Growing your digital health company to the point of acquisition can be exciting, but do you know the right steps to strategically close the deal? CarePort Health’s Marc Camm explains.
Stand around any drawing board long enough and you’ll hear a familiar question regardless of the innovation: how do we scale this? Startup growth, especially in digital health, is challenging—some will seek acquisition—some will take the bootstrap route—and most will fail regardless. Still, there is room to succeed.
“A company shouldn’t be built off the motivation to be acquired,” said Marc Camm, COO of CarePort Health, a Boston-based digital health solutions provider that was recently acquired by Allscripts in 2016. “If founders are passionate about the startup’s driving mission and are focused on building a strong company, the outcome could be an acquisition, but it shouldn’t be the starting goal.”
It seems that CarePort’s success story began with the authenticity Camm describes: a company that started simply with the passion of creating a useful solution to improve the care continuum that grew steadily and strategically into something more substantial.
Formed in 2012, by a group of Harvard physicians, CarePort was created with the aim of offering solutions to improve post-acute care and patient outcomes by helping providers facilitate and automate care coordination. As the company began to build market awareness on the issues that we’re addressing post-acute care, it began to seek building that platform through partnerships.
“We started seriously exploring acquisitions when our existing partners started seeking strategic relationships with us,” said Camm. “Some partners felt we could add a lot of value to their go-to-market strategies and enhance their solutions.”
Camm said he and his colleagues like, Dr. Lissy Hu who was a founder and current CEO of CarePort, weighed a number of options before strategically accepting the acquisition offer from Chicago-based EHR giant in 2016. He credits his company’s progress and successful acquisition to subscribing to a few principles that helped the company keep its eye on the ultimate end goal.
Three Simple Yet Strategic Principles to Follow When Selling Your Digital Health Startup:
1. Explore All the Options
According to Camm, the acquisition process should be explored by bringing multiple partners and potential acquirers to the table, vetting all opportunities to ensure every possibility is considered holistically. That requires holding conversations with multiple companies simultaneously. By branching out and entertaining all options, a company can position itself for the best outcomes of its employees and shareholders.
This sounds like a no-brainer, but the truth is some acquisitions opportunities may not end up being the right match, and so it’s good to not judge any book by its cover and truly assess all aspects of a potential deal.
“It is crucial that startups have plenty of communication with numerous potential acquirers to guarantee the best partner is chosen to ensure long-term success. Let me be clear, the best choice for acquisition isn’t always the one with the most money attached to it,” said Camm.
2. Avoid A Culture Clash
One common pitfall Camm believes eager startups may stumble into is not exploring the alignment of the company’s objectives and culture early on. Here are some questions Camm thinks every startup should ask itself early on, to avoid making such mistakes:
· Does the acquiring company want to grow your startup in the same ways you do?
· Are they going to invest time and money in that growth?
· Have you had conversations with everyone at that company – from the executives to the sales department to the engineers?
“All these conversations should communicate an aligned vision and shared understanding across the board internally for how the startup will fit into the company,” said Camm. “Complete transparency and alignment are crucial for a happy marriage.”
3. Be Decisive Yet Flexible
Camm said that an emerging startup that wants to maintain some level of control should be cautious to not get lost in the corporate machine of the business processes, policies, and procedures. For example, CarePort had to decide if it would keep its product engineering in-house or fold into Allscripts engineering organization. Ultimately, the company decided to keep its in-house engineering while folding its human resources processes into the EHR provider since it was straightforward and would save CarePort the trouble of scaling up its own operations.
Still, in today’s business environment Camm said remaining flexible is an invaluable part of the process. “You need to constantly evaluate and re-evaluate the state of your company. Don’t get hung up on the path you envisioned originally or thought the company would take. Be open to all potential paths that present themselves and to ultimately find the best situation for your company. You should explore each one.”
Of course, acquisitions aren’t the only way for digital health companies to find a successor to reshape the landscape. There are several companies taking the bootstrap path instead. For emerging companies to go out on their own, it all comes down to having the time and money to do so. Outside of significant investment, Camm said companies should understand who else exists in the space and how they can be leveraged for valuable partnerships.
Still, if an acquisition is on your radar, it’s important to look at the risk and the reward. Camm said some startups only focus on what the long-term reward would be without understanding the risk. “As the industry has seen, most startups fail. So, if there is a deal in front of you that makes sense for your shareholders, employees and overall company initiatives, it should be seriously considered,” he said.
Camm’s last piece of advice is that if you do go the acquisition route, you need to structure your deal for the long-term. “Eventually, investors will get cashed out, then it will be you and the company that acquired you keeping your shared vision moving forward. Don’t just look at maximizing the short-term dollars involved—focus on the long-term situation for the good of both companies,” he concluded.
