NetGain CEO Scott Warzecha On The $25M Capital Raise

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SWLate last month, St.Cloud-based Netgain announced receiving $25m in a majority strategic stake from Bluff Point Associates, a private equity firm focused on the healthcare IT and financial services space.

We spoke with founder and CEO Scott Warzecha about the past, present and future for Netgain:

When and how did Netgain form?

I founded Netgain in January of 2000 as a pure play application service provider (ASP) because I realized that St. Cloud had a lot of fiber optic available.

For the first time ever, in this area at least, we were able to use this to access our data centers and do things never done before.

My original business plan included about 25 employees and was really just focused on the area, which we were concentrated on back in the beginning.  An early salesperson really helped us break into the healthcare industry, which has become our specialty today and really expanded the geographic scope of Netgain.

What is your value proposition to the market?

IT as a service for middle market physician owned healthcare clinics. We provide a fast, secure and stable hosting platform for them to run their practice on. We also help them curb their costs by educating them on technology.

Beyond selling a product, we’re really selling a promise. A promise to take care of them by whatever that takes.

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How many employees do you count today?

We have about 125 employees – approximately 80 here in St. Cloud, 15 in Chicago, 10 in San Diego and the rest are remote stateside.

How many clients do you have?

We have about 400 clinic sites across the country and five data centers.

How did you pick Bluff Point Associates as your new partner?

First, they had to really understand the HealthIT market and bring some prowess to our board room.

Second, they had to have the right personal chemistry, that is people who I enjoy being around.

Thirdly, connections and introductions for us to grow our customer base.

Wrapped around all that was a no relocation deal — meaning we’re not moving the company — and also to treat us like the platform we are, not a bolt on to something else.

Honestly, it took us a few years to find the right blend, we had a lot interest over time.

What’s something that you’ve learned over the years?

Just how much I enjoy having employees and seeing them grow. When I started, honestly I didn’t think about it that much as it wasn’t part of the plan to become as big as we are.

What will you use the money for?

Investment into our current employees, investment into technology, and investment into new employees and sales. And safe bet acquisitions that are close to what we do.

How did you know it was time to bring in the partner and the money?

In order to do what we want to do we would have to take a lot of risk and sacrifice. The days of running so close to zero net income are behind us. At the emotional and subjective level, you start thinking about something bigger than yourself too, which this sets us up for. It will be good for our employees and their families in the long run I believe. They are the ones who have put us in this position, along with our customers.

What’s been the key to success over these years?

By really understanding our clients needs, listening and adapting.  It’s pretty business 101.

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