Irvine-based Kareo Inc. is using a fresh shot of funding to create a new division as it prepares to move to a larger headquarters this summer.
Kareo, which provides cloud-based billing and practice management software to small medical practices, said last week that it raised $20.5 million in its latest round of funding.
The company posted $13.8 million in revenue in the 12 months through June 30, 2012, landing it at No. 22 on the Business Journal’s annual list of fast-growing private companies based in Orange County. The company does not disclose any other financial data.
The Stripes Group LLC, a growth equity firm based in New York City, led the latest funding round for Kareo. Portola Valley-based Western Technology Investors, an existing Kareo funder, also joined the round. With the new funding, the company has raised more than $38 million since it started in 2005.
Kareo will use the latest round of money to establish Kareo Billing Services, which will specialize in revenue cycle management. Revenue cycle management uses software for coding and documenting insurance claims to help doctors manage their payments and cash flow.
Kareo Billing combines the company’s software capabilities with medical billing services. It was established after talking to customers seeking improvements to billing services, according to the company.
Getting the money is “another key milestone for Kareo and our efforts to deliver intuitive and affordable medical-office software and services to our small-practice customers,” said Dan Rodrigues, the company’s founder and chief executive.
Kareo also has signed a lease for 51,705 square feet at the Park Place office complex at 3353 Michelson Drive, according to data from CoStar Group Inc. Disk drive maker Western Digital Corp. also is a tenant in that building.
The company is expected to make the move from its current offices at 111 Academy Drive, an office complex near the University of California, Irvine, by midyear.
Growth
“With the rate of growth that we’re seeing in our staff in Orange County, we’re pretty close to outgrowing our current space,” Rodrigues said.
Kareo now has about 170 workers, the vast majority of whom are in Irvine. It also has an office in Indianapolis with 20 employees.
The company has considered creating a billing unit for “a couple of years now,” Rodrigues said. “What we’re seeing is just increasing demand for practices that want to outsource in that manner, so we decided to expand our offering” to serve both sides of the market and “pay attention to what new prospects were interested in.
“There are now an increasing number of IT-enabled companies like Kareo” that are getting into medical billing, according to Rodrigues.
Rodrigues added that Kareo plans to “fuel our aggressive growth” with “a lot of new investment in marketing and sales” in addition to creating the billing programs with its new funding.
Rodrigues declined to give an estimate on Kareo’s revenue for 2013.
The company is now focusing on a transition from being a single-product, software-focused company to one that will also offer related services, he said.
Kareo said that it also has established a medical billing partner program that’s targeted at the more than 600 medical billing firms that the company said uses its practice management software today.
Ken Fox, a managing partner of the Stripes Group, has joined Kareo’s board as a result of the funding.
“We have considerable confidence in Dan and his team and are proud to be part of [Kareo] and its ongoing efforts to help small practices thrive and prosper,” Fox said in a release.
