After a year of doubt, sacrifice and reinvention, does CrossChx’s Sean Lane finally have his billion-dollar idea?
For Sean Lane, $100 million isn’t enough. The co-founder and CEO of CrossChx moved his healthcare IT startup from Baltimore to Columbus in 2013 to build a revolutionary business. He wanted to change how hospitals fundamentally operate, make thousands of people millionaires and prove to the naysayers on the coasts that a billion-dollar tech company—with the right team, idea and support—can take flight in flyover country. “There was no other reason to come other than that,” Lane says.
That boldness has attracted plenty of attention in Columbus. CrossChx was the first investment of Drive Capital, the $550 million venture capital fund started by Silicon Valley transplant Mark Kvamme, who saw Ohio as an untapped moneymaking opportunity. From there, CrossChx grew quickly, attracted additional VC money, adopted a Silicon Valley-style business model (build something cool and worry about revenue later) and moved into eye-catching digs in a 118-year-old former Downtown auto dealership. The company appeared on the fast track to success, and Columbus business leaders seemed to anoint it and its fellow startup darling, CoverMyMeds, as the best bets to become the first superstar tech companies from central Ohio since CompuServe was inventing GIFs and popularizing email in the ’80s and ’90s.
Yet something felt off to Lane in January 2017. Even as revenue grew for CrossChx—and its latest product, Connect, spread to 200 hospitals—nagging doubts gripped him. Yes, CrossChx was poised for success. But was it enough success? Was it transformative? Had Lane settled for a double—or even a single—rather than swing for the fences? He and his team had been building up to this moment; Connect combined digital records management, data analytics, identity theft protection and other gizmos developed by CrossChx engineers over the previous five years into one convenient, mobile-friendly service. This was supposed to be CrossChx’s big moment. But it didn’t seem big enough. “I saw myself getting tired, and I saw myself resorting to a small company,” Lane says. “We could have easily made a nice little company. But in order to build something massive, we had to make these audacious moves. I was like, ‘I didn’t come here to do something small. I’m not going to do it.’ ”
That epiphany led to a year of audaciousness for CrossChx. Lane decided to reinvent his company, slashing jobs, scrapping plans and taking big risks. Rather than continue on a path toward what he perceived as a potential $100 million company, Lane steered CrossChx toward a less certain idea—one in the back of his mind for some time that he believed had a better chance of achieving his billion-dollar dreams.
In early January, Lane sits in a second-floor conference room in CrossChx’s East Main Street headquarters, not too far away from a brick wall emblazoned with the word “sacrifice,” one of CrossChx’s core values. In front of him on the conference table is a black metal coffee cup with the word “Olive” on it. All the self-inflicted pain of the past year has led to Olive, a software bot that uses artificial intelligence to complete tedious administrative healthcare tasks. It represents a major departure from what CrossChx had developed in the past, and the company is pinning its future on it—no more hedging, no more pivots. “It’s all Olive now,” Lane says.
If it wasn’t for a chance encounter, CrossChx may never have ended up in Columbus. In 2012, Lane and Brad Mascho, a buddy from Miami University in Oxford, founded CrossChx with the idea of linking fingerprints to electronic medical records. Through a pilot program at Holzer Medical Center in Lane’s hometown of Gallipolis, Lane became involved in economic development in the southeast Ohio village. At a ribbon-cutting ceremony for a new software company in Gallipolis, Lane met Kvamme, then the head of JobsOhio, Gov. John Kasich’s private economic development agency.
A former general partner at the renowned venture capital firm Sequoia Capital, Kvamme abandoned Silicon Valley in 2011 to lead JobsOhio at the request of his friend Kasich. But Kvamme never lost his eye for entrepreneurial talent and was intrigued by Lane, a former U.S. Air Force and National Security Administration intelligence officer who’d already sold his first business, a battlefield telecommunications company, to the U.S. government.
Lane and his business partner, Mascho, followed up that initial meeting with another face-to-face encounter with Kvamme in Columbus shortly thereafter. Lane told Kvamme about his busy life in Baltimore: leading a successor company to his first battlefield telecommunication business, dabbling in angel investing, co-founding a tech incubator called Betamore. Then he mentioned CrossChx, his most undeveloped idea, which had a goal of creating an “internet of healthcare.”
CrossChx interested Kvamme the most. He urged Lane and Mascho to abandon their other ventures, focus on their ambitious healthcare idea and move to Columbus. Kvamme told them about his plans to start a venture capital fund focused on Ohio and Midwestern companies and suggested CrossChx could become an investment prospect if they relocated.
“Everything you’ve done is interesting, but it’s nothing,’ ” Lane recalls Kvamme telling them. Angel investing is helpful, and so is selling a company for $10 million, he said. But nothing changes the complexion of a city like a massive outcome, and that’s what CrossChx could be. “You need to change an industry, and healthcare needs to be changed,” Kvamme told them. “Why wouldn’t you do that?”
Lane was happy in Baltimore, where he’d built a mini tech empire and lived in a home on the water with his wife. “I was really plugged into the scene in Baltimore and just having a great time,” Lane says. “My goal was to build a small company every few years and sell it for [$20-$50 million].” But Kvamme’s pitch made Lane reassess his plans. “I talked to Brad about it and said, ‘Let’s pick up our stuff, move to Columbus, leave everything behind and start from scratch,’ ” Lane says. “ ‘Let’s build a startup, something that’s venture-backed, where if the company doesn’t sell for a billion dollars, it’s a bust to them.’ ”
CrossChx made that big leap to Columbus in 2013. That same year, Kvamme’s new fund, Drive Capital, which he formed with Cincinnati native and fellow Sequoia Capital alum Chris Olsen, led an initial $5 million VC round for CrossChx. The healthcare IT company then collected $15 million more in both 2015 and 2016, as Drive re-upped its initial investment and was joined by the likes of Khosla Ventures and SVB Capital, both Silicon Valley stalwarts. The money allowed CrossChx to grow its staff from around 14 in 2013 to about 120 three years later, a nearly nine-fold increase. In 2015, the company moved into its funky 30,000-square-foot headquarters that includes an on-site chef, four beer taps, a taxidermied skunk in a conference room (a tribute to one of Lane’s favorite sayings—“put the skunk on the table”) and a crash pad under the stairs, ala Harry Potter, for Lane and others to use when working long hours.
David Landreman, CrossChx’s senior director of engineering, says the company showed that a Silicon Valley-style startup could exist in Columbus. “The impressions for West Coast people is, ‘Hey, that can only happen here,’ ” says Joel Chakra, head of marketing for CrossChx. “It’s not true at all. It’s happening everywhere now, and Columbus is one of the main areas.”
Yet CrossChx remains something of an outlier in Columbus, along with its Drive-backed brethren, such as Root Insurance, Aver and Beam Dental. And while more venture capital than ever is flowing through Columbus, the amount is still far behind the most dynamic entrepreneurial cities. “Columbus is not the city that it was when I first got here 12 years ago,” says Bill Diffenderffer, director of entrepreneurship at Ohio State’s Fisher College of Business and the former CEO of the Columbus startup airline Skybus, which went out of business in 2008. “It’s bigger. It’s stronger. It’s got more growth ability. But in certain areas, it hasn’t developed equivalently, and I think the startup entrepreneurial environment has not developed with the rest of Columbus yet.”
CoverMyMeds made headlines last year with its sale to San Francisco healthcare giant McKesson for $1.1 billion. But it didn’t follow the traditional startup path—instead, mostly building the business with little outside investment and capital until selling a minority stake to a San Francisco private equity firm in 2014. The truth is the city needs its pioneering VC player, Drive Capital, to hit a billion-dollar home run with CrossChx or another of its investments to prove the viability of its premise that Columbus and other under-the-radar Midwestern cities should be hotbeds of venture capital activity. Until that happens, Columbus will remain a question mark.
Entrepreneurs talk a lot about “pivots.” The goal is to “fail fast,” move on to the next idea and repeat the process until they find what works. If done properly, the results can be stunning. Consider these examples: Nintendo (started off as a manufacturer of playing cards), Nokia (a former paper mill company that sold galoshes), YouTube (originally a video dating site) and Dublin’s Cardinal Health (a grocery distributor before it became a pharmaceutical wholesaler).
These shifts are rightfully celebrated, but Diffenderffer says the best pivots tend to be smaller turns. After he left Skybus, Diffenderffer co-founded the luxury car rental company Silvercar. The company realized it needed it to get into markets more quickly than it intended so it started establishing rental offices in a variety of locations rather than focusing exclusively on airports, its original plan. “I think of [pivots] as evolving business plans,” says Diffenderffer, whose company, Silvercar, was bought by Audi last year for an undisclosed sum. “So if a company is truly pivoting, going left [rather than] going right, that’s not a good sign.”
CrossChx is very familiar with pivoting. Over the past five years, the company has churned through 28 products. Since breaking into the healthcare market with biometrics, CrossChx has created software that tried, among other things, to improve marketing, manage audits, speed up patient registration, track patient transfers, send out appointment reminders and combine a variety of previously developed products into a single service. Some products were built upon previous projects, while others were more one-off ideas that died quickly (the audit software lasted around two months).
Though the products have changed, the guiding, over-arching goal has remained the same: using information technology to connect the many different parts of the modern healthcare system. “Five years ago, when I came here, Sean was saying ‘the internet of healthcare,’ ” says Chakra, CrossChx’s marketing chief. “He hasn’t stopped saying that since.”
But the quest to find the holy grail of healthcare IT innovation has been exhausting, and one casualty was Mascho, Lane’s co-founder. Mascho remains a member of the CrossChx board, but he left his day-to-day role in 2016. The product development grind and the need to conserve money influenced his departure, Lane says. “He also worked his butt off for a good four years so he was tired, too,” Lane says. “We all get tired. So it was my turn to step up and take on more and his turn to kind of gracefully exit.”
Lane first floated his Olive idea about two years ago. It met resistance then, as CrossChx was deep into promoting a product called Queue for streamlining patient registration. “People were not having it,” Lane says. “I was like, ‘All right, we can let it play out.’ ” Then when CrossChx shifted to Connect—which combined Queue and other products into a mobile-friendly service—Lane returned to Olive and refused to let it go this time. “To be honest, we were very focused on this Connect business that we had,” Lane says. “We had a mobile app. We had care management software. The market signals were looking OK. We had just raised a little bit more money based on that, and it was tough for me to say, ‘We’re going to go do this AI bot.’ That was a pretty big leap.” Adds Landreman, CrossChx’s engineering chief: “It was a large pivot, but we built it on top of a lot of stuff we’ve brought to light in previous things.”
Lane terminated about 30 positions in January 2017 to prepare for the company’s most significant pivot yet. That winter, Landreman put his entire team of around 25 engineers on Olive, the first time the company had done that for a product. By late March, they had developed their first prototype, and by June, the first customer—Meadows Regional Medical Center in Vidalia, Georgia—began testing the service. The software bot uses artificial intelligence to serve as a connector between networks and systems, completing menial tasks typically handled by humans, such as insurance eligibility checks, prior authorizations, appointment reminders and scheduling.
The reaction was positive from the start, CrossChx employees say. Olive had so cut the workload of a staffer responsible for patient registration at the Georgia hospital that she had enough time to attend a conference about improving customer service, something she couldn’t have done before. About a month after Olive launched, Chakra visited the hospital. “When they were talking about Olive, they kept saying ‘she’ and ‘her,’ ” Chakra says. “To them, Olive was already personified. They started talking about, ‘Well, Olive is doing this. Where else can I get Olive going?’ ”
Indeed, Lane and his team see huge potential for Olive, which 50 hospitals (including Nationwide Children’s Hospital) have adopted since the summer, a total CrossChx aims to triple by the end of 2018. Lane says Olive is the most-in demand product CrossChx has ever developed. In January, CrossChx turned introductory conversations with two potential customers into sales within 24 hours, a turnaround unheard of in healthcare, where a typical sales cycle can take a year or two, Lane says. Olive has generated more revenue than any other CrossChx product during its first nine months—and Lane hopes to double revenue growth in 2018. “Every customer we talk to loves the concept,” he says.
Olive so far has focused on “low-hanging fruit,” says Landreman. “But your mind starts to really spin when you talk about, ‘Well, what happens if you get a little closer to path-of-care stuff?’ ” Landreman says. “Like integrating getting lab data from system A to system B, this kind of stuff we haven’t even necessarily looked at yet. But it all exists out there as the next stop that we could go down.”
The company is now completely focused on Olive. It no longer promotes any of its other products, and it’s even considering renaming itself Olive. Lane is confident he’s finally found his billion-dollar idea. “If this isn’t it, then I don’t know if I would ever recognize it,” he says.
Dave Ghose is the editor.