Why is Kaiser investing in Vidyo?

Kaiser invests in Vidyo

Vidyo, a fast growing video conference startup, recently raised another $15M – this time with $10M from healthcare investor Kaiser Permanente Ventures, according to MobiHealthNews.

In the startup world, “unicorns” or high valuation startups tend to raise mega rounds as they approach IPO. Is Vidyo now a digital health unicorn? With $163M now under its belt, Vidyo is most definitely the king of video conference fundraising. They’ve also done a great job grabbing video conference market share and bashing Cisco and Polycom into irrelevancy.

When VSee first entered the telehealth space, its main competitors were Cisco or Polycom. These days, fewer and fewer clients are asking us to compare with Cisco or Polycom.  This is because these traditional video conference giants have been taking too long to come up with a simple product and the telemedicine industry has finally given up them. These days, we’re competing with Vidyo on almost every deal 🙂

So what does this relatively small, $15M round, mean for Vidyo?

Scenario 1:

Vidyo is losing money. A steady head count normally indicates that revenue growth is flat. This is because fast-growing companies tend to go on hiring binges in order to pump up its size and to better execute its revenue strategy. However, Vidyo’s head count has been holding steady at approximately 300 for the past few years.

Another indicator is the change in leadership from founder Ofer Shapiro to new CEO Eran Westman.  When a board is happy with revenue growth, the management team is normally kept in place. When a board is not happy with revenue growth, the VP of Sales is the first to go, followed by the VP of Marketing, and finally, the CEO. Given how much investment Vidyo has raised in the past, this relatively small amount investment of $15M is a possible indicator that Vidyo is losing enough money to need outside help to cover a gap in revenue.

Scenario 2:

Vidyo is doing great, and that’s why Kaiser asked to invest. This is also a smart way for Kaiser to recover the money it is paying Vidyo now for its services. From our guestimate — given that Vidyo has complex server requirements— Kaiser is probably paying Vidyo about $5M a year. If I were Kaiser, $10M worth of investment is a relatively small amount compared to the $5M service fees I already have to pay Vidyo anyway, so it makes sense to try to get some money back as an investor.

In any case, the digital health market is on the rise. With investors looking to throw some  money at promising healthcare startups, it should be an interesting 2016!

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