Practice Fusion Inc. added $23 million to its coffers as the company closed its Series B round.
The round was lead by Founders Fund, whose managing partner Peter Thiel was the first investor in Facebook.
Practice Fusion may not have the same implications for societal change as Founders’ most famous investment, but its electronic medical record system is adding users at a rate that’s faster than Facebook’s.
The San Francisco-based company makes a cloud-based EMR system that is advertising-supported and offered to medical practices for free, and its user base grew by 400 percent in 2009 and 500 percent in 2010, according to figures cited by the company. Much of that growth was spurred by the federal government’s HITECH Act, which allows physicians using EMRs to qualify for a $44,000 check as part of the stimulus package, even if the records system is free like Practice Fusions.
The new investmest will be used for customer acquisition, board member and A round investor Rebecca Lynn of Morgenthaler Ventures told MassDevice.
Right now the company is not focused on revenues, but growing the numbers of doctors who use its service, she said.
Facebook, by comparison, was not a profitable company until it reached 300 million uses about five and a half years after it was launched. Practice Fusion has an advantage over the world’s most populous social networking site because its advertising model is much more focused.
"There is purity within the community," CEO Ryan Howard explained to MassDevice last June.
"All the doctors on the platform had to be verified as doctors, so because of that, we can guarantee that advertisers are reaching the targets that they want to reach — specific specialists, for example. The advertising also takes place while the doctor’s at work and in the context of a patient visit, so he or she is a very high-value user," he said.
Right now the company doesn’t have specific goals for how much of the market they need to capture in order to break even or become profitable.
"I think we will continue to grow very strongly throughout this year and the upcoming year, and right now there is a low penetration rate," said Lynn. There is also a significant tail wind from the HITECH act funds, she added.
The company currently has 75,000 physician customers — serving 9.5 million patients — out of the approximately 800,000 doctors in the U.S. and 80 percent of those work in practices of 8 or fewer doctors, which are Practice Fusion’s target customers.
The 65-person company is quickly adding employees as as well. Its website currently lists 14 open positions, five of which are engineering jobs. In March , Practice Fusion promoted former PayPal Inc. executive Jason Portnoy to be the company’s CFO. Portnoy was VP of financial planning at PayPal Inc. and CFO and Clarium Capital Management LLC, both of which Peter Thiel founded.
Thiel and fellow PayPal alums Ken Howery and Luke Nosek launched Founders Fund in 2005. This investment is their first in Practice Fusion. The round was also supported by new investors Artis Capital Management and Glynn Capital Management. Series A investors Morgenthaler and Felicis Ventures also participated. The company plans to add two board members in association with the funding round, according to Lynn.
"Practice Fusion revolutionizes our interactions with the medical community, just as Facebook did for social networking," Thiel said in prepared remarks.
The fast growth of Practice Fusion may make it an acquisition target in the near future, but the growth could also bode well for an attempt at a public offering.
"I think that company will have a number of possible exits and they’ll have opportunities all along the way to think about the timing of that exit, but for now that isn’t the conversation the board’s having," Lynn told MassDevice.
Howard told MassDevice last June that he was "planning to run the company as fast, long and hard as [he] possibly can."
"Based on that and based on revenue ramping up the way it is, and depending on what the investors want to do, I think this company becomes very viable as a public company, but we’ll cross that bridge when we get to it," he said.
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