ZyngaVille Has New Resident: Digital Health Startup Practice Fusion

1/13/14Follow @wroush

From all outward signs, Practice Fusion is one of the fastest-growing technology startups in San Francisco, and Zynga is one of the fastest-shrinking.

Now the two companies’ shifting fortunes are taking concrete form. Practice Fusion, which has 300 employees and recently raised $85 million in Series D funding, announced plans today to take over office space where Zynga once thought developers would be toiling away on the successors to FarmVille and Bubble Safari.

It was only about 27 months ago, in the fall of 2011, that Practice Fusion—which markets a free, advertising-supported electronic medical records system for physicians’ offices—moved from its original SoMa headquarters to 46,000 square feet of newly renovated space at 420 Taylor, in the Union Square neighborhood. But now the company is about to move again, to offices at 650 Townsend Street that are twice as large.

For anyone who lives or works in SoMa, 650 Townsend is familiar as the giant brick-and-glass edifice, on the edge of San Francisco’s design district, where Zynga took up residence in mid-2011 after outgrowing its previous Potrero Hill digs. Zynga originally leased about half of the building, which was previously owned by real estate developer TMG Partners, but then bought it outright for $228 million, anticipating that it would eventually fill up all 670,000 square feet.

But that’s not how things worked out. Zynga hasn’t had a profitable quarter since 2010, and its current stock price of about $4 per share is way below its December 2011 IPO price of $9.50. The main problem: user numbers are way down, as Web surfers lose interest in FarmVille-style social games. That’s led to hundreds of layoffs at Zynga and to a reported $600 million in losses; founder and CEO Mark Pincus stepped down last summer.

Practice Fusion, by contrast, is one of the crown jewels in a rising new economic sector for San Francisco: digital health. Thanks in part to carrot-and-stick mechanisms devised by the federal government to encourage physicians to adopt electronic recordkeeping, there’s been massive uptake for Practice Fusion’s software, which helps doctors’ offices digitize patient records, track appointments, and connect behind the scenes to pharmacies, labs, and insurance and billing services.

The company claims that its records platform is the largest and fastest-growing in the country, covering 80 million patients served by 100,000 medical professionals. Last time I visited the company, in late October, the Taylor Street offices were clearly packed to the gills.

The company’s return to SoMa “marks the next phase in our evolution,” founder and CEO Ryan Howard said in a statement. He said the company has “limitless potential to envision and create much-needed change in healthcare.”

According to a story in the San Francisco Business Times, Practice Fusion will lease 100,000 square feet of space on the fourth and fifth floors at 650 Townsend that Zynga never occupied. Meanwhile, Zynga has no plans to sell the building. Practice Fusion said it plans to hire San Francisco-based design practice RAPT Studio to convert the space to fit its needs, with move-in starting by the middle of 2014.

One thing will stay constant as the health-IT startup takes space once meant for game developers. Both Practice Fusion and Zynga—which was named after Pincus’s dog—offer their workers canine-friendly environments.

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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