From Bootstrap to VC: Appature Doubles Size in a Year, Looks for Next Defining Moment in Health IT

What happens to a scrappy, profitable startup after it decides to take its first round of venture funding? Cynics might say the founders will give up too much control to venture capitalists, focus on growth while sacrificing profits, and try to make a splash in a bigger market before it’s ready.

Seattle-based Appature would say none of the above.

So far, at least, the healthcare marketing software company doesn’t seem too fat and happy with itself. On a recent visit to Appature’s offices in downtown Seattle, chief executive Kabir Shahani and chief technology officer Chris Hahn gave me the lowdown on how the company is working closely with its investors to grow responsibly. That includes adding some key new staff members (see below), and finding ways to attract new customers without spending huge amounts of cash.

What makes Appature unusual is that it was already a successful, bootstrapped company when it decided to pursue a dream of capturing a bigger market, which required taking venture capital. But that kind of experience is starting to become the norm in venture-backed software startups. Gone are the days of pre-revenue companies getting fat Series A checks, just because VCs want in on a fad. In Appature’s case, first came the profits, then the Series A check. And it has used the cash wisely. Appature has doubled in size over the past year, growing to about 20 employees. The company hit a rough patch in 2009, like most, but now appears to be back on track for major growth.

Here’s the quick back story. Shahani and Hahn founded Appature in early 2007. They had met previously at Seattle-based social networking startup Blue Dot. The basic idea behind Appature was to make marketing and customer relationship management more efficient in the healthcare industry through software. They quickly found paying customers and became profitable in their first year, while growing slowly. Then, last December, the company raised $3.5 million in first-round funding from Seattle-area investors Ignition Partners, Madrona Venture Group, and Founder’s Co-op.

Appature’s software helps companies in healthcare, pharmaceuticals, medical devices, and consumer health and wellness deliver targeted marketing campaigns, track marketing activity and performance, and learn about their customers via sophisticated business intelligence and analytics tools. As Shahani explained at an Xconomy event earlier this month, Appature can help healthcare companies reach doctors and other customers more directly and effectively through the Web, social media, e-mail, direct mail, trade shows, and other marketing channels. “It’s about building the right workflow around the doctor’s day,” Shahani said. “How do I streamline all that information that’s coming in? For big companies, how do you get the right message to [doctors and healthcare providers]?”

What he means is that many doctors are under pressure to see more patients per day, and spend less time with them, to get the kind of insurance reimbursement they need to run their offices. Then there’s the deluge of clinical data and medical publications that they need to keep up with. It’s all made doctors busier than ever, and has made it hard for healthcare sales reps to spend much time to get to know them and what their patients really need. So, healthcare companies need to be more strategic … Next Page »

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