A Conversation with Valant and Golub Capital
Paul Cook
Paul Cook
Valant, Chief Executive Officer
Paul Cook served as the Chief Executive Officer at Valant until May 2019, when it was sold to private equity firm Gemspring Capital. Before being promoted to CEO, Paul served as Valant’s Chief Operating Officer. Prior to his roles at Valant, he served as the Chief Financial Officer at Talentwise where he was known as the “truth teller,” an aggressively transparent leader and trust-based communicator who was willing to say what needed to be said in order to drive positive change.
Paul Cook served as the Chief Executive Officer at Valant until May 2019, when it was sold to private equity firm Gemspring Capital. Before being promoted to CEO, Paul served as Valant’s Chief Operating Officer. Prior to his roles at Valant, he served as the Chief Financial Officer at Talentwise where he was known as the “truth teller,” an aggressively transparent leader and trust-based communicator who was willing to say what needed to be said in order to drive positive change.
Valant was founded in 2005 to provide behavioral health practices, agencies and clinicians with cloud-based software to streamline administration and empower what’s most important: improving outcomes. Inspired by the fact that technology has transformed all our lives in meaningful ways, Valant has reinvented the behavioral health platform.

For this edition, Golub Capital's Peter Fair interviewed Paul Cook, Chief Executive Officer of Valant.
Peter: 
Economic stimulus following the recession drove adoption of Electronic Health Records (EHR) technology. Adoption among hospitals is now nearly universal. What does this mean for Valant?
Paul: 

In the behavioral health market, adoption has lagged. An executive at the American Psychiatric Association estimates adoption among psychiatrists at 75%, a level confirmed by our private practice and community mental health pipelines. The EHR technology of 2009 has not evolved and scaled to meet the needs of clinician users and provider organizations—older software architecture is inherently slow, isolated and expensive to customize. Meanwhile, U.S. healthcare reimbursement models are transitioning from fee-for-service to value-based models, leaving legacy EHR technologies struggling to accommodate new reporting needs. There is great appetite for change, particularly in the community mental health market.

Peter: 
Growing demand for technology has resulted in the healthcare IT market becoming increasingly crowded. What is Valant’s competitive edge?
Paul: 

While there are many new players in healthcare IT, we have not encountered a significant new competitor in the behavioral health enterprise EHR space. We’re instead seeing new vendors pop up in specialty service technologies such as consumer digital, wellness, population health management—healthcare IT that may interface with EHRs but doesn’t replace them.

Competitors in the enterprise behavioral health market have products that, on average, are over ten years old. Our biggest competitive advantage comes from having decided to build new technology from the ground up, rather than extend our legacy technology. This sets us apart in terms of user experience, system performance, accessibility of data, responsiveness to change and interoperability.

Peter: 
How has uncertainty in Washington over healthcare reform affected your industry?
Paul: 

Before the failure of ACA repeal legislation in Congress, some prospective customers stalled EHR procurement processes to see what would transpire. At this point, it appears that Medicaid expansion is relatively safe. In fact, more states will expand it.

The requirement of coverage of essential benefits has helped solidify a trend toward parity between coverage for mental health and physical health benefits in the commercial insurance markets. While there may be some weakening of essential benefits in the coming months and years, we do not foresee major changes with respect to commercial insurance coverage for mental health benefits. Nor have we observed any impact on the private practice market as a result of regulatory uncertainty.

Peter: 
For a private equity investor, where are the opportunities in healthcare IT?
Paul: 

Valant receives inbound inquiries nearly every day to talk about our company and industry and interest in raising capital. We can’t engage with everyone, but we want to keep our opportunities open as we look to raise a final round in the next 12 months.

What’s challenging for private equity investors is that the underlying technology infrastructure in EHR may be entirely different within five years.

This creates some uncertainty across the entire healthcare IT market. There are also tremendous opportunities—particularly within relatively narrow verticals like ours—to invest in companies that are further along the technology curve. There are opportunities to integrate strong technology platforms, both horizontally and vertically, in ways that result in ownership of a market or create a network effect within a vertical.

Peter: 
As a VC-backed company in healthcare IT, where is your investment focus? How will this evolve as the company grows?
Paul: 

We just launched a product for the enterprise sector of behavioral healthcare, so we have invested heavily in product and engineering. We will always be a company that invests heavily in our product. In fact, there are several markets adjacent to behavioral healthcare that we will pursue beginning in 2019. We will also focus on sales and customer success in the coming years—investments that are also likely to be technology-driven.

Peter: 
What are the biggest challenges that the healthcare software sector faces?
Paul: 

As incentives shift from volume to value, healthcare providers will gradually assume more risk. They will need to integrate across different dimensions of care, including the social determinants of healthcare such as housing and education. To do this, they’ll need to capture, manage and share data in new ways—at great scale.

Software companies need to adopt technologies and processes aggressively that support these trends: cloud, big data, microservices, APIs, etc. Ultimately, software companies, like medical device companies, will be judged by their ability to help organizations achieve better outcomes.

Peter: 
Where do you see Valant in ten years?
Paul: 

Valant will be the dominant EHR software vendor in behavioral healthcare. It will be a model for how to build scalable and extensible service delivery technology infrastructures and how to use technology and data to continuously improve clinical outcomes at scale. Valant will also be the fastest growing EHR in physical healthcare.

Golub Capital would like to thank Paul Cook and Valant for participating in this edition of SaaS Talk.
Golub Capital is not responsible for the information or views communicated by representatives of other companies. This material is not indicative of the past or future performance of any Golub Capital product and should not be considered as investment advice or a recommendation by Golub Capital of any particular security, strategy or investment product. Golub Capital has distributed this material for informational purposes only.