If you are a doctor you may have many incredible accolades to show off: bachelors degrees, MCAT score, medical school and possibly more. But one thing you wont have is a business degree. With Kareo, all of that is taken care of. From billing to electronic health records, your small physician firm is free of any administrative woes. Recently funded for the fifth time (over $150M in total), this company seeks to expand its service and help save a few lives along the way.
Today, we chat with Dan Rodrigues, Founder and CEO to discuss the funding, the company, and the future of healthcare.
Who were your investors and how much did you raise?
The investment totaled $55.4 million and was led by Montreux Equity Partners with participation from Silver Lake Waterman and all of Kareo’s existing investors, including Stripes Group, OpenView Venture Partners, and Greenspring. This is Kareo’s 5th major round of funding.
Tell us about your product or service.
Kareo is the leading provider of cloud-based solutions for independent medical practices. The company serves over 30,000 healthcare professionals caring for 40 million patients and processes over $1 billion in medical claims monthly.
Kareo provides a cloud-based software platform that enables physicians and administrative staff to streamline practice operations, from the front office, to care delivery, and billing and record keeping. By easing the administrative burden faced by small practices, Kareo enables physicians and their staff to increase their focus on patient care.
What inspired you to start the company?
While there are more than 900,000 physicians in the United States, approximately 60% work in practices with fewer than five physicians. Running a small practice comes with big challenges. Typically, doctors are not trained as business professionals and in the ever-changing healthcare environment effectively managing a profitable practice is not easy. Kareo was founded in 2004 with a mission to free doctors’ administrative burdens so that they can focus on the important work of patient care.
How is it different?
Kareo is the only medical office software solutions platform dedicated to serving the small independent practice. Today over 30,000 medical professionals count on Kareo to manage their offices intuitively and affordably. Kareo’s cloud-based platform helps doctors find and communicate with patients, deliver care efficiently and effectively, get paid faster, keep cash flowing, and see the financial big picture through medical billing and practice management tools.
Most of our competitors focus on a variety of customer segments, while Kareo is dedicated entirely to the needs of small practices. This enables Kareo to uncover unique customer insights and needs. With these insights, we’re able to differentiate our product in ways that are valuable for small practices.
Kareo targets the independent practice market that includes primarily small practices with up to 10 providers. Almost two-thirds of healthcare providers deliver care to their patients in small practice environments today and it’s where most of us receive our primary care.
What’s your business model?
Kareo delivers incredible value to the business and financial health of small practice customers — all at an affordable price that works for their business. We have an “earn your business every month” approach through our affordable subscription-based monthly “per provider” pricing. Our “no long-term contracts” policy allows customers to have ultimate flexibility and the opportunity to intrinsically trust Kareo as a business partner, not because they have to, but because they want to. There are no upfront costs (keeping the risk for these small business really low) and no charge for basic training and support – its included in our model to always be there for our customers. We believe in transparent “what you see is what you get” pricing and business terms promoting a nothing to hide, collaborative approach to doing business. We have a financial model built for scale and profitability and a services model built for rapid response and continuing education of customers.
In terms of solution pricing, Kareo’s electronic health record is free, and we charge $300 per doctor per month for our billing software. Physicians can choose to outsource all of their billing to Kareo for a percentage of the practice’s collections each month, which averages around $2,000 per doctor.
What was the funding process like?
The overall process took 4-5 months. While we had two new investors in this round, many of them were familiar with our story since they had been tracking Kareo for some time. Each is active in our space and/or has relationships with our existing investors. To decide on the final participants, we narrowed down the field to three that were the best fit. In the end, we made the decision based on a few key factors including the investors’ experience and ability to add value beyond capital, the reputation and relationship with the firm, and the economics of the deal.
What are the biggest challenges that you faced while raising capital?
I’d say the biggest challenge we faced is the enormous time commitment of the financing process and the time it takes key executives away from operating the business.
What factors about your business led your investors to write the check?
There are a number of significant factors that draw investors to Kareo. They include the overall size of our market (large total addressable market), the favorable market trends supporting our business (cloud, industry drivers, etc.), the strength of our management team and a proven ability to execute against our objectives
What are the milestones you plan to achieve in the next six months?
The company will deploy the capital aggressively to support two major growth objectives. The new capital will be used to invest in the continued development and innovation of Kareo’s cloud-based solution platform as well as to expand our market reach to allow an even greater number of independent physicians to meet their care and practice growth objectives.
What advice can you offer companies in Los Angeles that do not have a fresh injection of capital in the bank?
Focus on building a great business and the capital (if you need it) will come. Solve an important problem for a large market. Do it better than your competitors. Create a business model that is highly profitable and produces significant recurring revenue. Build the winning team & culture.
Where do you see the company going now over the near term?
We want to become the market leading cloud-platform for independent physician practices. That means we need to expand our market share and continue to build our platform to be more comprehensive and differentiated from competitors.
What’s your favorite LA bar, when you need to kick back and relax?
Since my graduation from UCLA, I’ve probably spent less time in Los Angeles, so it’s hard to choose from so many great places I’ve been. But, since you asked, I’ll say the Rooftop Bar at the Standard downtown.