Appature Raises $3.5M, Led by Ignition and Madrona, to Expand Healthcare Customer Base

Well, it’s about time we confirmed this deal. Seattle-based Appature is announcing today a Series A equity financing round, worth $3.5 million, co-led by Ignition Partners and Madrona Venture Group. It’s an all-Seattle investor group, as seed-stage fund Founder’s Co-op also participated in the financing. Appature, which has generated some buzz in recent months, makes marketing and customer relationship management software for the healthcare industry.

Back in September, we reported that the company was close to landing its first venture round. The deal is interesting because Appature is already profitable and has big customers like Johnson & Johnson and Microsoft Health Solutions Group. The company was founded in early 2007 by Kabir Shahani and Chris Hahn, and has been bootstrapped to this point. It goes to show how much market traction software companies need to have before getting funded by VCs these days.

The financing is also significant because it represents the first time Madrona and Ignition, two of the region’s heavy hitters, have come together to invest in a true first-round deal. Richard Fade from Ignition helped lead the deal; he was previously an angel investor in Blue Dot, a social networking startup where Shahani and Hahn originally met. Tim Porter is the lead investor from Madrona, and Chris DeVore represents Founder’s Co-op.

“We’re excited to have the capital to grow our business,” says Shahani, Appature’s CEO. “This is really going to enable the company to do what we need to, which is commercialize our business.” He adds that the new investors will help the company stick to its plan, not take it in other directions. That means continuing to focus on helping companies in the healthcare industry deliver targeted marketing campaigns, track marketing activity and performance, and learn more about their customers online.

But an obvious question is why Appature chose to raise funding now—and why it’s so critical to the startup’s strategy. Shahani says it’s all about taking the company’s “quality product to the rest of the world” and shedding its label of being the “world’s best-kept secret.” In Madrona and Ignition, he saw the kind of expertise in sales and marketing software, the kind of “intellectual horsepower,” that could help the company get a much larger customer base.

“When you’re reinvesting dollars [revenues], you can only grow at a certain clip,” he explains. That means you can only sign up so many customers per quarter, target a limited number of new customers, and go to one or two big trade shows a year, instead of five or 10, for example. All of that is about to change, he says.

That Appature is doing it with all homegrown investors—despite plenty of discussions with Silicon Valley and East Coast venture firms—is a plus, in Shahani’s view. “We’re very committed to the region,” he says. He adds that Appature wants to be a source of significant job growth in the Seattle area.

It all sounds pretty ambitious—especially given the modest amount of funding. But Shahani says the company will be hiring, primarily for sales and marketing positions, over time. “We’ve always taken a stance of fiscal responsibility. Our eyeballs will be on margins very tightly,” he says. Appature currently has 11 full-time employees.

In recent months, Appature has released a number of new features and side projects, including “sentiment analysis” that helps marketers monitor and understand people’s feelings on the Web about brands, products, and other topics. The company also has developed its own Twitter search engine called Chatterfly.

Gregory T. Huang is Xconomy's Editor in chief. E-mail him at gthuang [at] xconomy.com. Follow @gthuang

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