WebPT Reached $42M Having Raised $1M, Ever
WebPT built a $42 million business on a single million dollars of capital, and the 2014 private equity deal everyone calls a raise put no new money into the company at all.
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WebPT reached $42 million in annual revenue having raised one million dollars in its life. Nancy Ham, brought in as CEO eight years after the company was founded, described the culture that produced that ratio in four words: do more with less.
“I love that,” Latka said. “I’m sitting here at my lovely IKEA desk.”
The 2014 Battery Ventures deal was not a fundraise. It was a secondary offering that bought liquidity for existing shareholders. No new capital went onto the balance sheet, and every acquisition since has been paid for out of cash flow.
A physical therapist who wrote her own software
WebPT builds the electronic medical record used by physical, occupational and speech therapists, and it exists because one of them got tired of paper.
Our co-founder Dr Heidi Jannenga, practising physical therapist running her clinics, frustrated by being on paper and using a lot of expensive transcription, went to look for a better solution. Couldn’t find one. Well, maybe I could write something that I could use in my clinic. She got together with some IT guys, produced a beautiful piece of software, and soon enough people were knocking on the door saying hey, can we buy that thing you wrote for yourself.
Nancy Ham, CEO, WebPT
Founded 2008. One million dollars raised, ever. In 2014 Battery Ventures came in — not to fund growth, but to provide liquidity to the founders and early shareholders, and to install a management team with experience taking a company from thirty or forty million to a hundred. Ham was that hire, arriving in 2016.
She had known the Battery partner, Chelsea Stoner, for years. “She looked at investing in the company I was then running, and that deal didn’t happen, but we clicked. So when the opportunity arose to work together it was an easy yes.”
A note on the record: the interview’s own title credits the secondary to Bessemer. Battery Ventures is named four times in the conversation, and Ham names her partner there. The investor is Battery.
The arithmetic she let him do
Ham would not volunteer a revenue figure. She volunteered the two inputs and let Latka multiply.
“Minimum 10,000 times $350 — I mean, that puts you well over 3.5 million a month in revenue, or 42 million bucks a year. You guys are above that, right?”
“You’re pretty good at math on the fly there,” Ham said. Unlike most founders who get that treatment, she let it stand, and added the growth rate herself: a 57 percent seven-year CAGR, twenty-five to thirty percent a year at the time, from about $35–36 million twelve months earlier. Fifth consecutive year on the Inc 5000, which she noted only seven percent of nominees manage.
Those are the figures the GetLatka profile still carries for November 2017: $42 million in revenue against 308 employees.
The market share is the moat
Ten thousand clinics out of roughly thirty thousand. Fifty thousand-plus individual therapists using it, out of about a hundred thousand in the country. WebPT had a third of its market.
Ham was precise about why a general-purpose EMR could not take it. “People walk into a clinic with every kind of physical injury — I’m a 16-year-old soccer player, I blew out my ACL, I’m an 85-year-old who just had my hip replaced. They have to go down many different diagnostic pathways based on the body part, the injury. That was very hard to figure out how to get a computer to do — that elegant, flexible, customisable clinical workflow. That’s really the secret sauce.”
The satisfaction gap is the evidence. Ham cited net promoter scores: eight of the top nine medical EMRs carry a negative NPS; WebPT’s physical-therapy competitors average minus 17 as a group; WebPT sits at plus 32.
Around the record they had built billing, marketing automation and home exercise programmes. “Some of your listeners might have been to a therapist and gone home with pieces of paper that had little stick figure bodies on them with cryptic notes about lift your right knee 20 times. Now we send you home with a mobile digital experience with videos, and you can communicate in-app with your therapist about how that’s working.”
The numbers she would not give
Latka asked what it cost to acquire one of those $350-a-month clinics. Ham declined outright.
I’m gonna just take the Fifth, because that’s not something we want our competition to understand — quite how good we are at that.
Nancy Ham, CEO, WebPT
She gave the shape instead. Backed by Battery, WebPT had access to SaaS benchmarks across more than a hundred portfolio companies, and on sales and marketing efficiency, “we are one of the most hyper-efficient companies in their portfolio.” The engine is content: free education, blogging, webinars, “millions and millions and millions of web hits a year.” WebPT was, by her account, the third most searched source of information in physical therapy, behind Medicare and the professional association.
Latka went back at it from the other side and got a number. Payback period: “Less than six months,” per clinic.
Ham then redirected the whole question, which is the most characteristic thing she does on the tape. “We need to be efficient and have a short payback, but what we focus on is what is the ROI to the customer — and across our products we see ROIs to them ranging as high as one time to three, four, even five times what they’re paying us.”
99 percent, and what it is worth
Retention is 99 percent, logo and revenue both, “pretty closely correlated.” That number invites a familiar mistake, and Ham refused it before being asked.
“Since your churn is so low, it’d be easy to lie to yourself and say they’re worth infinity because they never churn,” Latka said.
“That’s subject to a lot of debate,” she replied. “In healthcare people will assume six or seven years is a good number, rather than saying it’s infinity — there’s a lot of consolidation, and the customer you have today might get bought or become part of another entity.” Six years at $350 a month puts lifetime value around $25,000 a clinic.
Getting to 99 percent required removing the thing that usually breaks healthcare software rollouts. Onboarding is entirely virtual: credit card today, live in about thirty days, run by a team of only twenty people. “We spent a lot of time learning how to do it virtually, with a lot of clever digital and video and training support.”
Revenue per employee ran about $137,000 across 308 staff in Phoenix, Denver and Boston — and Ham was pushing automation for a reason she stated in that order, employees first: “I want our employees to have great jobs. If I see somebody stuck in a job doing some kind of manual repetitive task where we can automate that, so you can do something more interesting.” One project alone eliminated 1,500 support calls a month.
The stretch goal was $100 million in ARR by 2020 — “that’s our BHAG, but that’s what we’re shooting for.”
Asked what she would tell her twenty-year-old self, Ham did not talk about business at all. “My 20-year-old self was studying chemistry and thinking that she was pre-med, so I was studying something I didn’t like and didn’t have an aptitude for, because I had an artificial goal. So what I would tell her is: study humanities. Do what you love — history, art, philosophy, literature. And there’s time later on to learn the more technical aspects of a trade.”
Sources — Nancy Ham interviewed by Nathan Latka, recorded 30 November 2017. Revenue, headcount, customer and funding figures from the WebPT profile on GetLatka, with dates as recorded.
