Tech Article for You

As an M & A advisor, we regularly dialogue with the top executives in the industry. We have to chuckle when I reach a decision maker with a large HIT company and he says, “We have a corporate policy that we do not buy companies.” Does this guy read the industry publications? Did he miss the latest HIMSS Conference? Things on the first floor of the San Diego Convention Center were pretty much the same - the usual suspects. The convention, however, had grown to 1100 exhibitors and the overflow required almost the entire second floor.

That was fun. What energy. It kind of reminded me of the old dot com days. Lots of money, talent, ideas, hope, energy, and potential successful businesses. This is the innovation environment in HIT and any large company that feels it can keep pace with this force through internal development efforts alone is headed down the path of extinction.

Almost everyone will agree that information technology will be a primary driver of controlling costs in the healthcare industry. There is, however, a huge paradox in this market. The institutional buyers of that technology are relatively conservative late adapters. This prevents the expected innovation and commercial success that should naturally follow the resources and passion of these HIMSS innovators.

These entrepreneurs respond to a market need and achieve encouraging initial success from the early adopters. They soon hit the wall and are not able to “cross the chasm” from a small group of early adaptors to general market acceptance from the conservative majority. There is little economic value created when good technology is in the control or a failing company and the technology never reaches broad acceptance.

Most of the blockbuster new products are the result of an entrepreneurial effort from an early stage company bootstrapping its growth in a very cost conscious lean environment. Think of some of the new developments from PACS companies. The big companies, with all their seeming advantages have a very high internal cost structure for new product introductions and the losses resulting from those failures are substantial. Don’t get me wrong, there were hundreds of failures from the start-ups as well. However, the failure for the edgy little start-up resulted in losses in the $1 - $5 million range. The same result from an industry giant were often in the $100 million to $250 million range.

For every IDX or eMerge there are literally hundreds of companies that either flame out or never reach a critical mass beyond a loyal early adapter market. It seems like the mentality of these smaller business owners is, using the example of the popular TV show, Deal or No Deal, to hold out for the $1 million briefcase. What about that logical contestant that objectively weighs the facts and the odds and cashes out for $280,000?

As we contemplated the dynamics of this market, we were drawn to a merger and acquisition model that is used in the networking technology market by Cisco Systems. We believe that model could also be applied to great advantage in the Healthcare Information Technology industry. The giant networking company, is a serial acquirer of companies. They do a tremendous amount of R&D and organic product development. They recognize, however, that they cannot possibly capture all the new developments in this rapidly changing field through internal development alone.
Cisco seeks out investments in promising, small, technology companies and this approach has been a key element in their market dominance. They bring what we refer to as smart money to the high tech entrepreneur. They purchase a minority stake in the early stage company with a call option on acquiring the remainder at a later date with an agreed-upon valuation multiple. This structure is a brilliantly elegant method to dramatically enhance the risk reward profile of new product introduction. Here is why:

For the Entrepreneur:

1. The involvement of Large HIT Investor - resources, market presence, brand, distribution capability is a self fulfilling prophecy to your product’s success. The halo of the big secure company helps you cross the chasm to the conservative majority institutional customer.

2. For the same level of dilution that an entrepreneur would get from a VC, angel investor or private equity group, the entrepreneur gets the performance leverage of “smart money.” See #1.

3. The entrepreneur gets to grow his business with Large HIT Investor’s support at a far more rapid pace than he could alone. He is more likely to establish the critical mass needed for market leadership within his industry’s brief window of opportunity.

4. He gets an exit strategy with an established valuation metric while the buyer/investor helps him make his exit much more lucrative.

5. As an old Wharton professor used to ask, “What would you rather have, all of a grape or part of a watermelon?” That sums it up pretty well. The involvement of Large HIT Investor gives the product a much better probability of growing significantly. The entrepreneur will own a meaningful portion of a far bigger asset.

For the Large HIT Investor:

1. Create access to a large funnel of developing technology and products.

2. Creates a very nimble, market sensitive, product development or R&D arm.

3. Minor resource allocation to the autonomous operator during his “skunk works” market proving development stage.

4. Diversify their product development portfolio - because this approach provides for a relatively small investment in a greater number of opportunities fueled by the entrepreneurial spirit, they greatly improve the probability of creating a winner.

5. By investing early and getting an equity position in a small company and favorable valuation metrics on the call option, they pay a fraction of the market price to what they would have to pay if they acquired the company once the product had proven successful.

These successful transactions can benefit the small entrepreneurial firm looking for the “smart money” investment with the appropriate growth partner. At the same time benefitting the large industry player looking to enhance their new product strategy with this creative approach. This model has successfully served the technology industry through periods of outstanding growth and market value creation. Many of the same dynamics are present in the Healthcare Information Technology industry and these same transaction structures can be similarly employed to create value.

Tags: business broker, buy business, healthcare information technology, sell businessbusiness broker, buy business, healthcare information technology, sell business

Share This

Do you need access to your email (ALL of your email) from anywhere?

Are you concerned that you are only a hard drive crash or a stolen computer away
from losing all of your email?

Are you in the dark when it comes to transferring your email from an old computer
to a new one?

If you answered yes to any of those questions, you need to understand two
important email-related words:

-POP (Post Office Protocol)
-IMAP (Internet Message Access Protocol)

Don’t worry about remembering exactly what they stand for. As it is with most
technology acronyms, the exact meaning doesn’t really matter. It’s the underlying
idea that is important. All you need to remember is that those two acronyms decide
where your email lives.

With POP, your email lives on YOUR computer. With IMAP, your email lives on the
computer of the company that provides your email service.

No matter which you choose to use, you will read your email in the same way.
Things will pretty much look the same from your perspective either way.

Choosing whether POP or IMAP is right for your real estate business is something
you decide based on these key things:

1. The setup of your email service provider (do they offer you a choice?).
2. Whether or not you need access to your email (all of your email) from anywhere.
3. Do you want to be responsible for the security of your email or do you want a
professional tech person to watch over it?

Provided that your email service offers IMAP mail, you will need to make your choice
between POP and IMAP when setting up the program (Outlook, Thunderbird, etc.)
you use to read email.

Here is a quick rundown of the main differences between the two setups:

********
POP
********

PROS:

-simple and quick, even dial-up users can download email without too much
waiting
-most email programs default to using POP email so no extra knowledge is required
to set it up
-requires less space on your email provider’s computer (resulting in cheaper rates)
since you are constantly moving it onto your own hard drive

CONS:

-your email is downloaded to and stored on your computer only, after which it is
viewable from your computer only
-the safety and security of your email depends on how well you maintain the
security of your computer and how often you backup your data
-transferring email from one program to another or from one computer to another
can be a huge headache

********
IMAP
********

PROS:

-email is not downloaded to your computer - all of your email is stored on the
computer of your email service provider
-email security and backups are monitored by your email provider; if your computer
meets an early death, your email will be unaffected
-your email (including all of your folders and subfolders) is accessible from any
internet connected computer
-transferring your email from one computer to another or from one email program
to another is quick and simple

CONS:

-requires you to be connected to internet to read your email
-probably not a good idea for dial-up users
-takes up more space on your email provider’s computer as the amount of mail
stored there grows and grows (resulting in slightly higher rates)

Here’s the million dollar question:

How do you choose which one to use?

Just ask yourself two questions:

1. Do I need/want to view my email from any computer?
2. Do I want to ensure that I will never lose my email due to a computer crash?

If you answered “Yes” to one or both questions, you should look into IMAP. If you
answered “No” to both questions and regularly backup your email yourself, you
should probably stick with POP (that is most likely what you are using now).

Regardless of which email setup you choose, understand that as your real estate
business changes, you always have the option to change your technology setup to
support your new goals.

Tag: real estate technologyreal estate technology

Share This

The ’70s and the ’80s could be easily described as the ‘computer war’. Every company had a new kind of computer, better than the last that they wanted to change the world. Everyone knew it was only a matter of time before one was adopted as the standard, with all the advantages for software compatibility this would bring - and they were desperate for it to be their model that made the big time.

In the ’70s, two computers nearly became dominant: the Apple II and the Commodore 64. Both of these computers sold in the millions, inspiring a whole generation - they were used for everything from office tasks to games.

It was in 1980, however, that IBM launched its IBM PC, and things really went crazy. IBM’s PC wasn’t patented. IBM went to a small company named Microsoft to get an operating system for this computer, and ended up with DOS, but Microsoft was willing to license DOS to anyone else who paid their fee. By 1984, ‘IBM PC compatible’ computers were available, and a de facto standard was born. Software makers could finally write their programs for one operating system and one hardware configuration - and anyone computer that didn’t follow the specification to the letter was quickly left with no programs to run.

In 1990, Microsoft released Windows 3.0 (the first version of Windows to be really successful), and the PC’s lock on the marketplace was set in stone. The release of the Pentium and Windows 95 made it finally the fastest, cheapest and easiest system around, and it quickly stopped making sense to develop software for anything else.

From then on, the PC was the dominant computer - today, it is estimated to have between 95% and 98% of the market, with almost all the rest being held by Apple Macintosh computers.

Tags: computers, PC, Technologycomputers, PC, Technology

Share This