WHEELING & DEALING
Year In Review
By Jean-Marc Levy

First published in HRO Today (December 2003)
 

Where did investors place their bets in 2003?

The holidays are here! Time to look back at 2003 and assemble one of those ubiquitous top-ten lists that are the staple of magazine year-end issues. Since this issue already includes a list of the top HRO deals of the year, I will focus instead on private equity and VC investments, and present a list of the most notable capital raises of 2003 in the Human Capital Management industry.

The list below is not based on deal size or likelihood of success. Instead, it reflects my personal assessment of whether a particular deal or series of deals may be signaling the emergence of a new sub-sector in the industry, of a new technology worth noting, or of a new investor in the field. Finally, some deals are on the list just because they tickled my fancy. That’s the beauty of writing your own column – you can do things like that!

• HealthMarket – provider of CDHPs for small and mid-sized businesses.
• Vivius – provider of systems allowing consumers to build custom health plans that are unique to each family member.
• Vested Health – provider of CDHPs offered to consumers through employer groups.

Tied for first place gold are three transactions illustrating the appeal of the emerging consumer directed health care sector to potential investors. When the range of investors in a particular sector includes heavyweights like General Atlantic Partners, Whitney & Co. and Mellon Ventures, smaller boutique investors like Adena Ventures or Acacia Venture partners, as well as other private investors such as insurer Madison National Life, it is a pretty sure sign that the sector has gone from hot to hotter!

2.  An education is always a good investment.

• Northface University – postsecondary education organization for software developers.
• Element K – provider of IT and business skills e-learning solutions.

Investors like Great Hill Partners and Rustic Canyon are betting that their educational investments will allow them to capitalize on the dramatic shortage of skilled labor predicted for the U.S. over the next decade, and that the demand for specialized IT workers will translate into blue-ribbon returns for them.

3.  Customer rage is on the rise.

• LiveWire Logic – creator of a solution for developing intelligent virtual agents that answer customer inquiries through interactive text-based conversations.
• Unveil Technologies – provider of automated voice and text-based customer service solutions.

Rising customer rage headlines a recent study by the Customer Care Alliance, a consortium of companies seeking to foster customer care innovation and best practices in the customer service sector. Sevin Rosen, Solstice Capital, TD Capital Technology Ventures, Gray Ventures and Research Triangle Ventures are among the investors who are betting that technology holds the answer to better customer service.

Several other companies who successfully raised capital this year are on my runner-up list: 

• MindMatters Technologies – developer of a platform for developing, managing and protecting innovations and intellectual capital assets;
• GoldK – developer of a technology, investment and recordkeeping platform for third party administrators (TPAs);
• Capital H Group – provider of staffing and human capital consulting services;
• Symphony Services – provider of offshore outsourced software development;
• Fieldglass – provider of software and services for sourcing, delivering, and managing third-party services, including contract labor and consulting.

While these companies didn’t place for a medal, they are representative of the broad spectrum of HCM companies that successfully secured capital in 2003.  With a stronger economy in our holiday stockings and a sector that continues to attract a lot of attention from investors, my 2004 list may require a lot more space and work to sift through.

Happy holidays!