Edward S. Marflak’s vision is all about transforming communication in K-12 education, for all parties. It has inspired him to lead the charge to develop a suite of online products and services now being used by thousands of schools, and millions of students, parents, teachers and administrators across North America.
Ed has also created a business that grades itself against a detailed set of metrics, and has built a highly capable team.
Three guidelines for successful bootstrapping
Relying solely on real customer revenues to build a business was not the most common approach in the late nineties, but James Quist saw it as the best way to retain flexibility and grasp the opportunity at hand.
In the series of discussions with entrepreneurs whose capital-efficient businesses are recognized “return leaders,” Kennet Partners Managing Director Javier Rojas sat down with James Quist, founder of MedeAnalytics, to discuss why bootstrapping the company was so successful, and what advice he has for company founders today.
MedeAnalytics was a fast-growing, bootstrapped business, whose founder decided that he could achieve far more with the right investment partner. When Kennet's US team came across MedeAnalytics, then MedeFinance, in 2004, it was a near-perfect fit with our investment focus. The company was bootstrapped and had a strong, ambitious founder at the helm. MedeAnalytics' software is used to analyse hospital invoice and remittance data to improve collections and shorten the healthcare payment cycle. This managed service addresses a huge source of lost revenue for hospitals - the gap between the fees they book from patients and what they actually collect from insurance companies. At the time of Kennet's initial discussions with the company in 2004, MedeAnalytics had just completed a year with $5 million in revenue. Kennet US partner Javier Rojas understood that MedeAnalytics was operating at the confluence of several exciting market trends. The company was using analytic software to identify operational inefficiencies, which customers perceived as having very rapid payback on investment. MedeAnalytics was delivering its software as a managed service which kept barriers to customer adoption low and increased revenue visibility. Finally, the company was addressing a key pain point in a healthcare market that was seeing rapid increases in overall spend levels. While the market drivers pointed to strong potential growth, MedeAnalytics also faced the typical challenges of a bootstrapped business:
These factors created the perfect timing for a Kennet investment. MedeAnalytics' founder knew that smart money was key: "We selected Kennet because they knew how bootstrapped businesses operate, and they understood our motivations and desires for partnership and growth. We also trusted that they would spend time advising and helping us to scale the company, providing resources even beyond capital. These resources have been essential to our growth." During the relationship-building process, Kennet partner Javier Rojas demonstrated an understanding of how the needs of a bootstrapped business differ from traditional VC-backed companies. He also complemented the founder's level of ambition with an expansive view of how the business could increase its market opportunity by broadening its product portfolio. In addition, Javier showed how MedeAnalytics could raise its profile with potential acquirers and the public markets. In April 2004, Kennet invested $7 million, of which a portion was used to purchase ordinary shares from the founder and the remainder was used to fund growth. Javier joined the board and quickly set about working with the founder to improve the scalability of the business. Since then, Kennet has led board debate on key topics:
Since Kennet's investment MedeAnalytics has become the market leader in revenue analytics for healthcare providers, and is leading innovation in financial analytics for health insurance companies. The company has increased its revenues by a factor of more than 10x and has successfully entered the European market.
h2. How to convert from a licence to a subscription model.
h3. The founders of many software companies want to make the transition to becoming a SaaS vendor. The operational challenges of making this shift are significant, impacting every part of the company: technology, sales, services and pricing. Not least, the transition can have a dramatic impact on cash collection which, if not managed appropriately, can sink the business.
We have worked with a number of software vendors that have made the transition to SaaS and have found some useful lessons to ensure success. In several cases we have been able to complete the shift fairly quickly, migrating to a recurring revenue model for the majority of the business in as little as two quarters. Here are some key lessons learned that have worked well for these companies.
This article was originally published at SandHill.com – Business Strategy for Software Executives
In this white paper we explain why bootstrapping creates better companies and explore the key issues around bootstrapping, including how to choose the right time to raise capital.
Delivering a $425 million exit
It is a well kept secret that some of the leading companies arrived at the top without taking early venture capital funding. Today’s market may call on companies to be more prudent in how they apply capital to generate returns.
In the second in a series of discussions with entrepreneurs whose capital-efficient businesses are recognized “return leaders,” Kennet Partners Managing Director Javier Rojas sat down with Jon Craton, founder of Cramer Systems, to discuss how the company was able to achieve an exit value of $425 million or 47 times the amount of external funding used.
Click here to read the full article on Sandhill.com