St. Louis Park-based Novu lands $20 million in equity funding

Novu, a fast-growing consumer-engagement company used by health insurers and providers to get patients to take control of their health, has raised $20 million in its first round of equity from outside institutional investors.

The St. Louis Park-based firm, formed in 2011 by three brothers with a background in customer loyalty programs for other industries, helps patients use online-and-offline customized health-improvement measures that are advocated by doctors and insurers. These low-cost health-enhancement steps stress prevention, designed to avert expensive-to-treat diseases.

"We drive the engagement," said Novu CEO Tom Wicka. "We don't take your blood or provide gym access. We take on the branding of our [35] clients—the payers[insurers] and providers.

"The health care system has not been successful in moving past a transactional relationship with the consumer, resulting in low rates of engagement and lack of trust. We try to build trust between you and clients such as Medica, UnitedHealthcare and Delta Dental of Minnesota. Our purpose is to get consumers to take action [through simple health-enhancing measures]."

The two investors are Noro-Moseley Partners, an Atlanta-based venture firm focused on early-stage companies in healthcare IT and services, and Memphis-based SSM Partners, which invests in software, technology and health care firms.

"The Novu team has combined consumer marketing expertise with healthcare expertise to build a platform that is unmatched in the industry," Casey West of SSM, who is joining Novu's board of directors, said in a prepared statement. "Novu's ability to engage with health plan members in a positive way and assist them in closing gaps in care really caught our attention."

Allen Moseley of Noro-Moseley, who is also joining Novu's board, added: "We believe the company's comprehensive solution will continue to drive significant business growth, innovation, and industry leadership."

Experts say consumers taking control of their health is critical to controlling health care costs attributed to diseases brought on by lifestyle choices, such as adult diabetes and heart conditions, or failing to manage conditions that can spiral out of control and lead to expensive hospitalization, surgery and drugs.

Wicka said he and his brothers remain the majority shareholders. The business model is starting to prove itself, he said. The $20 million investment will finance growth and investment.

The company grown from a handful of employees and no revenue a few years ago to what is expected to exceed $20 million in 2015 revenue and up to 100 employees over the next year.

Health care providers increasingly will be reimbursed by private insurers and Medicare, the government program that covers the elderly, not for the number of procedures but for outcomes.

"The purpose of Novu is to engage consumers," Wicka said. "Action and outcome is highly valued and the [payers] are moving toward pay-for-performance versus the old ways paying for services. The payers know that if an individual takes certain beneficial examples, using engagement, trust and incentives, your health outcomes will be better than somebody who doesn't.

The $20 million equity raise is significant for a small company and falls in a hot area of health care providers and insurers trying to become more efficient through investments in software and also firms that try to empower consumers to take control of their own health through prevention and wellness activities.

"There are a lot of entrepreneurs in this space trying to find the best way to bridge the gap between health systems and consumers and Novu looks like an early success so far," said Ryan Baird, director of marketing at Minnesota Life Science Alley, an industry trade group.

Young Minnesota companies raised $91.6 million in venture capital in the fourth quarter and $368.4 million in 2014, the best year since the Great Recession. The funding was led by medical technology companies, a traditional Minnesota strength.

Although there are indications that the year is off to a solid start, Mark Scholtes a partner with PwC in Minneapolis who tracks venture-funding, said the first quarter numbers have yet to be tallied.