Connecture Secures $17.5M in Private Equity Funding to Expand Health Insurance Marketplace Platform

Connecture, an online health insurance marketplace platform based in Brookfield, Wisconsin, recently secured $17.5 million in private equity financing, led by Francisco Partners of San Francisco, with participation from Chrysalis Ventures. Francisco Partners now holds 56% of Connecture’s common stock, and its guidance is expected to further strengthen the company’s management capabilities.

Connecture’s business focuses on developing various SaaS products that connect health insurance plans, payers, and government agencies, thereby assisting individuals in selecting appropriate health insurance coverage. “Connecture plays a pivotal role in the distribution and development of health insurance plans. Our technology platform enables users to more easily identify the best health insurance options, complemented by favorable insurance policies.” Another key function of the company is to help healthcare-related organizations grow and retain their membership base, while simultaneously enhancing operational efficiency and reducing technology costs.

However, for Connecture, the political turbulence of 2016 created uncertainty in the U.S. health insurance landscape, resulting in an unfavorable operating environment. In its fourth-quarter earnings announcement, Jeff Surges, President and CEO of Connecture, pointed out that despite adding new customers and successfully navigating another annual U.S. public health insurance enrollment period, the company still faced numerous challenges.

“Uncertainty surrounding the Obama-era Affordable Care Act has created market headwinds affecting our growth,” Surges said in a statement. He further noted that the company implemented “significant cost reductions” in the fourth quarter to offset these losses, and expects conditions to improve shortly.

Following this financing round, they will also add a senior executive from investor Francisco Partners to their board of directors. For Connecture, this funding plays a significant role in helping them execute their 2017 business plan and develop the following business segments: private health insurance programs, employer-sponsored health insurance programs, and Medicare Advantage plans, which currently dominate the market.

The company stated that the new leadership team will focus on generating profits from health insurance services. As the broader market environment gradually improves, Connecture is poised to achieve greater profitability through successful customer service.

Connecture, originally named SimplyHealth, was founded in Atlanta in 1999. Over the nearly 18 years since its inception, the company has undergone several transformations: in 2012, it relocated to Wisconsin; in 2014, Connecture announced its initial public offering (IPO).

Private placements after going public usually indicate that a company is short on cash. Connecture reported a fourth-quarter loss of $6.2 million, or 32 cents per share, far missing some analysts’ expectations, as some had anticipated earnings of 18 cents per share for the quarter. The company’s current market capitalization stands at approximately $31 million.

 Connecture Raises Nearly $132 Million in Total Funding

From 1999 to the present, Connecture has raised funds a total of nine times, spanning from seed-round financing to post-IPO equity offerings. Following this latest round, the company’s cumulative fundraising totals nearly $132 million.

Connecture M&A Activity

Connecture has, to date,Three M&A Transactions. In July 2016, it acquired Connected Health, a company that provides employees with online health insurance purchasing services; in January 2013, it acquired DestinationRX, a company specializing in prescription drug price comparisons and healthcare plan comparisons; in February 2011, it acquired Insurix, a company providing technology outsourcing services for the financial and insurance industries.

Source: http://www.mobihealthnews.com/content/online-health-insurance-marketplace-connecture-gets-175m-expand-coverage-markets