Building a Healthcare IT Company out of Georgia: Reach Health Founder Grant Kohler (Part 5)

Sramana Mitra: Each hospital would only be paying you a couple of thousand dollars? The hospital would pay in terms of the software subscription service per month?

Grant Kohler: That’s correct. That’s each hospital. Each of these networks would grow to be anywhere between 20 to 25. Some of them have 30 community hospitals attached to them. Each one of those hospital would have to pay that subscription fee.

Sramana Mitra: If you were to look at your 2007 situation, how many of these hospitals were part of your customer base?

Grant Kohler: I think by the end of 2007, we had about 25 community hospitals connected up to one of three different hubs. It’s a low number.

Sramana Mitra: At what point did you raise venture capital?

Grant Kohler: It was in 2008 that we started to look for some venture capital.

Sramana Mitra: By the time you did that, you already had at least 25 hospitals as customers, right?

Grant Kohler: That is correct.

Sramana Mitra: What was your experience with raising venture capital? You were trying to raise venture capital in Georgia?

Grant Kohler: Yes. We needed venture capital money that understood the healthcare industry. So we went out and sought partners who understood healthcare and hospitals so that they can provide us with insight and information and more than just actual capital to get the company going. We were looking for more expertise than just dollars.

Sramana Mitra: Where did you go to raise money?

Grant Kohler: We started looking in the Nashville area at a company called Council Capital that specializes in healthcare organizations seeking venture capital funding. Council Capital ended up becoming our primary sponsor and they brought in a couple of other companies into the investment portfolio.

Sramana Mitra: Your primary venture capital is this firm out of Tennessee, right?

Grant Kohler: That’s correct.

Sramana Mitra: How much money have you raised so far?

Steve McGraw: We’ve raised around $15 to $20 million.

Sramana Mitra: How many rounds of financing is that?

Steve McGraw: Three rounds of financing.

Sramana Mitra: 2008 was your first round of financing?

Steve McGraw: Late 2008.

Sramana Mitra: What are the major milestones after you raised the financing? What were the next few big things that you did as a company from a strategic point of view to get to the next level?

Grant Kohler: We decided to go out to the first round of financing mainly because we had reached a crossroads in the company. We were cash flow positive and profitable, but we were working on razor-thin margins. We were a growing company but we started to realize that the industry that we were in was beginning to mature and there were other players coming into the market. We needed to try and do a land grab and try and get as many customers as we could to boost the company and give it a really solid foundation. The money allowed us to bring in a sales team, grow the development team a little bit, and put a support team in place. We really started to commercialize the software and formulate an enterprise strategy to take our software from more than just a stroke company and start focusing on a Telemedicine strategy that will allow us to service multiple specialties on our platform. That was really the turning point when we decided to go out and find some funding.

This segment is part 5 in the series : Building a Healthcare IT Company out of Georgia: Reach Health Founder Grant Kohler
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