all the information, none of the junk | biotech • healthcare • life sciences

Madison’s Healthtech Cluster: The Rise of Epic and Everybody Else

Xconomy Wisconsin — 

Healthcare, agriculture, and manufacturing remain the bread and butter of the private sector in Madison, WI, and the surrounding region, but healthcare IT has arguably become the area’s most buzz-worthy industry.

Today, Xconomy is adding to the conversation about healthtech’s ascent in the local economy. A new analysis of data gathered by the Madison Region Economic Partnership (MadREP) found that there are at least 43 healthtech companies in Dane County employing around 10,000 people. (The list may not be comprehensive, so e-mail us if we missed any companies.)

The data primarily come from business database ReferenceUSA. Xconomy supplemented MadREP’s research with additional information and used it all to create a detailed list (see bottom of this story) and a map of the area’s healthtech companies that can be viewed by clicking here. (Disclosure: MadREP is an Xconomy underwriter, but our coverage is determined independently by our editors.)

The research reinforces the popular narrative of Madison’s healthtech scene from the past few years. The gist is that fast-growing Epic Systems undoubtedly remains the anchor of the local sector, but more healthtech companies are constantly popping up (some either directly or indirectly because of Epic’s presence) and are building solid, if not yet gargantuan, businesses here.

Epic, the 36-year-old electronic health records giant, employs between 5,000 and 9,999 people on the outskirts of Madison, according to MadREP research. The wide range is a result of the way ReferenceUSA tracks and groups companies of different sizes. Recent news reports have pegged Epic’s current employee count at 8,000.

Take Epic out of the equation, and Madison still has at least 1,500 people, and perhaps as many as 5,000, working in healthtech. Those aren’t huge numbers, but they’re encouraging to observers like Michael Gay, MadREP’s senior vice president of economic development, who has closely watched the local healthtech cluster pick up steam in recent years. “To be honest with you, the list is impressive considering that really all of this has happened in the last decade, or a lot of it has,” he says.

Epic, despite being the proverbial matriarch of Madison healthtech, has experienced its most explosive growth in the past several years as it has capitalized on the federally subsidized shift from paper to digitized medical records. Meanwhile, 30 of the 43 companies on our list were founded within the last 10 years—21 of those since 2010, by Xconomy’s count.

The investment mix for Wisconsin Investment Partners (WIP), a Madison-based angel group that is the most active in the state, started to shift toward more healthtech companies around 2011, co-manager Andy Shrago says. WIP has invested in four companies on our list, plus at least one other healthtech company that’s not on the list because it’s based outside the region.

Those deals have come amidst a rise in healthcare IT companies nationwide, as entrepreneurs try to use software to make healthcare “better, faster, cheaper,” as Shrago puts it.

Healthtech has “definitely become a bigger part of the portfolio,” Shrago says. “It’s not so much that we have changed what we invest in, it’s that the market has changed what we’re seeing.” That includes “a lot of interesting ideas” coming out of Madison’s “strong” healthtech cluster, Shrago says.

Some of the biggest bets placed on Madison healthtech companies include more than $38 million in venture capital for Nordic Consulting Partners, $23 million raised by Propeller Health, and about $14.4 million for Wicab.

The biggest catalysts for the local scene, Shrago says, are Epic, which recruits lots of young, talented people to the area, many of whom quit after a few years and sometimes decide to create their own healthtech startups in Madison; a well-respected computer science program at the University of Wisconsin-Madison; and the entrepreneurial culture that Madison has developed.

“This is a sector where you can choose to be anywhere, and these companies choose to be here,” Gay says.

It’s worth mentioning that neither Shrago nor Gay could recall any large healthcare IT companies that have abandoned Madison for greener pastures in other states—a problem that has at times stunted the growth of other industries in Wisconsin, such as biotech and some types of software.

Madison will need its core healthtech companies to stay home if the growth seen over the past decade is going to continue. Among other challenges, it will also need its up-and-coming startups and small businesses to make the leap from a handful or a few dozen employees to hundreds or thousands of people. A few acquisitions or initial public stock offerings by local startups would also help boost the ecosystem and raise Madison’s profile on the national stage.

Shrago and Gay, for their parts, believe that Madison’s healthtech scene will look a lot different in 10 years—in a good way.

“I think that when we look back in five years or 10 years, there will be a lot of people who say, ‘Gee, who knew that Madison would become this kind of powerhouse in this space?’” Shrago says.

Before we dive into the full list of companies, here are three takeaways from the data:

1. Diverse company mix: We defined healthtech broadly, basically including any companies that use software to affect healthcare, whether it’s hospitals’ administrative operations, the practice of taking care of patients, or even educating medical professionals. We included hardware companies, as long as the physical product integrates with software. We also included a few services companies because the rise of consulting businesses that help Epic customers implement its software has played an integral part in growing the overall ecosystem. Finally, we included healthtech companies that have their headquarters based outside of Madison, but have a local office. (Again, the list may not be comprehensive.)

We found 29 software-only companies, 10 that have a hardware component, three software consulting companies, and one that does consulting and builds its own software. At least 15 of the companies are focused either entirely on electronic health records, or interact frequently with such records as part of their businesses—which seems to be more evidence of Epic’s impact.

Local companies’ software products include Healthfinch’s programs that aim to streamline routine hospital tasks like completing prescription refill requests; HealthMyne’s data analytics software and search engine that can comb hospitals’ vast stores of electronic health records and medical images; and Forward Health Group’s Web-based software that gathers data on large groups of patients from disparate sources and presents it in more easily digestible formats.

Local hardware examples range from Propeller Health’s data-tracking devices that snap on to medication inhalers, to Kiio’s sensors that are used for measuring physical therapy progress.

2. Location clusters: The companies’ offices are mostly located where one would expect. The heaviest concentration is around the Capitol Square, which is becoming a hub for software startups. There are also a few companies sprinkled near the UW-Madison campus and in the University Research Park. One cluster of companies that is perhaps surprising is the group located west of the U.S. 12 beltline, near where Madison borders Middleton.

3. Mostly small companies: The most common employee count range was 20 to 49, with 12 companies of that size. That was encouraging to Gay, who views those companies as survivors of the startup stage and on the cusp of rapid growth. “It doesn’t matter what industry sector we’re talking about, those are the companies you build on,” he says.

The second-most common bracket was companies with five to nine employees. There are 10 companies in that category.

The list only includes four companies with more than 100 local employees.

Here is the full list of companies. The data sources include ReferenceUSA, CB Insights, SEC filings, company websites, and other research conducted by Xconomy and MadREP. Some of the employee counts from ReferenceUSA could be as much as two years old, MadREP says, so the numbers might not be up to date. (Click here to see a map of all the companies.)

NameLocal employeesHQ in region?Venture capital raised to dateMain focus
AltusCampus14Yes> $870KSoftware
BlueTree Network20 to 49Yes> $240KSoftware consulting
Branch220 to 49Yes$440KSoftware
Castlight Health5 to 9No> $178M. IPO in 2014.Software
Catalyze10 to 19Yes> $6MSoftware
Clemetric20 to 49YesNoneSoftware
Dock Technologies6Yes$250KHardware
Epic Systems5,000 to 9,999YesNoneSoftware
Forte Research Systems50 to 99YesNone. Primus Capital acquired undisclosed stake this year.Software
Forward Health Group10 to 19Yes$7.3MSoftware
GE Healthcare500 to 999NoPublicly tradedHardware
Healthfinch20 to 49Yes$2.8MSoftware
Healthgrades250 to 499NoIPO in 1997. Acquired by Vestar in 2010.Software
HealthMyne20 to 49Yes$5.25MSoftware
Health eFilingsDeclined to discloseYes$934,500Software
HighFive HealthDeclined to discloseYesDeclined to discloseSoftware
Influence Health20 to 49No$6M. Acquired by Silver Lake Sumeru and Essex Woodlands in 2012.Software
Kurbi Health4YesNoneSoftware
Medical Cyberworlds5 to 9YesNoneSoftware
Moxe Health5 to 9Yes$100KSoftware
Natus NeurologyDid not respondNoPublicly tradedHardware
NavGate Technologies20 to 49YesNoneSoftware
Nordic Consulting Partners50 to 99Yes$38.3MSoftware consulting
Pharmacy OneSourceAbout 75NoNone. Acquired by Wolters Kluwer Health in 2010.Software
Philips Healthcare50 to 99NoPublicly tradedHardware
Propeller Health20 to 49Yes$23MHardware
Redox5 to 9Yes$400KSoftware
RevolutionEHR5 to 9Yes> $1.4M. RevOptix acquired majority stake in 2014.Software
Sensori5 to 9YesNoneHardware
Singlewire Software20 to 49YesNoneSoftware
Swallow Solutions6Yes$4.2MHardware
Symphony Corp.85YesNoneSoftware and consulting
Updown Technologies5 to 9YesNoneSoftware
Vistrata1 to 4YesNoneSoftware
Vonlay> 150NoNone. Acquired by Huron Consulting Group in 2014.Software consulting
Wellbe10 to 19Yes$4MSoftware
Wellsys5 to 9YesNoneSoftware
WITS(MD)Declined to discloseYes$1.6MSoftware