Tuesday, November 25, 2008
Interview with Jason Howe, CEO of Awarepoint
San Diego-based Awarepoint (www.awarepoint.com) is a developer of systems for tracking hospital assets, patients, and doctors, using RFID tags. The firm is announcing a substantial Series D funding round today, so we spoke with the firm's CEO, Jason Howe, to get the details on the company and what it's doing.
Congrats on funding. Explain what your products do?
Jason Howe: What we do at Awarepoint is, at the 10,000 foot level, is RTLS - Real Time Location Services. What we are is an indoor positioning system--like GPS is, but for indoors. We give visibility to the location, status, and history of resources in healthcare. What that means, is we can tell you what your assets, your doctors, and patients are in a facility, down to which room and their status--whether they are getting care, or not getting care--and you can also go back and audit all of that history and process a chain of custody of where your resources have been. It's analogous to GPS, but for indoors.
How's this different from the RFID being used heavily in such healthcare areas as pharmacy management?
Jason Howe: RFID is used a lot in pharmacies. The difference in what we're doing, is we're an active sensor network. Our RFID tags have their own battery power. Unlike Walmart, you don't have to walk through a reader or interrogator, because we have an active tag with a five year asset life, saying here I am. The pharmacy uses lots of passive barcoding and interrogators. We are really focused on the active RFID tagging area.
Who are the typical customers for your products?
Jason Howe: We are in hospitals, though we are moving into long term and assisted living. Right now we're at 31 different hospitals.
How long have your systems been in deployment?
Jason Howe: Since we were incorporated in 2002 we've gone through a lot of changes. We started with Wi-Fi based technology, using 802.11. We found out that just doesn't work, and our competitors are starting to find out too, for a number of reasons. In 2004, we switched over to Zigbee sensor networks, 802.15.4, for a number of reasons. It really attacks what we consider are the five critical success factors in acute care. We're not a manufacturer coming into acute care, we started here and stayed, though we might branch into manufacturing. We deliver our services directly to the acute care area. We change the paradigm, and we only do an entire institution, the entire hospital or enterprise--every square foot--anywhere resources can travel.
The second, is we connect to other applications, like workflow or security applications. We follow assets everywhere, which I liken to GPS, where if your driving and leave the main road: if you can't show where you are, it doesn't do any good. One differentiation for us is accuracy--we're in-room, and know which room something is in. There are lots of our competitors who only provide zone level accuracy. If you don't have room information, and have to look in four or five rooms to find an asset, you might as well be doing it the old way rather than signing into a computer. Without room information, adoption falls off. That's particularly critical if you want to know if a patient is in a room with an asset, or if a doctor is with a given patient.
The third, and probably biggest, is we are minimally invasive. You never have to pull a hard wire. We deploy in days, rather than in months or years. We just did Walter Reed Hospital in eight days, all 1.2 million square feet. Our closest competitor put in a bid to do that in eight months, and that was just to cable it. And, we do it for basically an order of magnitude less money. We are a minimally invasive install, we don't interfere with any existing products, are interoperable with a whole bunch of systems, and because we're web based you can tie into anyone else's system out there, wither it's an electronic medical records, order entry, preventative maintenance, or other software. We've got a nice API with ties to the enterprise class applications. The final thing is our business model. We have an almost no-risk model. We do the installation, teach everyone how to use it, and they never have to pay until we hit what we need to do. It's a month-to-month rental, although many of our customers buy the product--but they can do it on an operations budget. We are also not a burden on IT. They have much more important things that putting in an RTLS system--they've got electronic medical records, infection control, and other software that are more important. We're software-as-a-service, all of its encrypted, and we're more secure than hospitals. It's a fixed fee per asset per month. There's no hidden costs, and you can put it in or take it out in a day--though we never had anyone take it out, and don't intend to.
How difficult was it to raise this funding round, given the economy?
Jason Howe: That's a great question. I just went out to a VC conference out in New York, and what I'll say is -- it was just too damn easy. We were oversubscribed, and had a stack of term sheets. We were over 2x up on this round, and we also had a bunch of individual investors who wanted to put in--people who had invested in our competition a few years ago. There were companies at the VC conference starving for money, but I think we could have raised $20M like nothing. Looking back, I think we were lucky as hell, and I was blissfully ignorant. Plus, we were able to pick Tier 1 VCs likke Venrock and Cardinal Partners. I think we've got a great team, with the right product, at the right time in the market.
What will that funding go towards--it was a Series D?
Jason Howe: Yes, it's a Series D, though our Series A was an angel funding. We have enough revenue that we could have sustained without funding, but we raised funding to go towards expansion. We're going international, we have accounts in Columbia, over in Japan, and we'll be in Europe sooner or later. The second part, is we wanted higher level integration with the bigger players in the market, what I call the established medical oligopolies, so we can tie into bigger systems. The third thing is we want to really support Skytron, our value added distributor. We do lots of training, integration, and comarketing, and they're our number one customer--we want to make sure their 155 people are absolutely successful, to help us drive market growth. The money will take us well beyond profitability, if we stay in this vertical. Our revenue is pretty significant, especially with the recurring revenue model. We've already hit next year's number this year. That's probably another reason raising the money was pretty easy, and wasn't that hard of a sell.
We'd like to really expand what we're doing, and will split the dollar 50/50 between R&D and the rest of the company. We've also hired another VP of Sales, brought on a new CTO, who started ZigBee, Matt Perkins, and we are going to get some headcount growth--though we're planning to keep that under 50. It's a great time for that, because there's lots of talent out there.
Finally, as a firm toward the end of your fundraising cycle--what's your view of the poor IPO and M&A market?
Jason Howe: Right now, an IPO is an impossibility at this point in the market. I think that there might be cash toward the end of 2010 or 2011, where IPOs might be reasonable. The other thing to note is that there are lots of companies that are underfunded, and are going to be acquisition targets by the big medical oligopolies. Because they're desperate for funding, they are going to be crammed way down. Our only job at the company, is to make sure we're driving toward profitability. We think we'll reach profitability by mid 2010, and that gives us plenty of runway with our current burn and the new money, so we can pick and choose. There will be lots of consolidation in the marketplace, and I think lots of our competitors will get scooped up, because they have to be. Our position, depending on the market, is that an IPO is really another funding round. We'll be in good position when we're profitable to do some sort of M&A with the big players, the Cardinals, McKessons, Siemens, etc., but right now we're focused on building a long term, sustainable business. I have no problem running us as an independent company for some time, and neither do our investors who invested with us. Cardinal Partners is a long term investor, Venrock is a long term investor, they are not looking to turn and burn. Venrock was behind Intel and Apple. That was one of the main reasons we picked them, and we've got two new board members--Brandon Hull, from Capital, who is a seasoned veteran in the space, and Brian Ascher, from Venrock, who will be coming out. At the same time, we'll be making sure we're being responsible, and to make sure if we have to file an S-1 we've gone through all of the these you need to do. But, we're not focused on an exit--we're focused on profitability, which is a key metric for management.