CEO says Medalogix's Series A journey|
brings Nashville investment issues into focus
Milt Capps Updated 11:51a 6 Nov. 2015
Updated: Hogan filed to pursue a $1.5MM capital raise 5 Nov. 2015. Earlier: Aug. 25, 2014: Hogan announced closing a $5MM investment transaction with Connecticut-based Coliseum Capital Management. Our original story follows.-Ed.
MEDALOGIX, the predictive analytics healthtech startup, is soon likely to complete a pivotal Series A capital raise outside of Nashville, on what its chief believes are better terms than it could find here.
That's the signal that Co-Founder and CEO Dan Hogan gave VNC during a series of interviews, months after he began his ultimately fruitless discussions with local investors. He declined to identify his likely hedge-fund partner or its headquarters location, prior to the round's expected closure in August.
During the past decade, the proliferation of Angel networks, new TNInvestco funds and other milestones -- including the momentum by Nashville Entrepreneur Center, LaunchTN and other players statewide -- has spurred startup activity and discussion, thereof.
Candor such as Hogan's has become increasingly common in public forums. Hogan, 41, said his experience thus far in executing the Series A round has brought these issues into focus for him.
On June 23, Hogan told a Nashville Technology Council audience that he was likely to secure a commitment for $5MM in capital for the Series A round. He later told VNC that earlier he raised $1.3MM in convertible debt for Medalogix, as well as $1MM from friends and family, and he retains controlling interest.
After several months of fruitless effort to raise institutional money in Nashville, Hogan said he turned to major cities outside Tennessee. Immediately, he said, he found "a very different valuation discussion" and a greatly simplified process.
"The terms we've ended-up with are much cleaner than any of the deals that I saw or was discussing with investors in Nashville, in that the deals [here] were laden with preferences and other complicating mechanisms," said Hogan.
Hogan said he has come to believe that Nashville entrepreneurs are often at a disadvantage in dealing with the local investment community, which he perceives as behaving in a manner that is "beyond" merely collaborative, and which is averse to making truly competitive offers for startup stakes. More competitive, rather than opportunistic bidding would produce more equitable results for founders, according to Hogan.
Nashville investors, Hogan asserted, have been "quite accustomed" to setting the terms of a given transaction, with often-determining influence on investor preferences and on dilution of founders' equity.
Asked by VNC for comment on the issues Hogan has raised, some members of the Nashville investment and entrepreneurial communities, said they see some merit in Hogan's assertions, while others said the dynamic is much more benign.
Instead, they cited factors including: A traditionally close-knit business community; relatively small pools of capital and first-hand knowledge of some technologies and industries; and, the sheer economic rationality of investors who see far more attractive deals than they can afford to invest in.
Hogan said he believes Nashville -- Music City -- and its Healthcare sector, in particular, are getting fresh attention from many quarters. Increased investment from the East and West Coast is likely to infiltrate Nashville more rapidly, he said, if the Air Services Coalition, an advocate for new routes in Tennessee, succeeds in getting more nonstop and direct service to key cities. (Checkd.in CEO Nick Yaeger made related comments in our story earlier this week.)
A spokesman for State Economic and Community Development Commissioner Bill Hagerty and for the Metro Nashville Airport Authority confirmed yesterday that the Coalition is working aggressively and is confident that demand for air travel warrants expanded service for Nashville and elsewhere in the state. The ECD spokesman said San Francisco is "the real target," given the need for greater access to both Tech talent and capital. As previously reported, the capital-formation, startup development and technology commercialization efforts of LaunchTN, Jumpstart Foundry and others are also focused on building bridges to investors and strategic partners on the Coasts and in inland major-metro regions.
Five-year-old Medalogix serves post-acute care segments of the healthcare system. The company takes clinical data, mines it for trends and indications of patient risk, then provides risk stratification, with care responses supported with a workflow engine, said Hogan. Its focus is home health care and hospice-care providers, with emphasis on improving timing and quality of care, and reducing hospital readmission rates. Hogan confirmed the company is aware of other opportunities in Skilled Nursing and other segments.
Medalogix does not consider Brentwood-based naviHealth a competitor, though some market observers might. Hogan said he believes there are near-term opportunities for the two companies to partner in some way. The post-acute care consolidator is backed by Welsh Carson with at least $100MM. In 2012, naviHealth bought Brentwood-based SeniorMetrix, which provides predictive modeling for the frail elderly.
Hogan's co-founder was Gerald Andrady, who continues to advise Medalogix on technology, said Hogan. Andrady also consults to other companies, including ShareableInk, according to his LinkedIn. Medalogix LLC was chartered in February 2009; and, in January 2014, the company updated state records to reflect one LLC Member, down from two, according to data online.
In founding Medalogix, based in downtown Nashville, Hogan drew upon both his prior home health experience as CEO of Doctor's Associates in Manchester, Tenn.; and, a software tool he had been working with while with that company, according to earlier media reports. From 2002-2005, Hogan was a sale rep with DigiScript, a training and communications software company serving Pharma/Biotech clients, and which for years was backed by major Angel investors Fred Goad and Jim Kever, then operating as Voyent Partners.
Medalogix advisors include CRG Waddill CPAs (Brentwood); Eric Bergesen, interim finance chief and advisor; Bradford Group for public relations; and attorneys with four law firms: Butler Snow; Gullett Sanford; Bradley Arant; and, Waddey Patterson.
Though his views are entirely his own, Hogan said growing awareness of the company and his role as current president of Nashville's Entrepreneurs Organization (EO) chapter also create more opportunities for him to address such issues.
EO Nashville runs an 18-month-long Catalyst program for early-stage entrepreneurs; and, the global EO organization globally has supported the roll-out of accelerator programs in several other U.S. cities.
Earlier this year, Hogan presented his concerns regarding the nature and quality of end-of-life care, during TEDx Nashville. He earned a bachelor's in Speech-Communications at the University of Georgia, in 1998. VNC