This quarter we are pleased to announce HCTec, the subsidiary of HCCA, one of our fastest-growing portfolio companies has been acquired by Snow Phipps.

We sit down with Chrysalis Chairman David A. Jones, Jr., who’s on the Board of HCCA to discuss what this means for the former parent and Chrysalis portfolio company.

What’s the history of Chrysalis’ involvement in HCCA?
David Jones:  Chrysalis has been an investor in HCCA since 2002.  The company has experienced significant growth over the past couple of years, despite several obstacles.  When federal immigration policy stymied HCCA’s original overseas nurse recruiting business, HCCA repositioned itself as a provider of clinical process outsourcing services using its overseas nurses.  The company’s CEO, David Bartholomew, turned the company around and has been one of the best performing, and fastest growing, companies in our portfolio.

So, the HCCA subsidiary, HCtec was just sold.  How are HCCA and HCtec connected?
David Jones:  The companies operated separately from the beginning.  HCTec was formed in 2010, when HCCA was going through a period of transition.  Management launched a healthcare technology staffing business, HCTec, as a way to generate some cash to cover overhead while HCCA’s new business model took off.  Happily, HCTec grew exponentially due to the extraordinary demand for technicians who could implement electronic medical record and other “big IT” installations, mostly funded and mandated by the HITECH and Accountable Care Acts.

What’s in store for HCCA in 2013?
David Jones:  This transaction is a win-win for both HCCA, HCTec and Chrysalis.  The new partnership with Snow Phipps positions HCTec to accelerate its already impressive growth since its inception in 2010.  It also allows HCCA’s management to focus on the company’s core business to improve on already promising results for 2013.  Finally, the transaction allows Chrysalis to return capital to our limited partners.

A survey conducted on January 3-9th by the Kaiser Family Foundation, Robert Wood Johnson Foundation and the Harvard School of Public Health, respondents identified the top healthcare priorities.  The survey found that 55% said creating an insurance exchange should top the list of healthcare priorities for state officials.

Health insurance exchanges have been a hot topic in the media as the implementation of healthcare reform begins.  Chrysalis’ Chairman David Jones has written about the issue here.

Today, we sit down with Doug Schneider, CEO of Connecture, the leading provider of Web-based information systems used to create health insurance marketplaces and exchanges.  We discuss Connecture’s market opportunity and where the healthcare industry is headed.

Q:  Where do you see the greatest opportunity for Connecture?
Doug Schneider:  We are at a real crossroads in the healthcare industry and Connecture has the opportunity to become the market leader and innovator for buying insurance online.  While the concept of national and state-run health insurance exchanges is a relatively new one, the automation and technology behind it isn’t.  We’ve been doing this successfully for health insurance carriers and brokers for over 15 years.

The healthcare industry is extremely inefficient.  Health plans and large providers are experiencing extreme cost cutting pressure.  Connecture leverages advances in technology to ensure privacy and ease-of-use when purchasing insurance online, which will decrease costs.  I liken this evolution to when the travel industry was transformed by the internet — booking travel online.  This didn’t eliminate travel agents, nor will exchanges eliminate insurance brokers; instead it will force them to provide a real value-add.

Q:   Are you seeing large payers and providers looking to startups / smaller companies to provide the innovation they’ll need to comply with healthcare reform?
Doug Schneider:  Absolutely.  Purchasing health insurance has always been a very complicated, intimidating process for Americans.  The large healthcare companies are looking to Connecture to innovate around the user experience when buying health insurance.

Q:  You’ve been in the healthcare industry for quite some time.  Where do you see the industry in five years from now?
Doug Schneider:  From a business and operational standpoint, the healthcare industry is focusing on driving down costs and making strides in becoming more efficient — without compromising the quality of care.  What was once a complicated and paper-ridden process of applying and enrolling in a health plan, has become easier and more routine.  These are exactly the tasks where healthcare can reduce cost, in turn spend money in the right place to treat patients.  With hundreds of thousands of Americans about to enter the health system due to healthcare reform mandates, the industry must be prepared to create efficiencies in routine administrative tasks.

Tom Cox, MyHealthDIRECT, CEO from Chrysalis Ventures on Vimeo.

You’ve heard it time and time again — technology has changed the way we work, live, play….well, it has pretty much changed and impacted everything we do.  Now, technology is playing a significant role in how Americans take charge of their healthcare.

In this video, Tom Cox, new CEO at MyHealthDIRECT explains how eliminating the hassle and time it takes to schedule a doctor’s appointment helps the patient and makes the system run more efficiently, thus reducing costs for the healthcare provider.  The time it takes to get treated at emergency rooms in the U.S. is on the rise, but hospitals are trying new methods to reduce the wait.  MyHealthDIRECT is leading the way.  A recent article by the Wall Street Journal explains.

Burke Smith, StraighterLine, CEO from Chrysalis Ventures on Vimeo.

Next up in our CEO Chat series is Burck Smith, CEO of StraighterLine.  Founded in 2010, StraighterLine offers a low-cost option that allows students to take a variety of accredited, general ed courses online — complete your freshman year of classes for $999, compared to $8,244 which is the average cost per year at a public 4-year college.

Say whaaaat?  What’s the catch?

StraighterLine offers a path to higher education accreditation through its introductory course work.  StraighterLine isn’t an accredited institution — it isn’t trying to be and doesn’t really want to be.  Instead, students can receive credit toward a degree by transferring their course work to colleges and universities the company partners with, which are accredited.  College credit is college credit, right?  It doesn’t matter how much it costs, does it?

Recently, the Baltimore Sun included StraighterLine in this article taking a closer look at the online education industry:

“Straighterline has attracted 4,500 students — tripling its enrollment in two years — and has credit-transfer partnerships with 40 accredited colleges and universities in the United States. Its university partners like Straighterline because the company brings them a pipeline of students who’ve taken some courses, but still need more to finish their education at an accredited institution in order to receive a degree.”

According to this USA Today article:

“The online education sector grew 13% last year and had been growing at about 20% in previous years. Nearly one in four students take at least some college courses online, up from one in 10 in 2002. Two million students, most older than the traditional 18-22 year-old undergraduates, take all their courses online and two million more take one or more online course.”

Venture capitalists are certainly taking note of this growing industry.  This year, VCs are expected to invest over $600 million, five times more, in education than they did a decade ago when $150 million of venture capital was invested.

Whether the online education industry will continue to grow at these rates is unclear.  What is certain, the traditional student profile is changing and online education is rising to meet the needs of these non-traditional students who may forgo a higher education, if not for this option.

Doug Schneider, Connecture, CEO from Chrysalis Ventures on Vimeo.

Last month at the Chrysalis Annual Meeting, we were able to sit down with several of our portfolio company CEOs to discuss their business.  First up in our six-part series, Doug Schneider, CEO of Connecture.

Connecture has experienced significant growth this year as states are rushing to comply with the Accountable Care Act’s mandate to create health insurance exchanges.  Exchanges create a transparent, easy-to-shop place for consumers to purchase health insurance from competing plans.  Connecture revolutionizes the way in which health insurance can be purchased.

Connecture has been part of the Chrysalis portfolio since 2004.  During that time, the company has grown and has positioned itself to become a major player in health insurance distribution.

Recently, Chairman David Jones wrote about how states have a tremendous opportunity to create efficiencies and control costs through the delivery of health insurance via exchange platforms.

link to “Connecture in Delta Sky Miles Magazine”

by Wright Steenrod
9/11/12

Today General Dynamics C4 Systems announced it is acquiring our portfolio company Open Kernel Labs. This is a strong validation of the strength of OK-Labs’ technology and its value in military and defense communications. In addition, it demonstrates that high-growth, high technology companies are being founded in the Midwest, not just in Silicon Valley.

Chrysalis invested in the company behind a thesis that mobile usage is exploding and becoming difficult to manage, and carriers, system integrators and users would have a correspondingly increasing need to manage mobile environments, applications and software.  Chrysalis venture partner John Willmoth, a former mobile executive, saw potential value in the way OK-Labs’ mobile hypervisor could act as a virtualization layer to allow enterprises and government entities to maintain enterprise applications on a secure network, while giving users the convenience of using a single device (smartphone, tablet, or other connected device) for both enterprise and personal use. 

Throughout our investment, OK-Labs demonstrated customer adoption and growth in a very fast-moving, complex industry, landing customers across the mobile ecosystem as well as in new verticals such as automotive. It is because of the strong, defensible security of OK-Labs’ software that it is has been adopted for use in military and defense-grade systems and communications.

The General Dynamics acquisition will allow for greater distribution and continued growth of OK-Labs’ hypervisor software.  We congratulate the company on the acquisition and are pleased to provide our limited partners with a positive return on their investment.  I also congratulate Venture Partner John Willmoth on leading this investment to a successful exit.  We wish the company continued success in its new home.

Good Life Project(tm) founder, Jonathan Fields, interviews MeQuilibrium founder and former health media mogul, Jan Bruce.

NASHVILLE, Tenn.–(BUSINESS WIRE)–To proactively address the growing bullying epidemic in the U.S., HealthTeacher, the interactive leader in youth health, has created Awesome Upstander!, a fun mobile game that teaches kids how to stand up to bullies in a safe and positive way.

“Awesome Upstander! is evidence that we can make learning about the serious issue of bullying both educational and highly entertaining”

Dr. Susan Lipkins, child psychologist and leading expert in the development of Awesome Upstander!, believes playing this game can set the standards for teaching elementary-aged kids how to be an upstander, a person who knows how to intervene in a bully situation in a safe and positive manner. The game reinforces the concept of respecting and protecting others. Learning these skills during the elementary years will diminish the severity and frequency of bullying during the middle school years when it is at its peak.

“This game is perfectly placed in terms of the child’s social and emotional development,” Dr. Susan Lipkins said. “It teaches kids, in a meaningful way, how to make a difference. This is the first game that reinforces pro-social behavior in an age-appropriate way.”

Bullying most often occurs where adult supervision is low or absent: schoolyards, cafeterias, bathrooms, hallways, and stairwells. According to the U.S. Department of Justice’s “Bullying in Schools” report, only 10 to 20 percent of non-involved students provide any real help when another student is victimized.

“Awesome Upstander! is evidence that we can make learning about the serious issue of bullying both educational and highly entertaining,” said Scott McQuigg, CEO of HealthTeacher. “HealthTeacher is harnessing the power of interactive devices and gaming to address the important physical, social and emotional health issues affecting our kids.”

Filled with challenges, levels, hidden objects and fun sound effects, Awesome Upstander! is designed to engage kids just like other popular interactive games while promoting social good. At the Awesome Upstander! website, teachers can download supporting material for their classroom, and parents can download resources for teaching their kids about upstanding at home.

“Awesome Upstander! offers a highly entertaining play experience for kids while teaching them they have the power to diminish bullying by banning together as upstanders,” said John Herbold, VP Product of HealthTeacher. “Kids tell us Awesome Upstander! is fun to play, and parents say it gives them peace of mind knowing their children are learning how to deal with an issue affecting the emotional and physical safety of their kids.”

Awesome Upstander! can be purchased in the Apple App Store or Google Play for $.99, or played online for free at awesomeupstander.com.

ABOUT AWESOME UPSTANDER!

Awesome Upstander!, the first-ever anti-bullying game for young kids, is the most fun way to learn how to deal with bullies. Awesome Upstander! is a side-scrolling adventure where players must race through school cafeterias and bathrooms to rescue a target from a bully. To successfully rescue the target, players must collect enough friends to become upstanders and stand up to the bully together. Awesome Upstander! can be played for free at awesomeupstander.com, or downloaded in the Apple App Store or Google Play for $0.99.

ABOUT HEALTHTEACHER

HealthTeacher is the interactive leader in youth health, creating games, apps, and educational resources to make health awesome for kids. HealthTeacher’s research-based products are designed to get kids moving and to develop healthy behaviors that last a lifetime. Reaching over 6 million kids through its fast-growing network of 11,000+ schools, HealthTeacher’s interactive products are used by teachers, parents, and kids to address important youth health issues, including physical activity, nutrition, and social and emotional well-being. To learn more, visit healthteacher.com.

by Timothy Hay
August 16, 2012
(c) 2012 Dow Jones & Company, Inc.

Connecture Inc ., a 13-year-old enterprise software company that has been operating for years with a complicated capital structure, has been recapitalized for the second time, shaking up the ownership stakes of the various investors backing the company.

The recap takes place as federal health-care reform prompts a major spike in demand for Connecture’s products, Chief Executive Doug Schneider said. A provision of the health-care overhaul involves states offering online exchanges where consumers can comparison-shop for health-insurance coverage, a development that plays right into the company’s hands.

The recap involves two of the company’s main investors, GreatPoint Partners and Chrysalis Ventures , providing $20 million in growth capital, some of which was used to buy out the stakes of other investors, the CEO said. GreatPoint ponied up $18 million, with Chrysalis providing the balance, he added.

David Jones, managing director of Chrysalis and the chairman of Connecture’s board of directors, said his firm has a significantly larger stake in the company after the recap, but declined to give further information about the transaction.

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