations.
“Harmony is well positioned for rapid growth with award-winning solutions that uniquely apply CRM-functionality and a software-as-a-service delivery model to a relatively untapped market,” said Tim Meyers of Updata Partners.
Founded in 1998, Harmony provides an enterprise framework suite of solutions specifically designed to enable human service agencies to do what they do best - help people. Harmony serves a growing number of state and local governments and private human services organizations throughout the U.S. and was recognized in 2005 with Microsoft Corporation’s Best Innovation in State and Local Government Award.
IBM completed its acquisition of Softek Storage Solutions in March of 2007. Softek becomes part of the Storage and Data Services business unit within IBM Global Technology Services. This is a strategic acquisition for IBM that reflects the industry’s competitive trend to create high-margin services offerings through a combination of software, hardware and consulting services. Updata initially invested in Softek in May of 2004 as a management-led buyout from Fujitsu’s storage business unit.
Secure Software was acquired by Fortify Software in February of 2007. Updata first invested in Secure in January of 2005. The acquisition expands Fortify’s lead in the software security market by expanding its worldwide customer base and extending its presence in the greater Washington, D.C. area to better serve the federal market. Fortify is backed by Kleiner Perkins and Sigma Partners.
Faced with macro-trends in the US economy—rising healthcare costs, nurse shortages, government legislation, and an aging population—healthcare providers are spending more of their budget on information technology than before. In North America, hospital IT spending in 2009 is expected to reach $25 billion, growing at a CAGR of 7.4%1; Dedicated healthcare IT resources are expected to increase in the next twelve months as well. In terms of market drivers, healthcare costs in the U.S. will account for 1 of every 5 dollars spent within the next decade, continuing to outpace the overall economy. In addition, look for the outcome of the 2008 elections to play a defining role in making resources available to providers to accelerate IT investment as well as determining which components of the healthcare value chain bear the bulk of the costs.
All of the forces at play are pushing providers (e.g., hospitals, physicians, Regional Health Information Organizations, and pharmacies) to become more effective by employing IT solutions.
Likened to the ERP and business intelligence movements before it in other industry verticals, the pressure is on the healthcare industry to improve patient care and quality while simultaneously reducing costs. The healthcare industry traditionally lags IT spending compared to other verticals—2% of revenues for IT in healthcare vs. 10% of revenues for financial services providers—thus many trends in the space mirror lessons learned from early adopters in other verticals.
In a recent survey conducted by HIMSS (Health and Information Management Systems Society), providers cited electronic medical records (EMR) systems, computerized practitioner order entry (CPOE), and clinical information systems (CIS) as priorities for IT spending. Up until 2000, complex patient profiles and most processes were managed through paper systems, even if software-generated documents were included in these files. Survey findings suggest providers will focus on automation-centric technologies within and across networks that will ultimately serve as the foundation of CRM-like applications to come.
However, barriers around interoperability, privacy, security, and patient / employee behaviors must be been addressed before EMR and the advanced analytic applications that follow it can achieve critical mass. This is especially true for small practices (*note look for other articles to follow in terms of key trends in the long tail of the provider community). Most of the technologies marketed to larger providers—EMR, Billing, CPOE—are not optimized for clinics without a dedicated IT resource. These are the best targets for EMR SaaS plays, provided these companies can develop the right channel relationships and infrastructure to support an SMB-like sales cycle.
Trends to Track:
EMR and EHR Interoperability - Recent legislation, such as the National Health Information Incentive Act, targets physicians to implement wide-scale adoption of EMR and EHR technologies. As of 2006, only 16% of primary care physicians use EHRs in some form. A lack of compatible digital formats, increasing competition among vendors, and issues outlined above will drive the need for of technologies and services around interoperability. As an aside, storage needs will also increase as rich digital images (e.g., picture archiving and communication systems (PACS) continue to be incorporated into an EHR.
Scheduling and Staffing Applications - Nurse shortage (http://content.healthaffairs.org/cgi/content/abstract/26/1/178) is expected to increase by three times the current rate over the next 13 years, creating a need for advanced software training applications and staffing software as the U.S. imports talent. Existing patient (multi-provider) and staffing applications are either paper-based or dated and are difficult to optimize for cost reduction. With greater transferability of the healthcare workforce through digital mediums and geographies, predictive analytics are needed to map patient demand to staff availability and skill set. While there has been a trend for larger providers to hire staffing companies to manage flexible labor pools, the tug of war between outsourced agencies with custom applications and IT continues. Integrated and hosted HR applications are making a good bit of headway as they help to cut services costs.
Clinical Information Suites - Clinical information systems as a larger umbrella are departmental in nature and expensive for small to medium-sized hospitals with under 500 beds. Even larger hospitals are evaluating web-based platforms with stronger integration capabilities and deeper functionality to replace legacy applications from traditional providers. As long as many of the vendors with domain knowledge in key provider departments continue to penetrate the lower end of market with hybrid SaaS models and low-cost channel partners, the economics of an integrated suite to late adopters is attractive for the mid-market. In summary, investments in the sector have heated up with 64 capital raises in 2006, up from 50 in 2005. On the M&A transaction side, 117 companies exited (up from 106 in 2005) with an aggregate value of approximately $6.0 billion. The largest transaction in 2006 was by McKesson who purchased Per-Se Technologies, a provider of revenue cycle management technologies for hospitals, physicians, and pharmacies, for $1.6 billion. As the healthcare value chain becomes more efficient, IT investments in this healthcare will continue to expand and companies with the right solutions for providers facing the challenges outlined above be the best candidates to back with venture funding.
We are pleased to welcome two new members to the team who will play important roles in our investment identification team, as well as provide support to our portfolio companies.
Jon Seeber joined Updata as an Associate at the end of 2006. He comes to Updata from IBM Global Services Business Development, where he managed acquisition, divestiture, and investment activities for IBM's largest business unit. As a Business Development Consultant at IBM, Seeber played a key role on several strategic transactions, including the acquisitions of Internet Security Systems, Healthlink, and Corio, leading efforts ranging from strategy development and due diligence to negotiation and integration planning. Prior to IBM, he served on active duty in the U.S. Air Force as an Intelligence Officer. Seeber earned an M.B.A. from Harvard Business School and a B.A. in computer science and history from Duke University.
Joe Ghory joins Updata as an Analyst. Ghory comes to Updata after earning a Bachelors degree from the University of California, Berkeley and a Masters in economics from Cambridge University in England. His work experience includes three years at Vision Sports and Entertainment, where he represented leading sport figures and headed sports marketing engagements.
ForeSee Results -- April 4, 2007; Ann Arbor, Michigan -- ForeSee Results, a leading provider of online customer satisfaction measurement solutions, secured $20 million in funding led by Updata Partners with Investor Growth Capital as co-lead, joining existing investor CFI Group. Proceeds from the financing were used to re-purchase a common stock position held by Compuware, Inc. and to provide working capital to accelerate growth.
Harmony Information Systems – December 22, 2006; Reston, Virginia –- Harmony Information Systems, Inc, a leading provider of Web-based, business process and case management software solutions for the health and human services industry, completed a $7.5 million first round of institutional equity financing from JMI Equity and Updata Partners. The investment will be used to accelerate development and marketing of Harmony’s award-winning applications for state and local government and private human services organizations. 
Jon Seeber joined Updata as an Associate at the end of 2006. He comes to Updata from IBM Global Services Business Development, where he managed acquisition, divestiture, and investment activities for IBM's largest business unit. As a Business Development Consultant at IBM, Seeber played a key role on several strategic transactions, including the acquisitions of Internet Security Systems, Healthlink, and Corio, leading efforts ranging from strategy development and due diligence to negotiation and integration planning. Prior to IBM, he served on active duty in the U.S. Air Force as an Intelligence Officer. Seeber earned an M.B.A. from Harvard Business School and a B.A. in computer science and history from Duke University.