Why does Capstreet invest in healthcare?
Capstreet backs healthcare companies that sell to providers and payers, and that make those customers run better. The firm points to technology as the force changing how providers and payers operate.
Capstreet states its view this way on its What We Do page:
The operating models of healthcare providers and payers are being transformed by technology. We look to invest in business-to-business models that enhance operating efficiency and efficacy for providers (hospitals, ambulatory, and outpatient services) and payers in the areas of compliance, revenue cycle management, and practice management software.
That is a narrow, specific thesis. It tells you what Capstreet has studied. It also tells you what the firm does not describe as its focus: it does not say it invests in hospitals or clinics themselves. Its interest is in the companies that serve them.
The firm also says it is a thesis-driven investor. It researches an area before it invests, so it can move with conviction. For a healthcare founder, that can mean fewer basic questions about your market and more questions about your plan.
What kinds of healthcare businesses fit Capstreet?
A fit is a business-to-business healthcare company serving hospitals, ambulatory providers, outpatient providers or payers. The work should sit in compliance, revenue cycle management or practice management software.
| Area | What Capstreet describes |
|---|---|
| Customers | Providers (hospitals, ambulatory and outpatient services) and payers |
| Business model | Business-to-business |
| Compliance | Companies that help customers meet healthcare compliance needs |
| Revenue cycle management | Companies that help customers manage billing and reimbursement |
| Practice management software | Software that helps providers run their practices |
Look at your own company against that table. If you sell to providers or payers and your product saves them time or cost, you are in the right conversation. If you are not sure where you sit, a short call is the fastest check. Read the full list of Capstreet’s criteria first.
How do Capstreet’s criteria apply to healthcare companies?
Capstreet publishes five criteria, and they apply to healthcare owners the same way they apply to every other industry. Each one is listed below.
- Entrepreneur-owned businesses services companies
- $3 to $15 million of EBITDA
- Primarily majority investments
- Entrepreneurs reinvest alongside Capstreet
- Ability to apply the Capvalue Framework®
The firm also says it looks for “a tenured team of owners or managers seeking a majority capital partner, with solid financials, a defensive business model, untapped growth potential, and competitive advantages within their market niche.” A healthcare services or software company with a tenured owner team, solid financials and a defensive business model matches what Capstreet describes. Compliance and billing work often repeat month after month, which is the kind of steadiness many buyers prize. That is our observation, not a Capstreet claim.
Its $3 to $15 million EBITDA range sits in what many call the lower middle market. EBITDA means earnings before interest, taxes, depreciation and amortization. It is the profit measure Capstreet’s range uses. In a buy and build plan, the first business is the platform company, and later purchases are added to it.
Which healthcare companies has Capstreet backed?
Capstreet lists three healthcare companies in its portfolio. All three are realized, which means Capstreet no longer owns them. Status is shown as Capstreet publishes it on its portfolio pages.
- symplr: Past, Fund III. A software-as-a-service provider for the compliance and credentialing needs of healthcare organizations. Capstreet’s case study says the company completed five strategic add-on acquisitions. symplr was sold to a financial sponsor in 2018.
- Surgical Notes: Past, Fund IV. A healthcare solutions company with products and services meant to streamline reimbursement, cut administrative costs and manage information for US ambulatory surgical centers. Founded in 1997 and headquartered in Dallas, TX.
- Advanced Data Processing (ADPI): Past, Fund II. Outsourced billing and accounts receivable management for the emergency medical service industry. ADPI was acquired by Intermedix in October 2006.
Capstreet publishes a case study you can read: symplr. It describes what the company did, not what investors earned.
What does Capstreet do after it invests?
Capstreet applies its Capvalue Framework® in three steps: Research, Build Scalable Platform, and Drive Business Transformation. Across its history, the firm reports 50+ Platform Acquisitions and 200+ Add-on Acquisitions.
- Research. Perform deep research to identify markets and build relationships with key entrepreneurs.
- Build Scalable Platform. Invest in top talent and technologies, and provide functional expertise for scale.
- Drive Business Transformation. Develop a long-term strategic roadmap and execute a buy and build strategy.
In healthcare, the symplr case study shows how this looks in practice: new management talent, upgraded systems and acquisitions. Read it to see the type of work Capstreet describes.
There can be no guarantee that Capstreet will be successful in applying its Capvalue Framework®.
Next step
If your company serves healthcare, read the full deal criteria, then start a confidential conversation through the contact page. You can also call 713-332-2700 or email connect@capstreet.com. See all industries Capstreet lists.
Frequently asked questions
What healthcare companies does Capstreet invest in?
Capstreet invests in business-to-business healthcare companies that serve providers and payers. It names compliance, revenue cycle management and practice management software as its areas. Providers include hospitals, ambulatory and outpatient services. The company should also meet the firm's general criteria, including $3 to $15 million of EBITDA.
Does Capstreet invest in hospitals or clinics?
Capstreet does not describe hospitals or clinics as its target. Its published thesis is about business-to-business models that help providers and payers work better. If you run a care provider, ask the firm directly through the contact page before you assume a fit.
What is Capstreet's healthcare track record?
Capstreet lists three healthcare portfolio companies: symplr, Surgical Notes and Advanced Data Processing (ADPI). All three are listed as past investments. The firm publishes a case study on symplr that describes its management hires, systems work and five add-on acquisitions.
Can I sell my healthcare software company to Capstreet?
Possibly. Capstreet looks for entrepreneur-owned companies with $3 to $15 million of EBITDA and a team that wants a majority capital partner. Software for compliance, revenue cycle management or practice management is within its stated focus. A confidential call is the next step.
