LAVCA. Entrepreneur profile:Jaime Cater, HDS
LAVCA: Give us the HDS generals.
Cater
HDS is a Mexican company created by medical and IT professionals to provide technology and consulting solutions for the entire healthcare ecosystem. We offer a complete patient-centric information management system that integrates all three industry players:
1. Insurance and healthcare funder.
2. Providers, including hospitals, clinics, physicians, and the pharmaceutical industry.
3. Regulators, including health ministries and public institutions. Our system and services allow users to access, monitor and share medical data efficiently through a secure online network in real-time.
HDS services streamline clinical and administrative workflows and increase efficiency and transparency while reducing operating costs so patients receive higher-quality care.
At HDS we are deeply committed to transforming the healthcare industry and changing the way patients are treated. We want to make healthcare more equitable and create a sustainable model for other countries.
LAVCA: What is your background?
Cater
I have a degree in computer science from the Anahuac University in Mexico City and did a postgraduate degree in space communications. I started my first software company at the age of 19, so my whole life has been related to high technology. In addition to HDS, I have started more than 30 companies in Latin America and the US in the telecommunications, software, and security technologies sectors.
LAVCA: How did the business idea for HDS come about?
Cater
The idea was born almost nine years ago when I was participating in a public tender to provide a telecommunications solution for a chain of public hospitals in the State of Mexico. I realized there was no IT infrastructure of any kind and started reading about healthcare reforms around the world. I contacted some doctors to understand the problems in the industry, and initially, we decided to create a software application. We quickly realized that the problem was, and is, much more complex than we thought, and we would need experts in change management, people who understand behavior across the healthcare ecosystem, as well as the legal environment.
LAVCA: What kind of funding have you received so far?
Cater
We have received all kinds of support. My existing partners and I financed the first, second, and third rounds of capital, but we also received financial support from CONACYT (Mexico's Council of Science and Technology). Then we started a formal capitalization process and signed with a Mexican venture capital firm.
LAVCA: For early-stage financing, to what extent did investors factor in their cash flow projections in the equity valuation of your company?
Cater
Cash flow projections are always very important, but I think the market opportunity and the concept of innovation are more important in the early stages. In the case of HDS, the healthcare industry has changed in recent years that have created opportunities for entrepreneurs. Some controllers include:
• The fragmentation of the health sector, creates a need for reform in most of Latin America.
• Increased costs of health services and deficient management control
• A gap between information management and patient needs
• Poor quality patient services
LAVCA: What feedback have you received from investors on where to make improvements to your business model?
Cater
I think the most important advice has been to be very effective and clear in the use of resources. All business plans and models project revenue and positive cash flow earlier than can be achieved. Investors work hard to help meet those projections and map out the competition. We found that information very useful on HDS.
LAVCA: Who is your competition?
Cater
HDS has a wide variety of competitors as we not only provide software but also consultancy and professional services. We compete with companies such as Siemens, SAP, Cerner, Alert, iSoft and local software application providers. On the other hand, we also compete with consulting firms like Deloitte, PWHC, and others that have healthcare practices.
LAVCA: What do you see as your competitive advantage?
Cater
Firstly, we have the local clinical knowledge of the healthcare industry in Latin America, secondly, HDS has a unique software architecture for the entire healthcare ecosystem, and thirdly, We have a change management methodology designed by doctors and experts in the process.
LAVCA: What is your most pressing strategic challenge right now?
Cater
As we complete the client's installations, controlling the growth of expenses is crucial. End users in the healthcare industry are slow to adopt the technology. Doctors like to use technology for diagnosis and treatment, but not for control. So the economic cycle is long.
LAVCA: Tell us a bit more about your expansion in South America. Which countries are you targeting and why? Are you looking for additional funds to help expansion efforts?
Cater
Most of our ware is developed in Mexico and Colombia, but we also have operations in Venezuela. HDS's expansion plans also include opening in Panama, Peru, and Ecuador. We also recently opened a small office in Silicon Valley to begin learning about and penetrating the US market. We view expansion as our main investment and are currently presenting the plan to the board, emphasizing market opportunities and growth strategies that include both organic and inorganic expansion options.
LAVCA: Where do you hope to see HDS five years from now?
Cater
It is very difficult to predict the future in the technology industry, but I would like to see HDS as the dominant player in the healthcare IT market in Latin America. I hope we can have an initial public offering before 2015 or perhaps merge with one of the world leaders in the industry. We see HDS with more than 1,000 employees and revenues over US$200M. For 2011, we are projecting $30 million to $35 million in revenue and over 300 employees.
LAVCA: What advice would you give to other aspiring entrepreneurs in Mexico?
Cater
To deepen the transformation and innovation of your entrepreneurial idea and what impact it can have on the sector or industry. Be patient and determined.
LAVCA: In your opinion, what changes do you think are most necessary to build a stronger business and venture capital community in Mexico?
Cater
Communication and exposure. As entrepreneurs, we have very little knowledge about the opportunities to work with venture capitalists. In addition, the investment community needs to have better tools to contact and select the large companies that are emerging. I also think entrepreneurs need to think more institutionally and venture capitalists need to take more risks. That's what they are for!