September 15, 2013
Two of Chicago's most prominent entrepreneurs, Brad Keywell and Glen Tullman, are going into business together.
The company will be called Zest Health. It will be a joint venture of their respective investment firms, Lightbank and 7wire Ventures.
Zest Health doesn't even have a website yet, but it has hired a chief executive, Karen Ferrell, the former chief executive of Apollo Health Street, which was sold this year for about $183 million.
Keywell said the company will launch in "days and weeks, not months" and has begun soliciting clients. At this early stage, Keywell described the company as having two distinct parts.
The first is a mobile app, which Tullman said would have four buttons: "Talk to Me," which gives one immediate phone access to a medical expert (nurse, nurse practitioner, physician's assistant, etc.); "Schedule Me," which is a concierge for booking medical appointments; "Inform Me" a la WebMD; and "Track Me," which stores one's electronic health record. The goal here is to help users access good medical information fast, perhaps avoiding a costly emergency room or doctor's visit.
The second part is the classic Lefkofsky-Keywell business model — Lefkofsky being Eric Lefkofsky, the chief executive of Groupon, whom Keywell called his "lifetime business partner."
The two helped found Groupon, and Lefkofsky is a Lightbank partner, though his day job at Groupon has limited his involvement.
Their most successful startups have deployed software that helps large companies buy things "smarter" — meaning cheaper.
Take InnerWorkings, Lefkofsky's first company in this vein, which does for the printing industry what Keywell hopes Zest Health will do for employers buying health insurance.
Say you need to print 500,000 copies of the next issue of a magazine. InnerWorkings electronically sends a bid for that job to qualified printers; there are thousands in its database. Its software then analyzes countless pieces of data, including the printers' historical prices and locations, and selects the best option.
InnerWorkings makes money by taking a cut of the savings you achieve with the new printer.
This model has worked well for Keywell and Lefkofsky in subsequent ventures in the transportation industry (Echo Global Logistics) and media-buying business (MediaOcean). But it didn't work so well in the vehicle repair business.
Lightbank investment BodyShopBids, founded by Brad Weisberg and CJ Przybyl, originally designed a mobile application that allowed car owners to upload photos of their damaged vehicles. Local body shops would then submit quotes to do the repair and customers could book their appointments through the app.
But drivers wrecked their cars too infrequently to make the business work financially. So BodyShopBids became Snapsheet, which makes custom apps for insurance companies to receive uploaded customer photos of car damage and provide them with an estimate of the car's value within hours.
Zest Health probably will evolve, too, making the credentials and resources of those involved far more important than the current business model. Keywell and Tullman say their venture firms have committed "millions of dollars" to the company.
"There's now about a quarter-billion dollars of venture money into (health care) companies that are making price visible in a clear, easy way to people," said Robert Galvin, chief executive of Equity Healthcare, The Blackstone Group's health management program, at a February conference. He described these startups as trying to "Amazon-ify" health care spending.
Health care is new for Keywell and by far the most regulated industry he has ever entered.
Tullman, meanwhile, is a health care and insurance industry veteran. He was chief executive of Allscripts Healthcare Solutions, an electronic health records provider, from 1997 until he stepped down in December amid boardroom turmoil. He also is the chairman of Argo Tea Inc. His partner in 7wire is Lee Shapiro, Allscripts' former president.
Lightbank and 7wire previously have co-invested in solar panel installer SoCore Energy LLC, which was sold to Edison International this year.
Zest Health will be different. Keywell and Tullman will be akin to co-chairmen, Keywell said. I asked him whether he would even be launching Zest Health without Tullman's involvement.
"Yes, but I'm not sure we'd be doing exactly what we're doing," Keywell said. "That's where this could be really interesting. It's Glen and Lee and all of the things that are part of their world are coming together with all of our life experiences."
Part of what drove Keywell into Tullman's turf was the inefficiency of the health care system and a bit of rage. He said recent New York Times stories, including one titled "How to Charge $546 for Six Liters of Saltwater" about the cost of IV administration and therapy, have informed the founders' brainstorming sessions.
"Health care costs are going up every year for employers and way outpacing inflation," Keywell said before calling the system "out of control." He added, "When employers start to get data-enhanced transparency and collective buying power, maybe the tide can be turned a little bit."
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