right metrics. We’ve been looking in healthcare for four years now, and it’s just recently that we’ve found a couple of healthcare companies that fit the metrics we’re looking for. We’re actually looking at a couple of more now. IT really depends on the company and how it’s performing and what segment it is in. We certainly wouldn’t invest in two healthcare companies in the same segment.
X: It seems like there has been more activity in healthcare recently in your portfolio. Why is that?
GR: I think it’s because the market is beginning to grow significantly because of some of the healthcare changes. The reason we really like Prognosis [in the health IT field] is, number one, the market space, which is hospitals. Number two the service segment of the marketplace has been underserved by the traditional legacy vendors, the Cerners, the Epics, the McKessons, and even the Meditechs of the world. Prognosis has an updated technology platform, all Web-based, with much lower risk to implementation. [Editor’s note: Providers of web-based software often say that their customers can implement their technology faster than legacy systems that operate mostly on local servers.]
X: The firm has $240 million under management. How much does the company have left for new investments?
GR: Put it this way. We have plenty of money for new investments. I can’t give you specifics, but we have well over $100 million to place for investing.
X: Do companies need to have at least $2 million in annual revenue to get investments from you?
GR: They should be at $2 million in annual revenue or at least $500,000 per quarter in bookings or revenues. That’s really at the low end of the mark for us that says, “It’s an expansion-stage software company.” The reason we use that metric is because there are several things that happen when a company reaches that level; they have customers, revenues, and have a semblance of a distribution model.
X: Let me play devil’s advocate. What would you say if Mark Zuckerberg, fresh from Harvard, walked through your doors and pitched you guys on Facebook before it was making lots of money?
GR: We would pass on the investment. He would be considered early stage and that’s just not what we do. We use discipline in our approach and what we do.
X: What type of new health IT company would you be building if you were in a startup entrepreneur’s shoes?
GR: I would look for a segment in the healthcare space where there are established players. I’m talking about legacy players that have been around for 10 to 15 years at least and are making good profit margins. Then I’d look at how I could introduce a more disruptive business model and newer technology. I don’t believe there are truly disruptive technologies out there today, but there are disruptive business models.
