Building an Exciting Healthcare IT Company From Chicago: LaunchPoint CEO, Terry Ryan (Part 6)

Sramana Mitra: You’ve been in the market for five years. You have not raised any other funding after that $10 million seed round. Where are you now?

Terry Ryan: We have definitely turned down funding. It’s a very interesting world in healthcare IT right now.

Sramana Mitra: Yes, it’s a very interesting world.

Terry Ryan: We have 34 live clients today. On average, those clients run one to six of our seven in-production applications out of a total of 15 in our product roadmap. I can build a product and a half per year organically without outside capital. We became profitable as a software company last year. We’re a self generating machine but at the same time, you have constraints when you’re working within that same self-generation. We’re scaling the business. We were 100th on the Inc 500 list. We had 3,600% growth over the last three years.

Sramana Mitra: What’s your philosophy at this point? Now that you have a profitable company that’s generating good free cash flow to do new products, where is your head at? Do you want to accelerate by raising a lot more money?

Terry Ryan: Profitability isn’t good free cash flow. When you’re running an organization of that scale, there’s lots of decisions to make that are very constrained. You can’t decide to do all 10 good things. We sold 300% more in contracts this year over last year. What you start to understand is you do need to look to institutional money if you really want to hyperscale. If you really want to take advantage of the situation you’re in, you have to go to an outside capital because sooner or later, you’re actually constraining even your sales. You can only take on so many sales. I know that’s not the problem many people have. That is the problem we have today.

In a middle-age company, the last thing you want to do is have the quality of your delivery deteriorate. When you get to that point, you have to start thinking about outside capital. That’s a beautiful time to do that because you’ve got a horde of customers, a great sales pipe, and some products that have traction in the marketplace. It’s a really good position to be in. I’m outselling my ability to deliver. Let’s just put it this way, I’m starting to risk the quality of what I deliver and the quality of how I handle my clients. I’d like to get four products out a year versus one and a half. I’d like to almost double my executive team. I want to scale sales and marketing up. These are all things when you’re living organically sometimes.

I’m in a really good spot where I can choose to grow organically and make nice progress that people and private investors would be proud of. At the same time, that’s not really the right thing to do right now. This is the time to go to market and say, “Look what we got. It’s good but not perfect. If you infuse some capital into this, you really can take advantage of where we are.” It’s capital to deal with the sales we have today. Entrepreneurs need to understand that. You can think it’s going to help you find sales. The question is why aren’t you finding sales today? We have more selling going on than we anticipated and we are in front of ourselves on the ability to deliver. That can cause quality issues.

Sramana Mitra: It’s a great point to raise capital because at any given time in the market, there is more capital than good investment opportunities. You’ve clearly created an excellent investment opportunity. We use this tongue-in-cheek saying that VCs love to come to the rescue of victory.

Terry Ryan: I haven’t heard that one. That’s a really good one.