Aaron Block: We have raised $2.3 million of angel investment.

Sramana: Congratulations, you have done a fantastic job of building a business with very little capital.

Aaron Block: I am sure you advise your incubator companies on the value of bootstrapping. It is very sexy to interact with venture capital, but I think it is more important to give yourself a runway.

Sramana: I completely believe in capital-efficient business practices. That is not the method of Silicon Valley, and sometimes people think entrepreneurship means financing. I believe entrepreneurship means customers, revenues and profits. This is a difficult concept for young entrepreneurs to grasp.

Aaron Block: All of our key people are shareholders. We give straight stock grants. We talk about what dilution and fundraising mean as we balance the need to grow. Every time you raise money, you are selling a piece of your company, and the people you are selling to may or may not share your values. You need to make sure you have everyone pointed in the same direction. We hand-pick our angel investors to make sure we have people who embrace the same ideology. I can’t take any credit for the success of this business. We have a bunch of smart people who have the same shared ideology as we.

Sramana: What is your strategy going forward? Do you want to grow faster with the aid of external financing now that you know the mechanics of the business?

Aaron Block: We are keeping all options open. We are not raising money now. I have been through that a few times, and it can be very distracting. In our business it is important to keep your head down and grow. We believe that having a healthy, profitable, fast-growth business is the most important thing. We will give up top-line growth to maintain this profitability. Right now we are content, but that does not mean that we will not address this later this year. We are a retail business and that does mean we are a bit seasonal. We are going to have a big push coming up soon. Once we get through that, we can sit down and reevaluate our options for 2013 and 2014.

We are just a bunch of pragmatic Chicago guys who are trying to build a great business. It is refreshing to hear someone else who shares those values, especially since you coach them. I have spent a bit of time on your site, and you do great things. I talk to a lot of people who get caught up in hype. Good luck to you.

Sramana: I look forward to keeping in touch. Congratulations on your success; you have built a great company.

With a string of conceptual terms such as Web 2.0, Enterprise 2.0, SaaS 2.0, Project Management has also found its foothold in the term Project Management 2.0.

It all started with the term Web 2.0, which denotes the evolutionary phase of the World Wide Web where it allowed users to participate in information sharing as well as collaboration both as creators and consumers of content. Similarly, Enterprise 2.0 liberated employees from using legacy communication and productivity tools. It helped employees, customers and suppliers to collaborate and organize information. And SaaS 2.0 is known more as the next generation business management platform that can compete with traditional enterprise applications and not just as an application utilized in a hosted format.

The ‘2.0’ classification indicates the generational progress of concepts and technologies that have been enabled due to the emergence of Web 2.0. It is an underlayer for crucial technology development trends from 2012 onwards, and indicates how future organizations will have to manage more distributed teams and keep them connected.

Enterprise 2.0, Agile Methodologies and SaaS 2.0 together have given rise to the concept of Project management 2.0.

The ‘2.0’ terminology in Project Management discipline points to the social media zeitgeist that promises to grip this discipline as well. Project Management 2.0 is more of a cultural change that will have to be built-up around the traditional discipline of project management. Startups and SMBs (or any small and distributed team in any business unit) will definitely gain a lot from creating cultural change by adopting Project Management 2.0, as it will not only give them a chance to take advantage of other SaaS applications and globally dispersed teams but also help them reduce time-to-market for their new ideas and be agile and more responsive to the needs of their customers.

So, how do we go about creating cultural change with Project management 2.0?

Use the Right Tools

Whether you decide to go for Agile SDLC, traditional Waterfall SDLC or a mix of both, you will need to use the right project collaboration tools to manage the project. Let us assume that you want to launch a startup. It is highly likely that you will start working from your parents’ or your friend’s garage, until you build a prototype and start getting paid customers. You and your co-founder may not be able to meet all the time and will need a project management tool that facilitates project management discipline virtually. A Web-based project management tool would be the most prudent choice.

The tool must have features such as wikis, an intelligent ticket management system, milestones tracking etc., so that your small and distributed team can work effectively. Apart from these essential features, the tool must have collaborative features such as wall, activity stream, email integration and document sharing embedded in it to facilitate building a collaborative culture.

Adopt the Bottom-Up Approach

Perhaps the single best strategy for creating a collaborative culture in project management is to adopt the bottom-up approach. According to Eight Ways to Build Collaborative Teams in the Harvard Business Review, the culture of collaboration is created best when it comes from the top executives. It fosters a sense of community within the team and engenders higher creativity.

But the pure bottom-up approach has been criticized for its lack of control and clarity. Perhaps a mixed approach is best, depending upon the nature of their project.

Today, the business requirements of organizations have changed a lot. Executives need to match their business objectives strategically with how their businesses operate and get structured. Business objectives such as quick response to market changes, keeping costs low and retaining the best talent need to be strategically aligned with lean organization structure, agility and virtualization, in order to beat the competition. To achieve all this, there has to be synchronization with collaborative culture.

The aforementioned conditions will ensure easy accessibility and free flow of information sharing that will in turn foster creativity.

Project managers have to be the facilitators of communication and be able to utilize the knowledge from within their teams to be able to reduce operational costs and deliver superior quality products or services. They can do this by being proponents of Project Management 2.0.

AM: Typically in these private equity rollups of software companies, they’re not all that effective. The top talent will leave right away. Those two companies still exist [but] neither is competitive in the marketplace today.

SM: OK. All right. Those are on the private equity side, and then you’ve got the two big acquisitions by Oracle and SAP, and then you have the independent companies. What do you think is happening in this space now?

AM: The thing that’s happened over the last year is Success Factors and Taleo made a series of acquistions, and then over the last few months, they both got acquired. So, you’ve had two of the leading companies in the space become acquisitive prior to being acquired, which means there’s a lot of integration work to be done both from those companies down, relative to the companies they acquired, and up, relative to Oracle and SAP, which just acquired them.

You have a big shift in the marketplace now where, from our perspective, we’re the last man standing in integrated talent management. Our competitors now are the ERP players, so we compete.

SM: That’s not entirely true, though. Where would you put Workday?

AM: Workday is a partner of ours. We have some overlap around performance management. But we also complement each other in other areas.

SM: What does the small company landscape look like to you? We still see a lot of activity in various social, recruitment, there are all sorts of broad talent management players in the entrepreneurship world. What is on your radar that’s interesting?

AM: There were two companies that were more interesting than others on the small business side of things:  Rypple and Sonar 6. Salesforce.com bought Rypple as an extension to Chatter. And we bought Sonar 6 as the base of our small-business operations. There’s a lot of other companies out there, but I would describe them as very feature-specific. They tend to do one specific feature or one piece of the puzzle as [opposed] to a full suite that deals with talent management or even with regard to what we would define as a cloud. We have a recruiting cloud, a performance cloud, an extended enterprise cloud. There are many companies out there today sub $5 million in revenue that are focused on one feature within one of those clouds. We don’t view those as competitors.

SM: No, of course not. Those feature acquisitions could be interesting to plug the gaps in your own feature set, right?

AM: Our product has been built entirely organically. Sonar 6 is kept separate as its own product for the small-business market.

SM: Your main product is an enterprise product, right? So, you brought in Sonar 6 as a different product to service a different market altogether?

AM: That’s right. Our product is organically built, so we strongly favor building rather than buying as it comes to features and incremental functionality. We have a significant advantage today in that we are the only organically built end-to-end talent management solution out there, which provides significant benefit to our end users and clients. It has given us a real advantage in the market. We don’t want to change or weaken that advantage, so we aggressively have invested in development internally and are continuing to innovate and develop our suite.

SM: What is the primary positioning pitch that you have against large competitors like Success Factors and Taleo?

AM: Our view today is that the client has a choice between an ERP suite or best-of-breed solution. It’s worth mentioning that prior to this, it was a three-horse race between us, Taleo and Success Factors. All three public SaaS companies; all three significantly larger than any of the other companies in the space. I’m not counting Workday as an integrated talent company. They do have performance management.

SM: Workday, size wise, is also much larger than Cornerstone, right?

AM: From a bookings perspective, yes. We are continuing to grow faster than any of the other talent management companies. We were smaller than Success Factors and Taleo but growing much faster … prior to their getting acquired. It was really a three-horse race. Since the acquisitions, it’s become two distinct two-horse races. If a company is a global enterprise, it’s an SAP shop. So, they use SAP for all of their back office software. They’re highly unlikely to bring Oracle to the deal. Conversely, if it’s an Oracle shop, they’re highly unlikely to bring SAP into the deal. In most cases today, instead of being three competitors, there are only two competitors at the end of the sales cycle, and that would be us as the best-of-breed solution and one of the ERP guys as the other option.

Capitalizing on this trend, San Francisco, California–based Jellyfish Art sells specialized aquariums and products that allow jellyfish to thrive in the comfort of their owners’ homes. Jellyfish have become popular to exhibit because of their unique nature and mesmerizing and soothing movement. Personalized jellyfish aquariums from Jellyfish Art have been met with strong demand and are highly sought after as a new form of interior decoration. The aquariums are also used as sources of light and focal points in offices and other spaces.

Jellyfish exhibits opened in public aquariums several years ago when scientists first discovered how to display jellyfish in captivity by using tanks with special water flow patterns. Jellyfish can now be found in virtually all public aquariums. It quickly became clear people loved to watch jellyfish, but there was no way for individuals to own jellyfish as pets in the comfort of their homes.

Jellyfish Art founder and CEO Alex Andon has a BS in biology and environment science from Duke University. He became fascinated with marine animals while free-diving through underwater tunnels in coral reefs during a visit to the British Virgin Islands. For a time, he worked for the Sea Turtle Protection Society of Greece, where he camped on beaches in Crete to protect sea turtle nests and hatchlings. Andon accumulated extensive experience in building aquariums for his own research projects at Duke and the University of Delaware. He founded Jellyfish Art on a platform of cutting-edge jellyfish husbandry techniques that have been developed over the past decade.

After much tinkering and experimenting, Jellyfish Art started selling its jellyfish tanks, food and jellyfish through its website to satisfy people’s growing desire to own the umbrella-like creatures, also known as medusas, as pets. Within two months, the company had sold roughly three thousand units. Andon chose to sell moon jellyfish because they are harmless to humans and inexpensive.

Although Jellyfish Art originally pitched its product as a luxury item, the founders discovered that the demand for pet jellyfish far exceeded their initial estimates. The general public was extremely interested in raising and enjoying jellyfish. So, Jellyfish Art created a product that was affordable, beautiful, and available to the masses.

Jellyfish cannot go into a standard fish tank because they would get stuck in corners and sucked into filtration intakes. Jellyfish Art’s signature Desktop Jellyfish Tank has a water flow pattern designed to keep jellyfish healthy and properly displayed. The company also makes customized frozen jellyfish food that’s high in fatty acids. Jellyfish are kept in stock at all times, so customers have a reliable supply.

According Andon, he and his company are literally creating a new market. Currently, Jellyfish Art has no direct competitors. There are competitors that sell fish and other animal life online (e.g., PetSmart, Petco), but no one sells specialized jellyfish tanks, live jellyfish, and food that’s tailored to maintaining happy and healthy jellyfish. Until Jellyfish Art, there was no company selling and making personal jellyfish tanks and shipping live jellyfish, which can be purchased easily online, to customers.

Jellyfish Art takes company culture seriously. The team members have a great bond both inside and outside of work, and they frequently meet up for out of work events such as playing basketball together, meeting for happy hours, eating meals together, etc.

Jellyfish Art targets men and women aged 30 to 45 years old who want a low-maintenance pet, a unique gift for someone who has everything, or a modern and fascinating interior decoration for their homes or offices.

The pet industry is a $60 billion dollar a year industry, of which the pet fish market claims $5 billion.  Jellyfish Art, still in its infancy, already earns more than $100,000 per month in sales and expects to exceed $1 million in revenue in 2012.

A jellyfish tank and accessories, without jellyfish, costs $285. Jellyfish Art’s single jellyfish kit, which includes a tank, accessories, jellyfish food, and one live moon jellyfish, costs $382. A three-jellyfish kit costs $499, and the deluxe kit, which includes three jellyfish, two red leg hermit crabs, and two cleaner snails, costs $709.

Instead of following the traditional funding route, Andon pitched Jellyfish Art on Kickstarter and raised $163,000. Because the company is profitable and growing, Andon is not actively pursuing funding at this time.

Jellyfish Art’s growth strategy includes diversifying revenue channels, providing its product for people in other countries, and developing new products related to its jellyfish aquariums and accessories.

Andon has no thoughts about exits. He and his team are passionate about what they do, and all of their time and effort is reinvested back into the business to, they hope, build it into the Amazon of the online pet industry.

Related Readings:
The 1M/1M Deal Radar 2010: SitStay, Lincoln, Nebraska
The 1M/1M Deal Radar: Dura Doggie
The 1M/1M Deal Radar: Camp BowWow 

Gogo’s Financials
Gogo organizes their business into two operating segments – commercial aviation and business aviation. The commercial aviation segment provides in-flight connectivity and digital entertainment solutions to commercial airline passengers through personal Wi-Fi enabled devices. The Gogo platform lets passengers subscribe to Internet services, watch Gogo-provided on-demand entertainment on a pay-per-view basis, and access additional content such as destination-based event ticketing, e-commerce, flight trackers, and travel and weather information.

The business aviation segment deals with selling equipment and services for in-flight Internet connectivity and other voice and data communications through Gogo Biz and Aircell branded products and services to original equipment manufacturers of private jet aircraft.

As of September 2011, Gogo’s services were available on 1,177 commercial aircraft, translating to approximately 85% of Internet-enabled North American commercial aircraft. In addition, they had contracts in place to add a further 525 planes to their install list. Gogo has more than 4.4 million unique registered users. They also had more than 700 Gogo Biz systems in operation and 4,600 aircraft with Iridium satellite communications systems in operation.

Gogo earns revenues through fees charged for Gogo Connectivity and services from their commercial aviation flyers. Subscribers can purchase individual sessions, monthly renewable subscriptions, and multiple session packages. In addition, the company generates revenues through advertising fees and e-commerce revenue share arrangements. Their business aviation segment earns revenues through the sale and installation of satellite and networking equipment and from subscriptions for in-flight Internet connectivity and other voice and data communications products and services.

Gogo has seen significant growth in revenues since launch. Revenues grew from $36.8 million in 2009 to $94.7 million in 2010, recording growth of 157% over the year. However, the company is still to turn in profits. In 2010, losses fell from $88.6 million a year ago to $44.9 million. For the nine months ended September 2011, revenues grew 89% over the year to $113.8 million. Losses narrowed from $42.7 million a year ago to $1.8 million. To date, the company has received $150 million in funding from investors, including Ripplewood Holdings and Oakleigh Thorne. They are now working on raising funds through a $100 million IPO expected later this year.

Gogo’s Growth Opportunity
Gogo still has enough growth potential. According to market data, since 2008, Gogo’s services have been made available to 355 million passengers. However, a mere 4%, or 15 million, Internet sessions were purchased during this period. The growth of the mobile devices will help push their revenues. Researchers agree that the demand for Internet in the air will continue to grow, but they are still not sure about the “fair value” of such services. Gogo themselves are still figuring that out. According to their reports for the nine months ended September 2011, Gogo earned a rater small $0.41 per passenger for their services. A year ago, that number was $0.26 per passenger and in 2009, they reported revenues of $0.15 per passenger.

Analysts have written at length about how airlines of today are looking for ways to differentiate themselves from their competitors, and Gogo may be able to provide that platform. Earlier this year, Delta Airlines announced plans to spend more than $2 billion in the next two years to upgrade planes, refurbish airport facilities, and expand their in-flight entertainment options. With new services such as Gogo Vision, their on-demand entertainment system, they could be looking at getting some of this money their way.

Gogo also has international expansion on the cards. They will work to leverage their strong commercial aviation partnerships and flexible technology to capitalize on the large transoceanic and international in-flight opportunities.

Aaron Block: Our proprietary shipping algorithm is something we think is very special and we covet it. Another interesting aspect of our business is that we have the majority of our operation is in Chicago even though we focus on the former Soviet Union. We have 55 employees between the two countries and more than 40 of them are based in Chicago. There are only four of us in the company who were not born in the former Soviet Union.

Sramana: You basically have Russians working in Chicago for an e-commerce company that sells in Russia?

Aaron Block: Correct. Most of them are immigrants, and some of them are here on assignment. Most of us in the executive ranks travel back and forth a lot. I spend a week or two there every month. The head of Russian operations spends one to two weeks in Chicago a month.

Sramana: What is the Russian marketing strategy? How many customers are transacting through your platform?

Aaron Block: This year we should do 200,000 orders.

Sramana: You are going to do $40 million on 200,000 orders?

Aaron Block: Yes.

Sramana: Wow. I assumed this was more of a consumer business, but those numbers are along the lines of a B2B business.

Aaron Block: It is a consumer business. The order values are very high.

Sramana: That is fascinating. Tell me more. Who are your customers?

Aaron Block: Our customers cut across the entire population. If you have money and want to buy goods, then you are going to be interested in shopping abroad because the supply is so far below the demand in Russia. Our customers range from one-off purchasers in small villages in Siberia to twenty-something cosmopolitan yuppies in St. Petersburg and Moscow. About half of our business comes from a combination of the Moscow and St. Petersburg regions. The other half comes from the rest of the country.

Sramana: Are there any other nuances to the Moscow and St. Petersburg customer base? How do you figure out whom to target when you market there?

Aaron Block: People are very brand oriented. We spend a lot of time focusing on brand preferences. We do a lot of digital marketing although television is on the horizon. That has been a great success venue for other online businesses in Russia.

Sramana: Traditionally consume marketing is defined by demographics. They have ages, disposable income, and regions. Do you know that data for your customers?

Aaron Block: I would rather not go into too much detail, but yes, we do know that data. Our customer base is primarily men. We have a very uncommon business. We have high-value orders, a predominantly male customer base, and a distribution that covers the entire country.

Seven months ago, I sat down to talk with Cornerstone CEO Adam Miller for my Entrepreneur Journey series. The company has grown a bit since then, as has the talent management space.  

Sramana Mitra: Hi, Adam. Just for context, why don’t you tell us about Cornerstone OnDemand and where you are today? We have covered you before, so we’ll bring that into the discussion. But where are you today in terms of revenue, business, what sectors you are catering to and so forth?

Adam Miller: Cornerstone OnDemand is the leading cloud computing company in learning and talent management. We’re specifically focused on helping our clients empower their people and maximize the productivity of their employees by helping them with every stage of the employee life cycle, from recruiting new employees, sourcing and screening candidates, connecting them with others in the companies, developing them based on their jobs or meeting compliance requirements for a particular industry, setting their goals, measuring their performances, measuring their competence, training them based on gaps in performance or competence, paying them based on performance, and then using that same data to manage mobility within the organization; so, understanding workforce analytics and the opportunity for people to get promoted. This includes succession management and team building throughout the organization.

Today, the organization is used by more than 7.5 million users in 179 countries speaking 31 languages, which makes us the largest independent SaaS subscriber base in the world.

SM: What is the revenue level of the company right now? Are you public or private?

AM: We’re a public company.

SM: What’s the revenue level?

AM: About $114 million.

SM: OK. So, let’s start with a discussion of your sector. The talent management sector, of course, has seen huge adoption in terms of software-as-a-service. We’ve seen two major acquisitions happen: Success Factors acquired by SAP and Taleo acquired by Oracle. There still is Workday out there that is independent and at a substantial revenue level. And then you are still independent. Give me some thoughts about how you see the landscape evolving. What’s happening in the landscape? What do you see happening?

AM: There’s been a massive shift in the market due to the consolidation. The consolidation started a little over a year ago, right around the time that we went public [in 2010]. You saw a rash of consolidation in the space among the independent players. A couple of private equity firms had gotten into the space. They started to roll up some of the smaller companies – some of the low-cost competitors, in particular. Vista bought SumTotal, and then rolled up a bunch of smaller companies into SumTotal. And Bedford acquired People Click and Authoria and then rolled up other companies into that.

SM: So, Vista bought SumTotal and then grafted other small talent management companies onto that platform?

AM: Correct.

SM: What was the size of the deal? What was the size of SumTotal?

AM: It was a bunch of small companies that rolled up together. The deal was over $100 million.

SM: A total of $100 million?

AM: It’s over $100 million. I don’t know the exact number.

SM: And the second deal?

AM: Yes, it was Bedford. It bought People Click and Authoria. I don’t remember the deal size. It was a while ago.

SM: These were all SaaS companies, talent management?

AM: No, they were hybrids. Some were partially SaaS. Some were single tenant. And then some were legacy software companies.

Glam Media’s Financials
Glam Media’s network content is developed by independent writers who receive an estimated half of the ad revenues that Glam generates from this content. They have an estimated audience of 240 million users who generate 3.1 billion page views. Although Glam has never disclosed their financials, analysts believe that they have been profitable since 2010 and have seen revenues grow to more than $100 million from $75 million recorded a year ago. In the coming years, growth is expected to continue at a 25% annual rates.

Glam Acquires Social Media Network Ning
Glam has been expanding their social networking offerings. Last year, they spent $150 million-$200 million for the acquisition of social network, Ning. Ning operated on a subscription-based model that let users create their own social network. Ning had reached a user base of more than one million and was at one point valued at $500 million, but the growing popularity of Facebook hurt Ning significantly. It is estimated that at the time of the acquisition, Ning had more than 100,000 paying customers driving more than 60 million unique visits. Even so, Ning has managed to retain a fee-based subscriber service and is estimated to have annual subscription revenues of $10 million-$20 million. Through the acquisition, Glam will be able to include social features such as blogging, commenting, and social feed platforms on their content platform.

Earlier this year, Glam also launched Foodie.com, a food-centered vertical network that also features social networking capabilities. Foodie has content from more than 100 authors and will publish more than 1,000 recipes. Besides a recipe finder app, Foodie has been integrated with Facebook and Twitter. Further, Foodie will let users post their own content, including recipes, photos, reviews, and other comments.

According to market reports, Glam is valued at $950 million. Whether this value is justified will be put to the test when Glam makes their IPO this year.

Aaron Block: They took some loans from friends and family as well as some personal loans. They really bootstrapped the business, and that culture persists today. We consider ourselves a frugal organization. We just reached profitability in March, which is exciting. We watch every single penny, and that is part of the culture that attracted me to this company. Any startup needs to mind its pennies and dollars to be successful.

Sramana: What was the ramp rate of the business?

Aaron Block: The company ran pretty close to breakeven from the beginning. They had a slight loss the first couple of years. They brought on the first round of outside investments in 2009. They had two subsequent rounds, so there are now $2.3 million invested in the business. We reached our first $100,000 revenue months in 2010. We had our first $500,000 and million dollar revenue months in 2011. We reached our first $2 million revenue month this year. We will be at a $40 million run rate by the end of this year.

Sramana: How are you growing the business? What are the levers you are pushing?

Aaron Block: The most important thing is talent. We need to have very smart people and focus on improving the operations. We have somewhat complex operations relative to other startups that do not handle the movement of goods across multiple countries. Finding ways to bring in the right technologies and people to minimize headcount growth is one important labor.

Another key is for us to take advantage of the Russian marketing opportunity. We were just scratching the surface of pay-per-click marketing when I joined. We have been building out a robust marketing platform with the help of our team in Russia. Our biggest growth problem so far is lack of awareness. The cross-border shopping market is estimated to be $700 million this year. Getting the word out has been a big piece of what we are doing.

Sramana: What else is interesting about your business that is worth covering in this story?

Aaron Block: The founders, Anton and Gene, created a proprietary shipping algorithm. This does not get a lot of press, but it is a reason why we compete so well in our space. We estimate the fully loaded and fully landed shipping cost before the checkout is finished. The customer knows exactly what he or she is going to pay before they make the transaction. If people try other forms of cross-border e-commerce, they often have to buy the goods separately and have them shipped to a middleman service, have the goods weighed and priced, and then pay a second round of shipping costs. We integrate everything into one cost based on our five years of experience shipping to all time zones of Russia.

Peter Hudson: Yes, I think, with the caveat that the taxonomy of our content and the UI that supports that is representative of the many different workflows patients go through trying to solve their problems.

SM: So, the third differentiation is in the UI and the taxonomy, which allows for the friendly navigation in a small form factor screen.

PH: Yes, because you’re limited in those.

SM: Great. What business model have you followed?

PH: Our main business model is we created a new type of mobile advertising for providers. It’s basically location-based listings that add information and content to our application. We allow providers to update and enhance the information about their offices or hospitals and have done so in ways that provide the information that patients want when they are making decisions about whom to go see. [That is the] functionality that helps drive interests like wait times for ERs or appointment setting for doctors. One is an information product, and the second is a functional product. The two tie together very well. In a location-based search, that presentation of information and function is compelling to the user.

SM: Is that a free app?

PH: It’s free.

SM: So, you’re monetizing on the providers’ side by providing them with lead generation.

PH: Correct.

SM: And you have been acquired by Aetna?

PH: Yes, we were acquired in the fall of 2011.

SM: How come? How is it that Aetna was the company that acquired you instead of Google or any number of companies that are trying health care stuff, such as Web MD and so on and so forth?

PH: I don’t know. You should talk to Google there. I think they missed it on us. We’re a very specific content-specific location-based search engine.

SM: Yes, I fully agree with you. This is a company Google should have acquired.

PH: They do a lot of stuff to promote us on Android. But I think they were right at the time that Google Health was imploding, and they were about to shutter it. Aetna was interested in us because health insurance companies are tradition B2B companies. And they all have B-to-B-to-C products that are not well distributed because you probably don’t want to get those products from your insurance company. With Mark Bertolini, the CEO of Aetna, his vision was, Let’s go where the people have decided to go and use a product that fits what we want to do.

SM: It’s a smart move on Aetna’s part. These insurance companies spend so much money on customer acquisition and so many advertising dollars. This is a fantastic move from a marketing point of view. They will have access to six million users on mobile phones and conceivably a lot more over time. I think on Aetna’s side, it’s an incredibly smart move. I just think it’s a stupid move on Google’s part to not do it.

PH: Yes. On Aetna’s side, they see the writing on the wall that they’re going to be selling more directly to consumers.

SM: Yes, of course.

PH: Exchanges and all the different things that are coming with health care reform. They also have a robust business in ACOs, which stands for accountable care organizations, and connecting. Those are basically local health care delivery systems.That our ability to provide the solutions we provide for consumers penetrated into one of those ACOs is a fantastic model of health care delivery. Why would you go out of network when you could book an appointment on your phone with a doctor who’s in network? It’s far easier.

SM: Yes. And how about WebMD? Were they not part of your discussions?

PH: WebMD has lost 60% of its market cap. It just lost its CEO. I can’t say that we were not having discussions with WebMD or Google or others from an acquisition standpoint. Aetna was aggressive and ended up winning our process.

SM: Well, good. It’s an interesting application. It’s an interesting time in the healthcare apps market. We’re seeing a lot of activity in the healthcare application/social media application and healthcare IT in general. Is there anything else that you want to share?

PH: I think the more users we drive with our application, the more value we think it represents to Aetna.

SM: Yes, I think a precursor to what you’ve done is a company that WebMD bought called Epocrates. You must be familiar with this, right?

PH: Yes, I know Jeff Tangney pretty well.

SM: We’ve covered that company extensively. It’s something that’s been on our radar much longer because it’s a much older company.

PH: Yes. We were around only two years when Aetna bought us … two and a half years.

SM: Very cool.

PH: Yes, thank you for your interest. We’ve done a lot of outside-in disruptive change to healthcare delivery. We have 800 hospital clients. We have a lot of participation within the healthcare provider system. A partner with the right vision helps you get even further. I think that’s critical in healthcare. You can’t change it without having some participation from within.

SM: Right. Also, I think there’s a timing issue. This healthcare apps or healthcare IT market in general is moving very well. In the past three or four years it has moved well, especially recently. It’s been moving extremely well over the past two years. You got the timing right as well.

PH: Yes. It has been and continues to be a lot of fun.

SM: Good. Thank you for sharing your story.

PH: Thank you very much.