Tackling the next big tech frontier in healthcare
By CO Staff @canadaone | March 2, 2016
This article is sponsored by BDC.
Rick Stroobosscher, founder and chief executive of Karos Health, has one word to describe his company’s revenue stream: “lumpy.”
This successful Waterloo-based company develops web collaboration tools for the healthcare sector. Sales cycles are long—12 to 18 months. Customer contracts are even longer, typically five to eight years.
Stroobosscher’s team is always working to secure a mix of large and small capital projects. “The key to success is to have different revenue streams with different sales cycles and volumes,” he said.
Still, this isn’t always possible. Like many fast-growing tech businesses, Karos Health has had to take a broader look at the financing options available beyond venture capital investment. It has turned to angel investors, as well as working capital loans obtained through the local office of the Business Development Bank of Canada (BDC).
Making the grade
These have helped smooth out the lumps in the company’s revenue stream and provide additional cash flow. This has been critical in enabling Karos Health to make the right investments, at the right time, in the people and technology needed to grow.
“It’s always helpful to find partners who are interested in supporting you,” Stroobosscher said. “The BDC loans allowed us to invest in the people essential to our R&D without having to wait for a tax credit the following year.”
But getting those loans depends on having a business with legs to stand on.
“It’s the combination of Karos Health’s strong management team, innovative product and strong support from the market in terms of sales that makes the company the ideal client for BDC to support,” said Andrew Verlaan, Account Manager at BDC’s local Kitchener-Waterloo office.
Tackling an emerging market niche
Stroobosscher already had a varied career in engineering and integrating healthcare IT systems before founding Karos Health. He first worked with Mitra Imaging, and then Medicalis Corp., rising to the position of CTO with both companies. In the mid-2000s, he decided to create his own business around what he saw as the next big market opportunity.
“What I saw missing was the ability to share healthcare information across hospitals in a city, across an organization or between regions,” he said. “This was the next big frontier that needed work.”
He hired his first employee in 2008, brought on his first partner, and got to work on Karos Health’s first contract—a system for sharing medical imaging across Quebec.
To gain traction in a heavily regulated industry, Karos Health instituted a rigorous quality management system out of the gate to manage the design, documentation and delivery of its products and services.
Strength in people
“The strength of our company is really in the quality of the people we have,” Stroobosscher said. “If you treat people with dignity and respect, that gets returned and they take ownership of what they do.”
Karos Health now has 55 employees between Canada and Denmark. In 2014, the company expanded to Europe, with the acquisition of Denmark’s Medical Insight. It was the perfect fit. Karos had the back-end architecture for sharing clinical images and documents with its Rialto platform. Medical Insight’s EasyViz provided the diagnostic imaging and viewing tools for the user on the front end.
To attract and retain great people, Karos offers ownership in the company to every employee, as well as profit sharing and an unlimited paid vacation time policy.
A business built on lasting relationships
But in a B2B industry fuelled by long-term strategic relationships, customers and partners come a close second to employees.
“This is still a customer-service oriented business,” Stroobosscher said. “Sales are often based on references and reputation. We always have to be focused on serving customers well, including our existing customers. The last thing we want is to have new customers coming in the front end while existing customers are going out the back end.”
Four lessons from a fast-growing B2B technology company
1.Diversify your financing sources. Aim for a mix of venture capital, angel money and term loans.
2.Get creative to attract and retain the best people. Karos Health offers ownership in the company to every employee, as well as profit sharing and an unlimited paid vacation time policy.
3.Focus on building long-term strategic relationships with customers and partners.
4.Put together a rigorous quality management system to manage the design, documentation and delivery of your products and services.