Zipnosis looks to expand after raising $17 million in venture capital

Zipnosis, a years-emerging health-technology firm that allows medical providers to conduct economical "virtual" visits with patients, has raised $17 million in its first formal round of venture capital.

The Minneapolis-based company touts itself the first "virtual care solution" that enables health systems to launch their own "branded" virtual-care clinics online or mobile with their own medical professionals in timely consultations designed to help patients treat themselves, pursue an in-clinic visit or seek other medical help, as their conditions necessitate.

"We've pioneered virtual care as a [software] platform and we're raising the money to try and cement that position," Zipnosis CEO Jon Pearce said last week. "We're about 30 people today and we're going to scale up, double our staff fairly quickly, sales and marketing."

The $17 million round closed recently and will be announced Monday. .

It was led by venture-investor Safeguard Scientifics of Pennsylvania, with funding also from Ascension Ventures, a subsidiary of the nation's largest Catholic health care system. Minneapolis-based Fairview Health Services, Hyde Park Venture Partners, Arthur Ventures, Waterline Ventures and Omphalos Venture Partners, which earlier had made smaller investments that totaled about $3 million, also participated in the first formal round of equity capital.

Zipnosis produces a "white label" software platform that allows outfits such as Fairview, Group Health of Seattle and 15 other current health care customers to "care for more patients under their own brand name and without adding staff," Pearce said. "Patients are happier to be 'seen' sooner without having to step outside their home or go to a waiting room."

In a prepared statement, Al Wiegman, a managing director at Safeguard Scientifics who will join the board of Zipnosis, said: "Virtual visits are an increasingly popular way for clinicians to diagnose and treat patients … and we have the potential to produce better patient outcomes through more rigorous clinical protocols. We're excited to partner with Zipnosis and support its disruptive platform as it works to expand affordable access to health care."

Zipnosis, founded six years ago, struggled as it first tried to launch the product as a direct-to-consumer diagnosis service that didn't involve a medical center in the conversation.

"We lived and died trying to pivot from direct-to-consumer to virtual care as a platform [for health care partners]," Pearce said. "We changed our business model as the market matured. And the past couple of years have been about how fast do we want to grow. It's time to hit the gas.

"We see rapid growth in the industry because every health care system, we believe, is going to have to adapt a virtual care solution, some virtual access to their patients, over the next three to five years. There are 5,000 hospitals out there that need a solution. It's a multibillion-dollar proposition. This is a fundamental change and opportunity to go after."

At North Memorial Health Care, which has its own labeled version of the Zipnosis platform, a patient submits symptoms and answers questions for about five minutes and the information is reviewed by a nurse practitioner or doctor who makes a diagnosis and treatment plan through the integrated electronic medical records. It may be to do nothing, get a prescription based on symptoms and health history, or come into the clinic for further evaluation.

Zipnosis also is part of a growing "health IT" trend in Minnesota health care companies, once known exclusively for medical-technology firms.

A number of information-technology firms have emerged, designed to increase the use and mobility of electronic records, focus on preventive services and achieve efficiencies within what is considered a still-inefficient U.S. system.

And they are capturing millions in early-stage investor money.

"We may be the Silicon Valley of keeping people out of the hospital," quipped Casey Allen, an entrepreneur who organized last fall's "Health Rising" conference.

LifeScience Alley, the Minnesota trade group, said recently it has 30 members from the field of health IT, up from two a few years ago.

"Minnesota is the ideal spot for us to incubate and become the leader in virtual care," Pearce said. "Our health care savviness is exceptional and health care partners such as Fairview and North Memorial have been pivotal early partners."

The management team at Zipnosis includes:

• Chief Operating Officer Scott Booher, previously a principal of HIT Reboot, a health IT consultancy, and a former senior vice president in technology at Ascension Health and Medica Health Plans.

• Kevin L. Smith, a one-time family nurse with a doctorate in nursing clinical systems. He also was an early employee of MinuteClinic, a pioneer in placing primary-care clinics in retail locations.

Neal St. Anthony • 612-673-7144 • neal.st.anthony@startribune.com