Monday, January 21, 2008

HealthEdge closes second tranche

By Christopher Calnan

A Burlington health care claims-administration software maker recently closed on the second tranche of a $2 million round of funding, and is now looking to expand its base of two customers signed on since being founded in 2004 -- a more patient approach by the firm's CEO than his last go-round.

Robert Gillette, CEO of HealthEdge Software Inc., said the prudent pace stems from lessons learned at the late deNovis Inc., which tore through $125 million in venture capital in four years before burning out in 2004.

HealthEdge's software is based on what the company calls on its website $100 million worth of intellectual property from deNovis, where Gillette served as executive vice president of products and technology. And one of HealthEdge's investors, New York-based private equity firm Psiolos Group, was also a deNovis investor. But Gillette said the approach is totally different.

"DeNovis was sort of a get-big-fast culture," he said. "We're taking a very normal, early-stage valued software approach."

HealthEdge has raised a total of $14.6 million, said Gillette. Its two customers are Florida-based CareGuide and Canton-based OneBeacon Insurance Group Ltd. The claims-management software is designed for both health care providers and health insurers.

The market for health insurance software is dominated by two California companies: Newport Beach-based The TriZetto Group Inc. and San Francisco-based McKesson Corp. The two companies have captured 50 percent to 60 percent of the market by consolidating with smaller companies during the last five years, said David Smith, president of Kearny Street Consulting Inc., a Georgia-based health-care industry consulting firm. Gillette said he considers TriZetto the firm's closest technological competition but is confident Health-Edge now has the right stuff to grow and offer a competitive alternative.