Practice Fusion, a 12-year-old, San Francisco-based start-up backed by the likes of Peter Thiel’s Founders Fund, was written about several years ago as a company on the brink of going public. In 2015, JPMorgan, working with Practice Fusion, estimated that the company could be assigned a valuation of around $1.5 billion if it went public in 2016, a figure based off estimated revenue of $181 million for 2018.
Instead, Practice Fusion is selling for $100 million in cash to publicly traded Allscripts, it was announced today. The amount, roughly two-thirds of the $157 million the company had raised over the years from VCs, is further “subject to adjustment for working capital and net debt.”
The news won’t come as a complete shock to anyone who has been following the electronic medical records company for the last couple of years. Despite backing from Founders Fund — along with Kleiner Perkins, ORIX Growth Capital, Artis Ventures and others — Practice Fusion had stumbled in recent years as bigger competitors such as 38-year-old Epic Systems continue to gain market share.
In fact, despite raising a $70 million Series D round in 2013 led by Kleiner, Practice Fusion’s fortunes seemed to turn sharply by mid 2015. First, it swapped out its founding CEO. It then conceded it had cut 25 percent of its workforce in an effort to hoist itself into the black. Soon after, Politico reported the company was in “free fall” and looking to sell itself to Athenahealth, a medical software company that itself went public in 2007. (Practice Fusion didn’t vigorously deny the report at the time, either, calling it “purely speculative at this point.”)
For investors in Practice Fusion, whose cloud-based electronic health records are primarily used by small, independent practices, the deal is undoubtedly disappointing, though better than watching the company slowly go out of business.
However, it appears to be a win for Allscripts, which gains further reach in outpatient settings. The deal also looks to complement an early acquisition made by Allscripts. In August, it acquired for $185 million the electronic health records businesses of one of its rivals, McKesson.