Seattle-based Appature has signed up more new customers in the last nine months than it did in its first two and a half years in business, combined. Growth at that pace can drown a small company if it doesn’t put the right people, and right processes, in place to keep the operation running smoothly.
So Appature is making a splashy personnel move today, hiring one of the better known startup attorneys in Seattle to come work full time in-house. Eric Koester, who has advised dozens of startups on financings and acquisitions with Cooley and Heller Ehrman, has joined Appature this week as general counsel and vice president of operations.
Appature is still small, with just 16 employees, and doesn’t really need a full-time in-house counsel at this stage. What’s most interesting is that about two-thirds of Koester’s time will be devoted to managing existing contracts with Appature’s Big Pharma, medical device, and health technology customers. Chief executive and co-founder Kabir Shahani says having a trusted lieutenant like Koester, who has enough “horsepower” to run internal operations, is a coup that will free up other senior executives to keep their focus on new customers, partnerships, product development, and the strategic vision for the company.
“A lot of jaws are going to drop around town,” Shahani says. Koester, for his part, acknowledges it’s an unconventional career move for someone with his experience. “Kabir is a persuasive guy,” he says.
My colleague Greg Huang last wrote about Appature back in May, saying that it was on track for major growth. While it’s hard to pin down any privately-held company for specifics to describe revenue growth, this was a perfect time for us to check back on how the company is performing.
Appature, founded in 2007, has signed up “almost half” of the top 10 healthcare companies as customers, Shahani says. These companies are essentially buying a software-as-a-service program that helps integrate sales and marketing into sort of a unified intelligence system to connect with doctors that will make or break their products. Appature doesn’t name very many names, but its list of customers includes diversified health giant Johnson & Johnson (NYSE: JNJ), medical giant powerhouse Medtronic (NYSE: MDT), and NaviNet, which calls itself the nation’s largest real-time healthcare communications network.
Some of Appature’s customers are mid-sized players with $75 million to $100 million in annual revenue, while others count their sales in the multiple billions, like J&J. That means the legal contracts tend to be thick. And even with small companies, they have to trust Appature with the most sensitive of proprietary customer data. So it surely can’t hurt to have an attorney on staff who’s able to clearly explain the details and minutiae, as well as see the big picture of business.
“Dealing with customer data is not trivial,” Shahani says. “They need to be able to ensure it’s protected, it’s got the right safeguards.”
Appature found enough early traction with its product to turn profitable before it even raised its first venture round, but now the company has started to run in the red as it pushes itself to grow. The company raised $3.5 million in its Series A venture round back in December, led by Ignition Partners and Madrona Venture Group.
Part of that capital is going toward adding new offices in the San Francisco Bay Area, Chicago, and the Northeast, so its sales staff can be closer to where more healthcare customers are located, Shahani says. Many healthcare companies today use software programs from Oracle or Salesforce.com to manage sales contacts. They purchase all sorts of proprietary data on individual doctors’ prescribing habits from vendors like IMS Health, and also get data on interactive marketing from Unica (now part of IBM). But few have an ability to roll sales, marketing, and industry data together in a program like Appature’s, Shahani says.
There’s plenty of money in healthcare marketing, but it’s still a bit nebulous how big the niche is for healthcare marketing software. Healthcare companies spend an estimated $200 billion a year on marketing—on everything from flashy pens, trade shows, and print ads in the Journal of the American Medical Association. About $3 billion to $4 billion is spent, across industries, on marketing software, Shahani says. Much of what’s driving growth in marketing software for healthcare, like in other industries, is a desire to better measure and quantify which marketing dollars are generating the most bang for the buck.
Ultimately it was the size of the opportunity, and the team at Appature working to carry out their plan, that Koester says helped persuade him to take the startup plunge himself.
“I see this as a group that really can build a $100 million business,” Koester says. “They have validators in their venture investors, and some premier customers. That’s where it started to become obvious to me. When you add me and the skill set I bring, I have a chance to help affect that. It was exciting to me. It’s one of those companies with a big potential market, a lead in a sector within the market, and the right people assembled to tackle it.”
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