Case Study Of A Dotcom, Part 2
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Two weeks ago, we began our case study of SimplyHealth.com, a health insurance site targeted at consumers and small businesses. When we left off, things were going swimmingly for Eric Grossman's company. Too swimmingly, perhaps? We'd tell you, but then you probably wouldn't read the rest of this article. So keep reading. (And if you missed the first part, do some backtracking. We can't do everything, you know.)
SimplyHealth is getting set for an April 14 launch, but NASDAQ plays a cruel joke on the fledgling dotcom, plummeting 15 percent. And, as if in sync, Georgia's usually balmy April weather takes a downturn on launch day. The outdoor event atop the Chamber of Commerce building, is, to say the least, weather-challenged. "We were saved by a tent, an awesome band and space heaters," says Grossman.
On Monday, April 17, another blow. A major new investor pulls out, reeling at the effects of its own stock slide. Grossman, surrounded by disheartened employees, is no longer riding a stallion amid the Internet gold rush; he's trudging along in a covered wagon, hauling a heavy load of employee and investor expectations. "I was so stressed out, all the hair on the back of my head fell out," he says. "We needed a new lead investor."
SimplyHealth gets its first online enrollee, brightening employee morale somewhat. "Between April 14 and June 2, [employees] were a little nervous about what was going to happen to the company," says Mark Poling, SimplyHealth's vice president of technology.
Still, everyone hunkers down, looking to Grossman for a miracle. And along comes June.
With money running dry, SimplyHealth.com carries out two coups: 1) receiving $26 million in venture capital from SSM Ventures on June 2, and 2) becoming Healtheon/WebMD's exclusive provider of health insurance information and purchase options. Heavy hitters such as K. Robert Draughon of WebMD and Jim Witherington of SSM Ventures take their places on the SimplyHealth.com board of directors. As if on cue, employee morale and confidence reach an all-time high.
Things are coasting along, with orders picking up. Grossman forms partnerships with Ebix, an aggregator of insurance leads; MACOC, the 1 million-member Metropolitan Atlanta Chamber of Commerce; and ehealthclaim, an employee health-benefit management ASP, among others. Next step: new office space!
In true dotcom start-up form, SimplyHealth comes into its own in a posh glass and chrome building in Midtown, one of the city's hottest revitalized areas. With 25,000 square feet of office space, including a rec room with two Foozball tables, a lunchroom and four conference rooms, "SimplyHealth is poised for growth-we look like a company," says Grossman.
Grossman marries sweetheart Christi Bennett in an antebellum mansion and honeymoons in Maui for a week ("all the boss would allow me to take," he jokes). On the business front, "[I'm] hunkering down until we can go back to the market with a clear path of profitability." Translation: He wants to make sure the company has a cost-effective business model. Grossman watches with interest as other dotcoms go under-and meanwhile forms a partnership with Beverly Hills, California-based Survival Insurance Brokerage, which enables consumers to purchase health and service auto insurance through its Web site. This gives SimplyHealth another outlet to reach consumers.
To avoid guilt by association with failing Internet firms, Grossman drops the ".com" from the official corporate name, leaving it as SimplyHealth Inc. "We want to be viewed as a company, not a destination," he says.
Grossman looks for ways to diversify the company's revenue stream and focuses on developing more partnerships with suppliers. "It's all complementary," he says. "Everything we build on the Web site we can leverage to health plans." The company is agency-licensed in all 50 states and offers online services in 35. "We can't just have marching vision; we must be marching together internally," he says. SimplyHealth forms a global technology partnership with Cap Gemini Ernst & Young.
Despite the market downturn and the slide into the abyss by many of SimplyHealth's Internet counterparts, Grossman says the company is on track, serving the one out of 10 Americans not covered by health insurance, producing an incremental revenue stream and focusing on a segment of the market that general agencies haven't been able to effectively service themselves.
"Our revenue stream has been growing constantly at 30 percent per month.exceeding [forecasts]," says Grossman. "All signs are positive that we will not need additional capital, and we're [expecting] to be profitable in 2002."
How can he be so sure? "Every customer grows our revenue stream," says Grossman. "More important, not only are we becoming a business-to-consumer company, but we're developing a business-to-business model. How many companies can say they've raised $30 million since April 2000?"
Author Lathrop, whose article became Grossman's call to arms, predicts that future employee benefits packages may include commingled health and retirement benefits. "As [the cost of] health benefits goes up, employers will be looking at new ways to solve the dilemma," says Lathrop, now retired and serving as Booz-Allen & Hamilton's national advisor on managed care. "Healthy young workers may opt for a high medical deductible in favor of more funds for retirement, while older workers with more health-care needs may select plans with lower retirement benefits and higher health-care benefits. If this happens, employers will need people like SimplyHealth as a window into the health insurance market. Eric is building his business, learning fast and learning what it will take to operate in that world. He'll be first in line." Grossman is ready to lead the parade.
Mickey Goodman, a freelance writer in Atlanta, has written for Atlanta Magazine, Style Magazine, Southern Flair and other publications.