Practice Fusion, a start-up in the crowded electronic medical records market, was acquired on Monday for $100 million, two years after bankers were expecting to take the company public at a $1.5 billion valuation.
Fueled by funding from powerful venture capital firms like Peter Thiel's Founders Fund and Kleiner Perkins Caufield & Byers, Practice Fusion raised more than $157 million on the promise of developing medical records software that smaller practices could use for free. But the market has continued to consolidate in the hands of giant vendors like Epic Systems and Cerner, leaving little business for start-ups.
"Oh my goodness, how disappointing," said Bob Kocher, a health and technology investor at Venture firm Venrock, which did not invest in Practice Fusion. "A company with so much promise has fallen so far."
Practice Fusion last raised a big venture round in 2013 at a $700 million valuation. In January 2016, The New York Times reported that the company had hired JPMorgan to explore an IPO that could value Practice Fusion at $1.5 billion, on the basis that it could reach $181 million in revenue by 2018.
Practice Fusion was founded in 2006 by former CEO Ryan Howard, who was ousted in 2015. Rather than selling expensive licenses, the company makes money by showing ads to physicians that use the service.
In 2016, the company settled a privacy complaint with the federal government for misleading patients into sharing sensitive medical data that could then show up in a public directory.
Practice Fusion and other electronic health record companies benefited from legislation passed in 2009 that incentivized doctors to digitize paper records.