New Bootstrap Fund Pulls Itself Up in World of Health IT Deals

Xconomy San Diego — 

Healthtech entrepreneur Parker Hinshaw and his wife Jean Balgrosky said they intended to take a step back when they founded Bootstrap Incubation near San Diego in the fall of 2012.

They wanted to combine Hinshaw’s experience in starting and growing health IT startups with Balgrosky’s expertise in strategic IT planning and overhauling healthcare IT networks—but without getting too deeply involved.

Just a few months earlier, Hinshaw had sold his private healthcare IT consulting company, MaxIT Healthcare, to government contractor SAIC for $473 million. Balgrosky, a health information administrator and former Scripps Health chief information officer, was finishing her doctorate in health policy and management at UCLA.

They came to San Diego in 1996, when Scripps Health hired Balgrosky as CIO and senior vice president. She was previously the CIO for Holy Cross Health System in South Bend, IN, a 13-hospital chain where she was responsible for strategic IT planning from Maryland to California. In 1998, Hinshaw sold another health IT consulting firm, Resources in Health Care Innovations, to Daou Systems, a San Diego-based provider of health IT services. He founded MaxIT Healthcare in 2001.

Jean Balgrosky

Jean Balgrosky

After selling MaxIT, Hinshaw said he became immersed in the startup world. “We started the incubator with the idea of helping people with ideas, and making some investments,” he said.

They initially raised $5 million for their “Bootstrap Incubation Fund” from a portion of their payout from the sale of MaxIT Healthcare (with the rest coming from friends and family), and settled into an office building they acquired in Solana Beach, CA, about 23 miles north of downtown San Diego.

It didn’t take long, however, until both had joined MD Revolution, a Bootstrap portfolio company providing Web-based services to help people improve their health and fitness. Hinshaw joined the San Diego healthtech startup as senior vice president of business development. Balgrosky is MD Revolution’s chief information officer.

Instead of stepping back, they both leaned in. Starting Bootstrap Incubation “turned out to be a lot of work,” Hinshaw said. Still, they want to help boost the innovation ecosystems in both San Diego and Indiana, where Hinshaw grew up, and are now looking to raise the visibility of Bootstrap Incubation.

“I really want to use technology to help people,” Balgrosky said. “I’m kind of an innovator. I like to be on the frontier of new technology, and this is an opportunity to be on the frontier here in San Diego.”

Hinshaw added, “Indianapolis is a lot like San Diego, in that there’s not a lot of investment capital there—so you can get great valuations.”

Their original investment fund, raised in 2012 and known informally as “Fund 1,” has made 16 investments to date. A second fund, the Bootstrap Venture Fund, has closed $13 million so far, and has invested $10 million in five additional startups and one existing portfolio company.

Hinshaw said Bootstrap’s investment focus is chiefly on health-related software as a service, data analytics, healthcare, healthtech, and Web-based sales and marketing technology and services.

Parker Hinshaw

Parker Hinshaw

Of 21 portfolio companies on Bootstrap’s website, 11 are based in San Diego—including MD Revolution, (previously known as Assay Depot) Freedom Meditech, Rhombus Energy Solutions, Mogl, and Cursive Labs. Another four are based in Indianapolis: Perceivant, BearFace (acquired by Perceivant), CloudOne, and Indigo BioAutomation.

“Our model is more hands-on,” said Kyle Williams, who provides strategic guidance and financial management for Bootstrap’s early-stage companies as president of Bootstrap Incubation. “The incubator provides services to startups that they don’t even know they need, including accounting, HR, recruiting, and marketing services,” Williams said.

Williams, who also serves as managing director of the Bootstrap Venture Fund, said the firm “actively manages” 15 of its 21 investment deals, which means either Williams, Hinshaw, or Belgrosky serve on those startups’ boards.

“Out of 15, we’ve probably got four or five that are really great, relatively speaking; another four or five that are OK; and maybe four or five where we’re wondering how we’re going to get out of it,” Hinshaw said.

At Cursive Labs, a “venture studio” working to roll out digital media startups, co-founder Jon Belmonte said Bootstrap Incubation has been “a great partner” since last year, when the firm participated in a $2.2 million investment round.

“They have taken the time to understand our business; as such they have been able to make several valuable introductions to potential customers and partners,” Belmonte wrote in an e-mail. “While their primary expertise clearly lies in healthcare and tech IT, [their] insights have been very helpful in our digital advertising industry…likely as a result of years of technology-related business and management experience.”

Other portfolio companies are similarly appreciative. “They really have been great in doing everything they can to help us get going,” said CEO Kevin Lustig, citing marketing guidance that led him to re-brand the company known previously as Assay Depot. The company operates an online marketplace that enables scientists to hire contract research organizations for specific R&D projects. Bootstrap led a Series B round two years ago that raised $3.4 million for the company.

“We need to grow the venture community in San Diego,” Lustig added. “Their idea is to help bootstrap new companies—so maybe they can bootstrap a new fund on that side.”

(Photo of Solana Beach, CA, by Caitlin Bigelow)