The tech market is filled with many stories of early-stage funding. It’s even more exciting when you can report an exit of a company that is a major win. That’s why I’m proud to announce today that HealthDataInsights (founded by Victor Chaltiel), where GRP Partners was a 30% owner, has been acquired for $400 million. It maps to several themes about “solving bigger problems,” “taking more meaningful ownership positions” and “women in entrepreneurship.”
1. Solving bigger problems
HealthDataInsights (HDI) is a company that helps to recover money for the government or private insurers who have been incorrectly billed or fraudulently charged. This is important because at the US federal level Medicare is billed about $500 billion (yes, that’s half a trillion!) / year and it estimates that up to 9% of its billings are over-billed or fraud. That’s $45 billion just in federal billings. HDI also focused on state Medicaid programs as well as private insurers.
Just how effective has HDI been at recoveries? At the federal level HDI is responsible for auditing 22% of the US territory yet has been responsible for 41% of all US refunds or a whopping $658 million between the original pilot program and the current program.
So when I talk about solving big problems – 2/3rd of a billion dollars to taxpayers is high on my list. The longer-term potential of this is enormous, which is why the company was acquired by HMS Holdings. They are excellent at what they do.
The science of finding recoveries is based on computer-based algorithms that flag high-potential errors and trained technicians that then review these claims. My partner & mentor Yves Sisteron (You can get to know Yves in this YouTube video) has been active at HDI for years (as has our CFO, Dana Kibler).
2. Taking more meaningingful ownership positions
Every investor has different strategies for driving returns to its shareholders. At GRP Partners our focus has always been on having a small number of investments in the industries we know well. Our investments focus heavily on the financial services industry, digital media, mobile applications & infrastructure, SaaS / Cloud and retail innovation. These are industries in which our partners have focused for the past 15-20 years.
And we’re not restricted to territories. HDI is based in Las Vegas. Our other big wins came from Chicago (Ulta & Envestnet), Baltimore (BillMeLater), New York (DealerTrack) & LA (TrueCar). We have two big winners in France, one in the UK and a couple in San Francisco.
When we invest we tend to be very active in our companies and we look to invest enough capital to have meaningful ownership stakes. In the case of HDI, for example, we owned 30% of the company, which therefore returns a sizable portion of that fund (the company was profitable enough that it had already dividended out a 2x return on capital invested prior to the exit).
Having had several big exits like this under our belt (the largest being Ulta) is what drives the Prequin returns for our last GRP fund to be ranked at the top performing fund in the US for its vintage year. (note: some people note that Prequin is only one of several industry databases ranking companies. Whatever the outcome, our fund will be ranked in the top 5 funds or top 1% no matter how it’s sliced).
9 companies out of 33 drove our largest returns. Where we find companies that perform well, we always look to invest more capital over time, not reduce our stake. We believe in the model of investing in a few companies and spending much time with them over the years.
3. Women Entrepreneurs
I thought it was worth noting since “women in tech” is a much debated topic, that our two biggest returns of our last fund – Ulta & HDI – were run by women. Andrea Benko, the founder & CEO of HDI, is simply one of the most talented CEOs we have worked with in our portfolio and that included 15 companies that have exited north of $1 billion. Lyn Kirby ran Ulta Cosmetics from its early days through its successful IPO.
I don’t think that makes us unique or says that we did anything proactive to encourage this. I don’t want to give us any unique credit. Still, for all the discussion about there not being more female entrepreneurs it’s quite an achievement and testament to Andrea & Lyn that they were the most successful in our peer group and both built extraordinary companies.
(Cross-posted @ Both Sides of the Table)