04 April 2017 10:36:49 IST

An angel helps stitch an alliance

Rajan Srikanth of Keiretsu plays matchmaker in Omega Healthcare-WhiteSpace buy

Marriages, it is said, are made in heaven. But if the parties concerned are a few thousand kilometres apart, separated by continents and oceans, you need angels to bring them together, even if it is only to find if there is a fit.

That is what angels at the Chennai chapter of Keiretsu Forum, a US-headquartered global network of angel investors, did for a US-based healthcare analytics start-up they had invested in. Doing the match-making was Rajan Srikanth, co-President, Keiretsu Forum, Chennai and Singapore, who, over a dinner conversation in Chennai with Gopi Natarajan, Chief Executive Officer, Omega Healthcare Management Services, which is into healthcare revenue cycle management, wondered whether he would be interested in the US company. Introductions over e-mail followed, then the conversation took place in person culminating in Omega acquiring WhiteSpace Healthcare, in the process giving the Keiretsu Forum Chennai chapter members their first exit.

WhiteSpace Health, recalls Srikanth, was one of the earliest investments from the Keiretsu Forum Chennai chapter, which came into being in February 2015. It has invested in 22 companies with three more deals expected to close in a couple of weeks. In the initial months, all the investments were in US-based companies. That Sasanka Yella, CEO, WhiteSpace Health, came to pitch for investments at the Chennai chapter itself is because of the Keiretsu network.

Sasanka was a member of the forum in Seattle, where he is based, and has invested in a couple of early-stage Seattle deals and with Keiretsu Capital’s fund. In a conversation over telephone, Sasanka recalls he was asked by Keiretsu Forum Bay Area members to make a pitch to the Singapore chapter of the forum. On the way to Singapore, he stopped over in Chennai and made a pitch to the Chennai chapter members. Led by Srikanth a few of them invested about $150,000 in WhiteSpace Health in August 2015. They got two times their investment as return. Normally, it takes at least five years for angel investors to sell their investment, but WhiteSpace Health happened in 16 months.

The trigger point

According to Srikanth, the members looked at Sasanka’s pedigree – he had spent long years in Microsoft – and he came across as a trustworthy and credible entrepreneur. Besides, says Srikanth, healthcare and analytics were beginning to become big and hot and relevant.

What was the trigger for him to make that introduction? Srikanth says Sasanka sent quarterly updates on the state of the venture. The first report around March 2016 painted a good picture of the business, but the second report, which came around June-July, got his antenna up. “The early warning signs were there,” says Srikanth. The report talked of revenue pressures, of delays in leads materialising into deals, of cutting back on salaries, of some not taking salaries in the US. “The steps that he described in the quarterly report were drastic, for a company that had taken money one year ago,” points out Srikanth. WhiteSpace Health has a development centre in Hyderabad.

Srikanth put Sasanka on to people he knew in California and the Bay Area, and to his credit, says Srikanth, he followed up on all the introductions. None of them led to anything serious. “I got a feeling that he had his back to the wall,” says Srikanth. That was when he met Gopi over dinner at a common friend’s house. When Gopi told him that his company was into revenue cycle management and medical coding for US healthcare companies, Srikanth casually mentioned to him about WhiteSpace Health.

A few days later Gopi got in touch asking if Srikanth could give him an introduction to Sasanka. The rest is history. Omega Healthcare acquired WhiteSpace Health in March 2017.

Sasanka continues to be the CEO of the company, which for legal and tax purposes is a separate entity. Omega, according to Gopi, will pump in money into WhiteSpace Health, giving it the much-needed lifeline, and grow the business. Gopi recalls that he and Sasanka were to meet in North Carolina – WhiteSpace Health was founded in February 2015 at the Research Triangle Park in North Carolina – where he was going for a business meeting. The meeting was supposed to last an hour, but they ended up playing golf together and discussed the deal over the next five-six hours. Gopi is happy with the deal as it gives him a company with a set of talented engineers with specialisation in analytics, and Sasanka is thrilled with the way things panned out.

Lessons to be learnt

Is there a lesson in this for entrepreneurs and the larger investor community? Definitely, yes. It underlines the need for entrepreneurs to provide investors with regular, periodic and complete updates on the state of health of the venture. And, for investors to have their ear to the ground and clued in to what is happening to their portfolio company without actually breathing down the entrepreneur’s back.

Says Srikanth, the updates from Sasanka gave the Keiretsu Forum members a small window into the state the venture was in, thanks to which they could step in and help out Sasanka. “You don’t want to push too hard on an alliance with somebody who is not ready,” Srikanth says and adds, it is important for a mentor-investor to know when and how to intervene. For this, he says, the entrepreneur should be completely transparent with the investors.

(The article first appeared in The Hindu BusinessLine.)