Benefits of Strategy

In my past life as a former strategy consultant, I liked to remind clients that strategy is often most helpful in informing what you won’t do, rather than defining what you will.  Some of the most difficult decisions an organization needs to make are those on the margins, where the allure of an attractive opportunity – into a new market, new product line, or new investment – can result in stretching the boundaries of the strategic sandbox an organization has declared as its focus. 

Recently at Osage Ventures Partners we had to pass on just one of those attractive opportunities that sat on the margin of our strategy.  As readers of our website are hopefully aware, the OVP strategy rests on three pillars: early stage (which we define as first institutional round and significant market traction, typically seen through visibility into $1 million of revenue), enterprise software, and the Mid-Atlantic region.  We spent significant time on diligence with an exciting new company, growing very comfortable with the team and excited about their potential given a set of attractive market dynamics and the value they purported to deliver to customers.  As we dug deeper in diligence, however, we recognized that the company had not achieved sufficient market traction to meet the OVP definition of early stage, and we made the difficult decision to walk away – and, we hope for the sake of the entrepreneurs, possibly miss out on the potential to invest in a wildly successful business. 

Dedication to a clearly defined strategy may mean we miss out on the occasional home run, but that is a risk far outweighed by the benefits derived from a strategy we believe in – and that we convinced our limited partners to invest behind.  The rationale for the OVP strategy is best saved for another post, but our experience suggests that we are executing against a unique strategy that has proven successful.  Regardless of whether or not we have the right strategy, having one that guides all of our actions and decisions helps to:

• Build a portfolio of companies with similar characteristics facing similar challenges that can learn from each other to create a whole greater than the sum of its parts
• Guide entrepreneurs in knowing how – or even whether – to pitch us
• Establish a clear brand in the market that guides our relationships with potential partners and other stakeholders in the early stage ecosystem
• Ensure efficiency and focus throughout the deal process, allowing us to maintain a small and nimble team
• Provide confidence to our investors that we will act as responsible stewards of their money

For entrepreneurs seeking institutional funding, my advice would be to dig carefully into the strategies of your potential investors, as doing so will help you execute a more focused and efficient fundraising process.  A fund without a clear strategy should raise a red flag.  An investor with the ability to carefully define and then execute against a clear strategy for her own fund will hopefully bring similar discipline as a board member, while a focused strategy leads to a focused portfolio that you should be able to leverage to help drive your business.    And if you ever find yourself on those tricky strategy margins, proactively address the grey area right from the start to prevent a lengthy diligence process with a fund for which your company may not be a good fit. 

Congrats to 2012 PACT Enterprise Awards Finalists and Winners

Last week, PACT – the Philadelphia Alliance for Capital and Technologies – held the 2012 Enterprise Awards, their annual black-tie awards gala.  Each year top technology companies and life science companies are nominated for categories corresponding to different stages of business maturity.  The event highlights three finalists in each category and then announces the winners.   Osage Venture Partners is pleased to have five finalists and two ultimate winners in our investment portfolio including:

•        ProtonMedia – Early Stage Technology Company Finalist
•        InstaMed – Technology Growth Company Finalist
•        Ceptaris – Life Science Growth Company Finalist
•        FieldView Solutions – CleanTech Company of the Year Winner
•        Mike Phelan of SevOne – Technology CEO of the Year Winner

Congratulations to all five companies for being recognized as leaders in their categories and a special call out to Fred Dirla and the entire FieldView team, as well as Mike Phelan and everyone at SevOne!   It was a special night.

Robert Adelson, Nate Lentz, David Drahms

I am Short on Facebook

At Osage Venture Partners, we don’t invest in consumer technology.   For those who read our occasional blog posts or who have browsed our website, it should be clear that we are business technology investors.  Personally I do not understand leading edge consumer behavior and would have a hard time guessing what the next trend will be.   I certainly respect the investors who do this well and think they deserve all the credit they get.  

Consumer trends do impact business technology, as a worker (whether an employee, staff member, etc.) can be thought of as a consumer with a purpose.   When the purpose is understood, a product that serves the purpose has an ROI, and thus can be rationally assessed.   Business products have lifecycles that are much longer than most consumer products and are much less subject to flavors of the day.  Ubiquity for consumers is uncool.  Ubiquity in business means efficiency.   Scale for consumers is not their problem.  Scale for businesses is a slide down the cost curve and up the profit curve.  Facebook’s success will be its downfall

Here are some of the reasons I am short on Facebook –

1. Cool young people do not hang out at the same places as parents and grandparents.  Like the search for the next great undiscovered beach, when the families show up, when the resorts go up, the backpackers go elsewhere.  The cool people are spending time elsewhere and less and less time on Facebook – they just have not told us where yet.
2. Social will fragment.   If I only care where my friends are, why do I care if a billion other people are there?  Only the advertisers care and we are not social for advertisers’ benefit.
3. Targeted advertising based on personal information is creepy and the backlash is coming.   Google read our emails when they drove around town.   What do you think Mark is doing with your pictures?
4. Companies that are secure about their position do not have their CEOs buying small non-revenue start-ups for $1.0B without consulting their board of directors.  Companies who want to sell their stock to the public should not ignore corporate governance after they have filed their S-1.
5. Remember when everyone wore Levis?   Remember when everyone loved the Motorola Razor?  Remember when we used to be addicted to our Crackberries?   Remember Facebook?

Sure – it may empower a few more third world revolutions, but the biggest first world revolution for Facebook will be where its users go next.

Stay tuned for my views on LinkedIn and why I am long on the benefits of a business network.

Healthcare IT From a Patient Perspective

We spend a lot of time here at OVP meeting with entrepreneurs determined to make the healthcare system more efficient and effective.  For me, many of those meetings are somewhat abstract, as I choose to enter the healthcare system myself as infrequently as possible precisely because I find the system both inefficient and ineffective.  Yet, as pain in my knee from an injury picked up playing soccer lingered, I decided to overcome my aversion for visits to the doctor and have it checked out.  I have a friend who is an orthopedic surgeon, and he told me to call his office and they would squeeze me in.  Thus began a long and enlightening journey through two different hospitals that provided a different level of insight to the confusing and convoluted world of providers and payors than is achievable reading healthcare IT business plans, blogs, and industry reports – and suggests that developers of such IT solutions should spend more time doing the same and building solutions with the end user in mind.

A few “highlights” (in the sense of amazement they generated) of the experience:

• When I first called about a week before Thanksgiving, the scheduler informed me that the practice did not have any openings until mid-January.  When I reached back out to my friend to see if he could find a time in his schedule, he found me an opening the next day; I arrived to find myself as the only patient in the office
• He explained the issue related to their recent implementation of an EMR system from Epic, which caused them to intentionally schedule 75% of their normal patient load for three months to be able to work through the kinks of the system
• The Epic system is so complicated that Epic provides a full-time, on-site representative for that entire three month period to answer questions and help the staff onboard to the EMR.  While I was there, the Epic rep was called in twice to answer a question, and my visit was the last day of the three month training period; the practice was dreading how they would survive without the rep nearby
• When scheduling my MRI, they took all of my information to “pre-register” me, a process that took about 10 minutes on the phone; I arrived at the hospital and the receptionist at the registration area instructed me to fill out the exact same information again on a paper form before directing me to another woman at a registration desk who asked me to confirm that same information again as she typed it into the computer; in total, the registration process took about 25 minutes.  I then went to the imaging department and filled out much of (though not all) of the same information again on a paper form, and confirmed it one more time for the radiology technician as she entered it into the computer.  For those counting at home, that adds up to six times of providing my personal information across the physician office and hospital, three employees who keyed that information into the computer, and three paper forms that are now stored somewhere
• Through the entire experience, I never saw or heard a single estimate of what this care would cost, despite having a high deductible insurance plan that would require me to fit most (if not all) of the bill
• My first communication from my insurance company was in fact a denial of coverage for a knee brace I required – which I opened literally minutes before I met the rep to ensure the custom-made brace fit properly nearly two weeks after I had ordered it

As someone who invests in healthcare IT solutions intended to directly address these very inefficiencies, the experience certainly validated the Osage Ventures belief that technology can revolutionize the healthcare industry.  However, it also demonstrated how far those technology solutions have to go before truly having an impact.  Current stats suggest that nearly 60% of physicians use an EMR system[1], up from just 30% in 2006, and the EMR market is expected to grow to $6.5 billion in 2012, a sixfold increase over 2009[2], on the surface implying the huge government incentives under ARRA are having their intended effect of driving a technology revolution in healthcare.  Yet the almost universally disgruntled sentiment among physicians I have spoken with about their EMR experiences, all of whom have had a system foisted upon them as part of a rollout at a large hospital, suggests EMRs – and all of the other HIT breakthroughs they will enable once medical data is digitized – are a long way from delivering their promised benefits.  The cost (estimates suggest the average EMR system costs $46,000 per physician to implement, which don’t include the three months of reduced patient loads and numerous headaches once the Epic rep is no longer there for handholding) and complexity of the systems that don’t easily fit into physician workflows are the most recently cited reasons for slow (or begrudging) EMR adoption. 

These issues feel addressable by new innovators that can leverage the economics of the cloud to build a solution designed around the needs of the end users – physicians, nurses, their staff, and to a lesser extent patients.  While we are wary of EMRs at OVP given the fits and starts of the industry, the huge number of providers (at last count it exceeded 400), and the increasing concentration among large players, we have seen many entrepreneurs who recognize the need to create physician-focused HIT solutions, while other prominent startups such as PracticeFusion and ZocDocs have grown quickly by taking a simple and user-centric approach.  As just a few examples, we have recently met with several startups that are bringing gamification and social network approaches to the world of employee wellness, and others building solutions to allow physicians to access critical patient information on their own mobile devices using simple, intuitive – and very consumer-like – user interfaces.  Our portfolio company Instamed is attempting to solve the real-time communication disconnect between payors, patients, and practices to avoid situations such as rejection of coverage after a custom-built knee brace is already produced and delivered.  I hope these entrepreneurs succeed, and inspire others to do the same, as I really am tired of filling out the same form six times. 

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[1] CDC/NCHS National Ambulatory Medical Care Survey

[2] Frost & Sullivan, October, 2011

Immersing Themselves and Enjoying It

We are investors in ProtonMedia, a company which enables advanced levels of collaboration by bringing remote people, in the form of avatars, and disparate data together in virtual meeting and learning environments.   At the time we invested, it sounded like a stretch, yet there were major companies – in life sciences and in energy - using the product and willing to speak about its benefits.  

This is a solution that is deemed to be much more engaging than Webex or GoToMeeting, given the level of interaction and the content sharing capabilities that it provides.   This is also a solution with significant economic benefits over in-person meetings, especially when the distance is far, costs are high, and personal and professional time are both highly valued.   So was the premise.

Last Friday, I had the chance to see ProtonMedia customer survey data from participants in major training sessions who used the Protosphere platform.  I have to say – I was more than a little surprised by the extent to which the data supported the value proposition.   In summary:

• 88% of those surveyed agreed or strongly agreed that the Protosphere solution was an effective method of delivering training

• 95% of those surveyed agreed or strongly agreed that using Protosphere had them more engaged than standard web tools such as WebEx or GoToMeeting

But what surprised me more was the next answer.

• 35% of the survey participants preferred Protosphere to in-person meetings, 33% preferred in-person meetings, and 32% were neutral.

Thus 67% of participants were positive or neutral to Protosphere versus live in-person meetings.  To me, this was very surprising, especially as this does not factor the corporate economic costs of travel, which depending on the distance of travel, can be as high as 23x in real-dollar savings by using Protosphere versus live on-site training sessions (documented by one major pharmaceutical customer).

To top it off – people learn in Protosphere.  Tests taken after training suggest that people score equally after being trained in Protosphere as compared to in-person training, and may have modestly higher retention rates than if trained in Protosphere than those who participate in in-person training.  In comparison, web-based tools measured well behind Protosphere and in-person training.   This is not my data and this is not ProtonMedia data, but rather this is customer data that was collected independently and shared with the company.  

While training is only one application for this solution, it is a proven one.   Scientific poster boarding sessions have also been huge successes for ProtonMedia and have won awards for the company.   Global sales meetings and product roll-outs have also been well received applications.  Board meetings are another use case– including occasional meetings where we, as investors, “eat our own dog food” and conduct full board meetings through the virtual environment – and we are tough critics.  

For products like this – sales are to the enterprise, but adoption is up to the people who use it.   I am encouraged by the adoption story.  I am encouraged by ProtonMedia.   I would love to hear of other experiences with such virtual worlds.