Point C: Continuing the Journey with the Advantage Fund | Ryan Kelley and John Hennegan

Michael Burcham: Welcome to Microcap Moments, a podcast from Shore Capital Partners that highlights the stories of founders, investors, and leaders who have taken on the challenge of transforming ideas and small companies into high growth organizations.

The journey of becoming and scaling a business takes one down many unexpected paths. It’s a journey where we learn from our mistakes. Fall down often but have the entrepreneurial grit to pick ourselves up and persevere. Within this series, we will share these stories of success and failure of the challenges, and the rewards faced by those who dare to dream big. And through their lessons learned, we hope to inspire others who are on a similar journey of becoming, growing and leading.

In this episode, I am talking to Ryan Kelley and John Hennegan, two of our founding partners here at Shore Capital. This podcast begins with. With Ryan sharing how he discovered a small medical TPA in Wisconsin while looking to grow another portfolio company within the Shore family known as Navia. We will take the journey of the creation and growth of Point C through the eyes of Ryan.

And what’s next for Point C as John shares his vision. His view on the future opportunity for the company to continue its work in helping employers deliver great medical benefits to their team. Point C is the first company within the Shore portfolio to become part of our new middle market fund focused on healthcare. It is known internally as Shore’s Advantage Fund. I thoroughly enjoyed this interview with these two founding partners, and I think you will as well.

Ryan and John, thank you for joining me today. I am really excited to have a discussion with you about Point C and it becoming the first company within Shore Capital’s mid-market fund called the Advantage Fund.

Ryan, I’d love to start with you about the early days and the creation of Point C. Can you tell us a little bit about that journey and what that was like for you?

 

Ryan Kelley: Sure, Michael. Thrilled to be here with you. In talking about Point C, I think it’s helpful to even go back one step further and talk about our investment in Navia Benefit Solutions.

Sometimes, an investment just clicks on a personal level. That was Navia for me, back in 2017. Navia was more than just a business. It was a bridge for employees to access healthcare with ease. Navia administers flexible spending accounts, health savings accounts, commuter reimbursements, and other benefits that mainly allow people to set aside pretax dollars from payroll and use those dollars to fund their first out of pocket health care expenses. Say the first $2,000 or first $3,000 out of pocket. So, think of their deductibles or coinsurance. So, it gives people the power to manage their health care expense more affordably and I knew immediately this is something I wanted to be part of.

So, what I also loved about Navia was the business model. As I’ve gone deeper into my investing career, I’ve grown appreciation for revenue quality. revenue predictability, and Navia has that in spades. They have over 100 percent net revenue retention. Many years it could be 105 or 108%, meaning you could sell no new clients, and you’d have 5 to 8 percent organic revenue growth, which is pretty incredible.

That’s in line with some of the best SaaS vertical market software companies. What was also great about Navia was, in Seattle and the Bay Area. So, they had a lot of tech clients, and they got referrals from brokers. But Hillary, the CEO and founder we partnered with, talks about the early days of bringing on Uber and Dropbox, DocuSign, Stripe, some of these Bay Area icon companies.

They were implemented with Navia when they had maybe a hundred employees. And to date, many of those companies have a thousand or tens of thousands of employees. So, what was great about Navia was their revenue, Navia’s revenue could grow with the growth of those companies. Because on average, Navia is getting, say, four dollars per employee per month of admin fee.

And so, if a company like Dropbox goes from 100 employees to 4,000, just think of the revenue increase for Navia. So it was, you know, doing a great service for people to help them pay for a first dollar out of pocket health care with a great business model and revenue framework. I just really kind of fell in love with the business model.

This really led to Point C. So, we’re doing acquisitions for Navia. We’re calling different TPAs that are similar for acquisition. And I meet this company, Benefit Plan Administrators. And my first call with BPA was really pursuing them as an add on for Navia. I quickly realized it was a different business.

It was, yes, it was a third-party administrator, but BPA was doing the whole benefit plan. Whereas Navia is just doing the flexible spending account or health savings account, BPA would essentially make a benefit plan for a company. And I’ll get into this more later, but BPA would merge into networks, say Cigna.

They’d merge into PBM, CVS. They’d handle all claims payments. BPA would do the whole benefit plan. This became a new thesis for Shore. And I spent a lot of time with the BPA folks in 2018. Went many trips to Eau Claire, Wisconsin. And in late 2018, they hit the brakes. They said, you know what, it’s busy season. I don’t think this is right for us. Let’s just put this whole thing on pause.

So, I was completely devastated because this was my favorite new area, and I had BPA in my head all lined up as a new platform investment for sure. But, recognized I may be able to take some breathing room, I put a reminder on my calendar for March of 2019.

And the reminder was something like, reach out to Dan Cuskey at BPA. And so, three or four months goes by, I get this reminder in my calendar, and I reach out to Dan Cuskey in March 2019 and, we do a call that leads to a visit and things really took off in June of 2019. I took an operating partner to Eau Claire to visit with Dan Cuskey and BPA.

And that operating partner was Bob Carlson. And so, for those that aren’t familiar, an operating partner is someone that has industry expertise, someone that’s been an operator and run a business. And they bring a different level of expertise to the table. And I would explain it like I was conversational in TPA, but Bob Carlson was fluent in TPA.

Bob had worked at a vendor that was used in this ecosystem. So, I go to Eau Claire in June of 2019 with Bob Carlson. It’s a great meeting. I can tell things are going to go forward. And from there, we moved to an LOI, I think in August of 2019. And our partnership closed in November of 2019, where we invested in BPA Eau Claire and then launched Point C.

Michael Burcham: The third-party administration space has a few complexities that likely need some additional color for one to fully understand. In this next segment, I asked Ryan to share with our listeners the defining elements of a TPA.

Ryan, I think many of our listeners may be scratching their head to try to understand what the heck is a TPA. So, in the most simple terms possible, could you explain what a TPA is and does?

 

Ryan Kelley: The way I try to simplify this is think about if I was explaining this to my child, so I have 11-year-old twins. So, if I was explaining what a TPA does to my kids, I would say a TPA is like a hub for health benefits. The TPA’s job is to move data and money and make sure the whole benefit plan runs smoothly.

And I’d explain to my kids, think of your allowance. You get a certain amount every month, you’re going to set aside some for snacks, some for games, and the rest you’re going to save. TPAs do the same thing with healthcare dollars. They’re gonna pay stop loss premiums, some money’s going to pharmacy benefits, some’s going to medical benefits, we’re gonna build some reserves, so that all the money kind of flows through a TPA, and the TPA’s the integrator of all these different parts that make up a benefit plan.

What’s interesting for me is a TPA coordinates every element, so think of every claim, every call, So, there’s different models in healthcare. You can get a plan from, say, UnitedHealthcare or Blue Cross, or you can unbundle, which is what we’re advocates for, and go to an independent TPA. And the independent TPA will allow you to write your own plan document.

So, you truly create your own medical plan that’s governed by ERISA. And it allows you a lot more flexibility. And so, Dan Cuskey used to tell me, just to drill the point home, he’d make it really simple and say, like, Ryan, if you’re self-funded with us, you can put in your plan document we don’t cover the cost of skydiving accidents.

So, if you work for my company and you get injured skydiving, that’s not a covered benefit, because I don’t think that’s what health insurance is for. You could also say, you know what, if you get in an accident drunk driving, we don’t cover the cost of that, because you shouldn’t be driving your car drunk.

So, if you’re in a fully insured plan, off the shelf you don’t have that customization flexibility. If you’re self-funded, I use those examples, they’re kind of silly, just to give you a sense for how customizable the plans are. A more relevant example would be like you could exclude specialty drugs. So, the cost of health care, as everyone knows, is increasing dramatically.

One of the biggest spend areas is on pharmacy benefits. So, 10 years ago, pharmacy would be maybe 10 percent of the plan spend, and now it’s 30 to 35 percent of plan spend. So, what a lot of companies are doing with these TPAs is they’ll put in their plan document, we don’t cover specialty drugs. A lot of these drugs are $120,000 up to $250,000 a year.

Think about that for an employee that’s making maybe a third of that. It just can be crushing for your company. And so, with the model of TPAs allows you a lot more control to kind of manage that cost.

 

Michael Burcham: So Ryan, it seems it’s an opportunity for an employer to have control, but also to have customization and to be given choice in how they want their benefits to be shaped and looked so that they can attract a workforce that really is reflective of the type of work and the type of their industry. And would that be an accurate summary of that?

 

Ryan Kelley: Yes, I totally agree. It’s the flexibility, it’s the choice, you know, think about the analogy of buying cable and you get, here’s 500 channels and you’re required to get them. For me, that’s the UnitedHealthcare Blue Cross fully insured. You’re paying for a bunch of stuff you may not need and you’re also providing benefits that may not be relevant.

With a TPA, it’s like you get to just pick the channels that you want. Another thing, I think the key theme to hit on here is transparency. And so, I think of it from the seat of the CFO. If you’re fully insured, the CFO gets an invoice once a month from United or Blue Cross or whoever, Aetna, pick your carrier, and they pay the invoice.

But it’s like a one-page invoice. It says you had, you know, 84 subscribers, people aren’t playing, and here’s what they cost, and here’s the dollar amount you owe. But you have no idea what you actually purchased. Because under that was doctor visits, hospital visits, prescriptions. So that’s the full insured model.

When you go self-funded, the first week of the month, typically you pay your fixed costs. So, you pay your stop loss, you pay your TPA admin fee, you pay your network access fee. Every other week of the month, you get a claim register. So, if I’m the CFO and a self-funded plan, I get an Excel register, and it shows everything I’m buying.

So, make it up. Might go into the physical therapist. John got this prescription; Ryan went to the chiropractor. Like you’re seeing as a CFO, what you’re actually paying for. And the benefit of that is it allows you to manage the costs. Let’s say you see some costs that are trending really high, or you see something that’s really kind of getting out of control, you can see that real time and influence it.

The analogy I’ve started to use is, like think of if you’re running a business, and you’re procuring office supplies, and you’re using a vendor, let’s say it’s Staples, and Staples just sends you an invoice. You pay it, but you have no idea how many reams of paper you got, how many paperclips you got, how many boxes of pens. You just pay the invoice.

Self-funded, you’d get this detailed invoice. It would tell you down to every staple and every paperclip what you procured. For me as a CFO, I just think that’s a better model and that’s how you can actually drive savings.

Michael Burcham: In the upcoming segment, Ryan shares some of the interesting stories of growth as Point C transformed from a single third-party administrator to what it is today.

So, Ryan, I know you and I share some fun and some crazy stories over the last five years with Point C. I think one that I would love you to highlight is, you call it, your Hotel Lobby Synergy Story. Would you share with our listeners about the Hotel Lobby Story?

 

Ryan Kelley: Yeah, thanks for reminding me of this one, Michael.

This is pretty fun. So, we started with BPA in Eau Claire in late 2019, as we talked about. And one thing these TPAs do is they pay medical claims electronically. So, 20 years ago, it was paper checks. So, think of TPA sending a check to a hospital and to doctor’s offices. They’re paying for services. Most people now want electronic payment.

And so, what the TPAs do is they’ll collect the funds from the employer, and then they’ll send out all the payments to providers electronically. TPAs will use a vendor for this. So, the big ones are ECHO and Zelis. And so, with BPA, we’re using the ECHO payment system. And as most people are aware, when there’s a dollar paid electronically, think of an ACH or credit card payment, there’s usually about 3%.

So, 3 cents of every dollar that goes to pay all the people in that ecosystem. So. Think of the credit card issuer or the ACH processor. There’s a lot of people in that payment system that are kind of getting a cut of every electronic payment. So, ECHO gets about 3 percent of all payments, and they share 1 percent of that.

So, a third back to the TPA, back to BPA. So, we can imagine for every a hundred dollars that we pay of medical claims, 3 is going to ECHO and then ECHO gives us a dollar. So, we acquire Mid-American Benefits as kind of the second add on under Point C. And we’re looking at things just after closing. And we see that Mid-American Benefits has an ECHO contract where they get 40 basis points of interchange.

So, you got BPA at 1 percent, and you’ve got Mid-American Benefits at 40 basis points. And I look at Dan, we’re sitting in this courtyard Marriott hotel lobby in Omaha. We’d just closed the investment. We’re working on a hundred-day plan. And I go to Dan, I’m like, Dan, how do we get Mid-American Benefits from 40 basis points to 1%?

And he’s like, I think if we just call Ryan Davis my contact at ECHO. I think we can just explain that we purchased Mid-American Benefits and that they should fall under our contract. And I was like, why don’t we just give Ryan a call right now? And so, we’re in the hotel lobby. I think Dan on speakerphone calls Ryan at ECHO.

We get him on the line. So, he answers, you know, within a few rings. And Dan explains that we had just acquired Mid-American Benefits. We both have these contracts with his company and that we need Mid-American to now have the 1 percent interchange. And with barely a pause, Ryan says, yeah, this happens all the time with consolidation and M&A and the Mid-American contract will change to match your BPA term.

And so, I think Mid-American is making $15,000 a month of interchange revenue, and that probably went to $35,000 the next month. So, a phone call, the contract changed, revenue goes up $20,000 a month, or $240,000 a year. And I thought, wow, this is the easiest synergy I’ve ever seen. Even a private equity guy could execute this synergy. In a hotel lobby, it was that easy.

So, what we liked about it was there was no restructuring. There were no layoffs. There was really no impact to the staff. It was just talking to a vendor and getting the economies of scale and this power of the bigger business to drive enhanced revenue.

Michael Burcham: In the following segment, both John and Ryan talk about what was so attractive about Point C becoming the first company in Shore Capital’s Advantage Fund.

The conversation naturally turns to the power of the team. We have a fundamental belief at Shore that great companies are only possible with a great team. Listen as Ryan also shares some of the specific stories about key team members that have been so central to creating this great business.

So, John, a question for you, as one of our leaders of the Advantage Fund, what did you see in Point C that made it so attractive to become the first company within this fund structure?

John Hennegan: Michael, as you know firsthand, being lead director of the board, Point C is the ideal starting place for the Advantage Fund. There are so many different directions that we can go for growth.

And as we think about businesses getting larger and larger, organic growth becomes more and more important. And I distinguish organic growth, which means, you know, how do you grow the business that exists today versus inorganic growth, which would be utilizing add on acquisitions and so forth to grow a company.

That organic growth becomes critical as a business scales. And there are so many organic growth opportunities. It’s also an industry that is going to thrive regardless of who is in the White House or who controls Congress, regardless of economic cycle. We all know that the growth in healthcare costs in this country is unsustainable.

Point C is providing the perfect solution. It allows employers to provide better services. better benefits to their employees at a better cost. Who wouldn’t want that to be the foundation for a new fund?

Ryan, the other part of it though that really jumps out to me is the incredibly strong team that you had built. Can you talk a little bit about the team?

 

Ryan Kelley: Sure, John. So, we started in 2019, as I mentioned. Our first hire was from our CXO program. So, for those that are not familiar, we have a program at Shore where we hire CXOs. The freshly minted MBAs. Mark Larsen was the first real outside hire to the Point C business in June of 2020.

Mark quickly made an impact with integrations, special projects, and launching the Care Management Division. Michael, Mark worked very closely with you on this Care Management Division, but it was essentially something we outsourced, where the business got no revenue, we didn’t control it, to where we built up to 30 nurses, an in-house hospital. you know, engage with our members, try to reduce their costs, but improve their medical outcomes.

And so, what I’m most proud of, really with Mark Larsen and his transition from CXO to COO, was all the work he did, and particularly the care management build out. Now, interesting side note on Mark, he’s our first CXO to become a CEO of another Shore company.

So, in a bittersweet moment for Point C, we had invested in another company in this ecosystem called Connexure, and we’re looking for a CEO about 12 months ago. And Mark Larsen raised his hand, and it was the right fit. And so, Mark has, after being a key part of Point C, is now a CEO of a separate Shore business.

 

Michael Burcham: And when we say CXO, I think the X is kind of like the Swiss Army knife because when you think of the different types of work Mark did, it was everything from integrations to putting our first data constructs together to building the very first Point C website. And the list could just go on and on. I think he sat in almost every chair within the C suite because there was no one else to sit in those chairs.

So we had six chairs and he would just spend an hour a day in each chair until we actually hired all the right team members, which positioned him, I think beautifully to be the Chief Operating Officer for Point C and that experience really helped him be ready to take on the CEO role at Connexure. Any thoughts about some of those early journeys with Mark and some of the other players?

 

Ryan Kelley: You’re exactly right, Michael. The X is what I call a utility player. Think of a free safety, Swiss Army knife is a great analogy. And remember Mark in the early days built out our first Salesforce instance. He helped drive accountability in our call center and our claim’s function. He led all the integration of the early acquisitions.

So sat in every seat and ultimately became Chief Operating Officer of Point C and then sort of bittersweet for Point C left and became CEO of another Shore business. But to John’s point on the team that is going with the Advantage Fund, Mark was key in the early days until we hired our CEO. So, Ben Frisch joined us in April of 2021.

So, the early days, the first 18 months of the platform was really myself, the founders of BPA, mainly Dan Cuskey and Mark Paulson, along with Mark Larsen. And so that team was in the early days doing a couple acquisitions, getting the foundation set, and we wanted to find the right CEO and we didn’t want to rush it.

So, we took maybe six or seven months with a headhunting firm and a recruiter and met a bunch of different candidates. I remember the first call with Ben, I was immediately kind of drawn, he’s charismatic, the way he talks about the business, his passion for the business just came through that first Zoom call.

As I learned more about his background, Ben had essentially grown up in the TPA business. His father had, I think, two TPAs and so Ben worked in the mailroom and probably did every job as a teenager and college kid in a TPA in Kansas City and was part of that family business being sold to Blue Cross of Kansas City.

So, Ben had kind of seen the family business being sold to the big payer. And then more recently, so right before Ben joined Point C, he had been in a top secret running a division for Trustmark. So, Trustmark was maybe $150 million to $200 million revenue TPA, and Ben ran one region. So, I think Ben had a, you know, $50 to $60 million P&L.

So, Ben’s just a great human, but his personal experiences in this industry made him the ideal candidate for the job. And so, Ben joined in April of 2021. We quickly hired a Chief Financial Officer and Bill McNally. He joined summer of 2021. And shortly after John Vujovich, our VP of Business Development joined.

And so really it was that kind of Q2, Q3 of 2021 that the core team was formed. And then that’s the team that drove a lot of the growth and success. And that’s the team that’s being backed by the Advantage Fund.

Michael Burcham: Throughout our discussion, Shore’s new Advantage Fund has come up several times. In this segment, I asked John to share the rationale for Shore’s creating the firm’s new Advantage Fund, which Point C will now be the first company to become part of that investment vehicle. John also describes the early work Shore has done through special purpose vehicles to build the expertise to launch such a fund.

John, Shore has historically focused on the microcap market space, and as our companies mature, Shore’s companies were then either acquired by a larger strategic or financial investor.

This year, the firm launched its first mid-market fund. Can you tell our listeners some of the rationale for creating what we now call the Advantage Fund?

 

John Hennegan: Michael, you’re right. The legacy of Shore Capital will always be in the microcap. That is where we began and that is where we have done the most deals.

But we have not just been only microcap investors. If you look at our investments to date, while each of the companies began at less than $10 million in EBITDA several have scaled quite large. We’ve had numerous companies with more than $50 million in annual earnings. We have a handful of companies with more than $100 million in annual earnings.

And what we’ve seen is that the Shore playbook and all of the resources available, be it the Portfolio Performance Group, the growth techniques that we utilize, our investment committee process, and so forth, all of those tools have been quite beneficial for the larger companies as well. And so, as we began to discuss the idea of expansion into what became the Advantage Fund.

We stepped back and realized that based on the portfolio’s performance and based on the size of our team at Shore Capital, we thought we had the resources to make this move. But Justin Ishbia, our managing partner, rightly pointed out that we hadn’t proved it to our investors yet. And that’s where a critical inflection point comes to mind.

And in 2018, we recapitalized Southern Veterinary Partners into a special purpose vehicle. Southern Veterinary Partners had begun with Three locations outside of Birmingham, Alabama. Very run of the mill veterinary clinics, but with an incredible leader in Dr. Jay Price. That business had about $1 million of EBITDA when we started.

That company grew to $17 million of EBITDA in Shore’s microcap fund. And it was at that point that we were considering an exit for the company. When Justin Ishbia came up with the idea, why not create a fund dedicated just to that business? What if we raised a fund to continue to help that company to grow?

That’s become very popular these days, what’s known as continuation vehicles. But in that era, it wasn’t really spoken about. Well, that company recapped into the Special Purpose Vehicle and continued to flourish. Today, it’s well over $200 million of EBITDA and continues to thrive as a leader in the veterinary sector.

Similarly, in December of 2021, we created a special fund dedicated just to Brightview, our outpatient addiction treatment company. The success of that special purpose vehicle gave us the confidence to believe that we could create a fund dedicated to working with the best of the best companies in the Shore portfolio.

Now not every company is going to want to continue to progress with Shore Capital. Others may want to partner with another private equity firm because they want a new partner to work with. They want a new playbook to follow or whatever the reasons may be. But for the companies that see the benefits of working with Shore Capital and are excited about the future with Shore Capital, I believe this vehicle creates an excellent opportunity to double down, if you will, on those winning companies and allowed them to unlock their full potential while benefiting from the lessons learned of prior large companies at Shore Capital.

 

Michael Burcham: Making such a transition from one investment fund to another, even in the same private equity firm, isn’t always easy. I asked Ryan and John to share some of their thoughts in working together that made this transition a positive experience for everyone involved.

So, I want to turn our attention to how the two of you worked together on this recap to make this first deal happen for Point C into the Advantage Fund. So John, why don’t you give us some of your early thoughts on that and then I’ll have Ryan chime in as well because it takes a lot of coordination between the two of you given Ryan was the original board chair for Point C and now you are the incoming board chair and bringing this company into this new fund.

 

John Hennegan: I’ve been lucky to work with Ryan for more than 15 years at this point and there’s nobody more collaborative and there’s no better example of what it means to be a team player. Ryan’s built a great track record here but is quick to share success with everyone that’s a part of the organization and that includes me.

He was gracious enough to include me in board meetings where the two of you were helping to drive the business forward and because of attending those board meetings in advance of this partnership, really was able to hit the ground running with the Point C team. As Ryan touched on previously. Ben Frisch, the CEO, is an incredible leader and a very gracious and gregarious guy.

And so, he welcomed me with open arms as well. But part of what made Point C so attractive to the Advantage Fund is that it’s a good, clean, healthy business, right? We are looking to double down with Shore’s trophy assets. And because the business is so clean, it makes for an expedited legal process. It makes for an expedited diligence process.

Now, from the Advantage Fund’s perspective, we still need to do equality of earnings. We need to do legal due diligence and so forth. But it’s a well-trained team that’s operating at a very high level. And so, they were quite prepared for those questions. Also, because we come in with such a high level of knowledge of the business and the sector, I think it allows us to cut to the core issues right away and makes the process more efficient for everyone, but it would not have been possible without Ryan playing therapist and advisor to me and probably the management team and board of directors at various points in the process.

Ryan, what would you add?

 

Ryan Kelley: Yeah, a couple thoughts. So, I think one of the hardest things we do at Shore and private equity is decide when to sell. And it’s really hard to a third party because you’re often having less rollover, and it really feels like it’s moving out of the Shore ecosystem. So, for me, once the management team heard about the Advantage Fund and they knew that they were being considered, they were really excited about it, and it just became kind of a no brainer.

Where, you the founders and the management team wanted to work with John and the Advantage Fund team. And it was exciting for me that the business would still stay in the Shore family. So, while I’m off the board formally, and it’s not formally in my portfolio as of November 1st this year, what’s great for me is I’ll still see Ben and the team around Shore events, and I’ll still be involved, kind of, on the fringes.

So, in terms of the deal process, I think the Advantage Fund makes it easier in that sometimes when you’re selling to a third party, that third party won’t value the things we’re doing the last, you know, four or five months of the hold. So, in the last, call it four months of the hold, we were bringing on a new Chief Technology Officer in a very senior role.

We were hiring a new Head of Growth in terms of organic growth in sales and investing in new sales reps. What was great about the Advantage Fund process is John had been in the board meetings. John actually started joining our weekly calls. We do a weekly call with every portfolio company months ahead of closing.

So, one of the benefits for our Advantage Fund investors is that just the transparency into the asset you’re buying. It’s almost like you’re on the team before you buy the company. And so, we were completely aligned around, we’re going to make these investments. We could have made EBITDA higher for the last four months of the year by not hiring a CTO and a Chief Growth Officer and investing in sales reps.

But we knew the right call for the Advantage Fund was to have the technology leader in place and to invest in organic growth. So, I think that’s, that’s a big benefit, like we’re going to just hire a banker and auction the business. I think it would be ill advised to be adding $500,000 to a million dollars of new cost to the business at the end.

And so, I just think that’s just a very key part of the advantage of the partnership. I’d say on process, we agreed early on, I think in June of this year on the LOI, so that the multiple for the business. As John said, the legal process is very smooth. The QV process is very smooth. We do get a fairness opinion from investment bank just to opine on value, but last thing I’ll say is just even though this all made sense, right?

It stays in the short ecosystem, the price was right, the management team wanted to do it. It’s a good fit all around. There were some days where it’s your baby and it’s hard to let go. And so, I just think it’s a new appreciation for what all founders go through in selling a business.

 

Michael Burcham: You know, as a three-time CEO myself, I can appreciate the feeling of it’s your baby and hard to let it go. It’s fun to hear that same perspective from the lead investor as well. But fortunately, you’re letting it go to a brother who is going to keeping it close to the family. And that is all the better than it being sold to someone that you don’t get to have an ongoing relationship with.

 

Ryan Kelley: I think, Michael, it feels more like a child because we named it together.

So, I remember Michael and I, we bought Benefit Plan Administrators of Eau Claire, and we knew that that wouldn’t be the holding company name forever, given it had Eau Claire in it. And so, we engaged a branding firm to help us. I think it was probably, like, December of 2019 to help us. And they gave a bunch of options for the holding company name and Point C, the logo and the name really struck Michael and I and the founders weren’t on board initially, they didn’t like Point C and eventually we just kind of pushed it forward.

But the background on it is most people in healthcare and benefits go from point A to point B and the whole vision was going one step further. So going to Point C. So that was kind of the vision of going further and doing more, caring more. And I think that’s cool for me is to see that logo on vests and to see that, that name and brand go forward with Advantage.

 

Michael Burcham: And it’s funny, the management team now not only has embraced the name, but brags about it and you know, it’s the greatest compliment of all when they feel they created it.

 

Ryan Kelley: Michael, I can just smile.

 

Michael Burcham: Well, we did have a good time putting that together. That’s fine.

Michael Burcham: In our final segment, John talks about the bright future he sees ahead for Point C.

He shares how the company can continue to be a great partner to employers who wish to provide meaningful health benefits to their employees, but also have ways to manage the ever-escalating cost of health care delivery. So, John, let’s talk about the future of Point C and what’s next for them and the Advantage Fund. What comes to mind when I ask you that question?

 

John Hennegan: Thanks, Michael. It’s really exciting to me because I believe that the future of Point C has never been brighter. There are truly so many different directions that the company can continue to scale. It’s a testament to what you as lead independent director and Ryan Kelley as board chair have built that there’s such a strong foundation in place that I think about continued regional expansion.

Certainly, mergers and acquisitions will be a continued part of the growth playbook. We’ve really just scratched the surface on care management and care support. I think we’ll continue to see greater penetration in behavioral and mental health. As you both know, the behavioral health industry has been very productive for Shore over the years. That’s a sector that we know quite well and what we’re seeing more and more frequently. is that employers are looking for a mental health solution for their employees.

And finally, I think everyone listening to this podcast knows that healthcare costs continue to rise at an unsustainable rate. Anyone that’s a business owner or an executive knows they cannot continue to pass those costs along to employees. It’s just not sustainable. So, we need to find solutions that allow employers to tailor their benefits to their population.

 

Michael Burcham: John, you’re getting a company with a great team, great products, great reputation, tremendous financial performance, and an organization is excited about their future. And so, I know you’re going to have a lot of fun.

Well, thank you both for being part of this podcast. I’m really excited about the future of the Advantage Fund, John. And I know I’ll be talking to you on future podcasts about additional organizations to become part of the fund. And Ryan, I look forward to future opportunities to share some stories about your next investments in healthcare over 2025 and 2026.

 

John Hennegan: Michael, thank you so much for having us today. And Ryan and Michael, thank you for the incredible work on Point C. I have so much respect for what you two have accomplished and I promise we’re going to work really hard to keep Point C moving at the same trajectory. Thank you again.

 

Ryan Kelley: Thank you, Michael.

Super excited to see where Point C goes with the Advantage Fund. Great to be here.

 

Michael Burcham: This podcast was produced by Shore Capital Partners with story and narration by Michael Burcham. Recording and editing by Austin Johnson. Editing by Reel Audiobooks. Sound design, mixing, and mastering by Mark Galup of Reel Audiobooks.

Special thanks to Ryan Kelley and John Hennegan for joining me for today’s discussion.

This podcast is the property of Shore Capital Partners, LLC. None of the content herein is investment advice, an offer of investment advisory services, nor a recommendation or offer relating to any security. See the Terms of Use Page on the Shore Capital website for other important information.