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May 9, 2019
Eric McDonald, who began his startup writing code in his basement almost two decades ago, has merged his company, DocuTap, with a competitor and is no longer CEO.
The health care technology company and Illinois-based Practice Velocity have joined together, creating an organization operating under the name Experity.
The deal was brought together by Warburg Pincus, one of the largest global private equity firms, which took a majority stake in DocuTap three years ago.
McDonald will become a member of the company’s board of directors.
“I don’t know that I ever envisioned being able to get the company to a place where we could merge with our largest competitor,” he said. “You have to do a lot of things right to be able to get to this spot, and luckily we’ve been able to do that. I give the credit to the leadership team and the team we’ve built over the years. I never thought we’d get to this spot.”
For McDonald, it’s the latest chapter in a startup success story that began in 2000 when he saw the future of using hand-held mobile devices in a health care setting. The increase in urgent care clinics and the birth of tablets further supported his vision, but first there was a lot of work and no revenue.
The journey took him through the Zeal Center for Entrepreneurship, where he had one desk and regularly worked in excess of 12-hour days.
“There were years of hardship,” he said. “I spent the first five years writing the code all by myself. We didn’t raise money until 2012. And it was hard raising capital in this market. It’s easier today than it was then … but the one common thread is you have to have persistence.”
McDonald was born in Washington and went to Northwestern College in Orange City, Iowa, where he earned a degree in computer science and contemplated attending a seminary.
Technology called, instead, as a summer job found him preparing a company for the potential Y2K computer bug in 2000.
In 2005, he had three employees.
The company grew to more than 250, mostly in Sioux Falls although there are offices in Atlanta and in two locations in Missouri.
The newly formed Experity will have about 650 employees and be based in Machesney Park, Ill.
Dr. David Stern, former CEO of Practice Velocity, is Experity’s CEO.
“We thank all of our clients and partners for the overwhelming enthusiasm and support since announcing our intent to merge,” Stern said in a statement. “Not only is this an exciting time for Experity’s employees, customers and partners but for the industry as a whole. We’ve all witnessed the evolution of urgent care and growth into nontraditional, on-demand health care. This merger is a reflection of industry growth and the need for solutions that can further power the patient-centered health care revolution. Patients have more choices than ever before, and the unification of these great brands will further enable current and future clients to deliver an unmatched patient experience.”
Experity will continue its presence in downtown Sioux Falls. Chief revenue officer Matt Blosl will be the top local executive.
“I get really excited for all the employees and people involved,” Blosl said. “The opportunities that are going to be created with us doubling in size overnight is really boundless. I think this will just continue to shine an even greater spotlight on the business community of Sioux Falls.”
Staffing levels are expected to be maintained and grow companywide, he said, adding there could be consolidation of some functions in certain offices, but “we don’t anticipate any significant reductions in staff. We both have huge customer bases we serve, and those don’t go away.”
The merger is a play for growth, he and McDonald said.
Instead of each company trying to match the other with new technology and products, their combined forces are able to serve more than 4,000 clinics nationwide and support new services such as patient engagement, teleradiology, business intelligence, remote patient registration and contracting/consulting.
“I think it’s hard to take two competing companies and merge them together, and if you get a chance to do that, you should capitalize on it,” McDonald said. “This story is all about how we grow faster.”
For McDonald, the relationship with Warburg Pincus stands out as among the most rewarding elements of his entrepreneurial journey.
With the firm’s equity stake, he was able to buy out his prior investors, a number of local angel investors and his employee-investors.
“It felt great to pay back all the people who had taken a risk on me,” he said. “We did a breakfast for the team, and it was really fun to essentially hand-write them a check. They had no clue it was coming, and they never knew amounts. To be able to give them those checks was really fun and rewarding.”
Both DocuTap and Practice Velocity have driven significant expansion in the on-demand health care space, said Andrew Park, managing director of Warburg Pincus.
“Both organizations have helped urgent care providers carve out their own place in the increasingly diverse ecosystem that is health care,” he said. “We expect to see continued, rapid growth in this area of health care, and we are confident that this newly combined company will play a key role in shaping and defining the future of on-demand health care.”
The companies have been working through transition planning for the past couple of months, and McDonald has been easing out of daily operations.
Today is his last day as CEO.
“What’s really cool about this exit for me is I’m not leaving the organization in a hard spot,” he said.
“Sometimes, you get pulled out of the game when you’re not playing so well and the company isn’t performing, but we’ve had our best quarters back-to-back in 19 years, our employment churn is at its best, our sales pipelines and close rates are better than they’ve ever been. I couldn’t be leaving at a better point, and a big part of it is the leadership team I’ve built. I don’t want to say it’s easy, but it is really easy for me to step out of this role knowing the company is at its best spot and I’ve got one of the strongest executive teams I’ve ever had.”
He plans to stay in Sioux Falls and said it’s hard to see himself tackling another startup. He could see himself leading another company in a high-growth stage, but he’s not sure.
“My current plan is there is no plan. I just need to lay low, is my goal, for the rest of the year,” he said. “I don’t know if I can make it. There are side bets going on if I can make it the rest of the year, but I need a little breather.”
The next chapter has arrived for one of Sioux Falls’ most successful startups: DocuTap has a new name, new headquarters and new leader.