Karis: Chicago’s Outcome Health just went from bootstrapped to unicorn.
The maker of digital touchscreen wallboards for doctor’s offices has raised a $500M+ round of funding at a $5B valuation. The company, previously known as ContextMedia, got backing from Goldman Sachs, Alphabet’s CapitalG, Pritzker Group VC, and others. It’s the first time Outcome has ever taken venture capital in its 11 year history.
This one’s a big deal, folks.
Jim: It’s a major milestone for Outcome, but it’s also a huge deal for Chicago’s tech ecosystem. The city has another tech unicorn, and as Illinois Tech Association Executive Chairman Fred Hoch told me, Outcome is now a “tentpole company” for Chicago’s technology ecosystem.
As much energy as there’s been around Chicago’s tech scene, the city lacks some of the “tentpoles” or pillar companies that hire hundreds and hundreds of engineers and make the city a destination for technologists.
Outcome helps change that narrative, Pritzker Group VC investor Adam Koopersmith told me. Groupon and Grubhub proved you can build a $1B business in Chicago. Now the goal is to prove the city can support tech companies 10x as big, he said.
“Our next step as an ecosystem is supporting companies that can reach the $10B+ level, a level rarely scene outside of Silicon Valley,” Koopersmith said in an email. “With companies such as Uptake, SMS Assist, and Outcome Health – 3 companies disrupting huge markets with stellar management teams – we think (hope) that next level is within reach by the end of the decade.”
Here’s a rundown of the things to know from Outcome’s half-a-billion-dollar fundraise:
- It’s the biggest round of funding for a Chicago tech company since Groupon’s $950M round in 2011.
- Outcome is now the 6th “unicorn” tech company in Chicago, joining Uptake, SMS Assist, Mu Sigma, ExteNet Systems and Avant.
- CEO and co-founder Rishi Shah jokingly referred to the funding as Outcome’s “seed round.”
- Outcome did $130M in revenue last year, more than double the $60M it did in 2015, according to the Wall Street Journal. Outcome gets a majority of its revenue from ads—mostly drug makers—and 99% of doctors don’t pay to use Outcome’s tablets.
- While the company hasn’t taken outside funding, it did take a loan out for $325M to pay for its acquisition of competitor AccentHealth, according to the WSJ.
- Shah had an 80% stake in Outcome going into the fundraise, which makes his net worth $3.6B, according to Forbes. Co-founder Shradha Agarwal has a 20% stake in the company.
- The ability to dominate marketshare is one reason investors wanted in on Outcome. The company is currently in 20% of doctor’s offices across the US, and it thinks it can be in 70% by 2020.
- The deal will guarantee investors a 20% per-year return “under certain scenarios,” and Outcome can also “pay a nine-figure sum from the investment proceeds to shareholders as a dividend,” WSJ says.
- Is an IPO around the corner? Not so fast. Shah says a public offering could still be a few years away, as the company will have an easier time expanding into offices outside the US as a private company, he said.
Karis: Want another reason to buy into Outcome’s deal as a win for Chicago tech? The war chest will allow them to buy up other companies and invest in startups that can improve their platform. Outcome is poised to be the acquirer, not the acquiree, and that’s something that could have long-lasting effects for Chicago’s startup scene. [More here]