Flychain newsletter for October 2023
Financing our largest provider yet, building a lockbox banking infrastructure, and getting closer to our monthly goals.
Highlights from October 2023
Financing our largest provider yet
We began financing our largest provider to date, which is a lab services business based in California. We were able to secure the provider an initial line of credit of $500K. We’re currently developing a healthcare-specific lockbox banking infrastructure, which would enable us to increase the provider’s credit limit to $1M.
If you’re curious to learn more about secured lending in healthcare and why the lockbox infrastructure that we’re building gives our capital partners peace of mind to increase the provider’s credit limit, you can learn more here. Long story short: our banking infrastructure gives our capital partners access to the provider’s insurance revenue before the provider can access it (cash dominion, akin to a traditional factoring transaction). This is a highly preferable way for lenders to collect repayments.
We’re excited about this development for multiple reasons:
With a credit limit of $1M, we’ll get closer to hitting our monthly principal goals for the next few months.
The healthcare-specific lockbox banking infrastructure that we’re building in collaboration with our partner bank, Synovus, gives our capital partners peace of mind to increase credit limits for all providers that opt-in.
This means that we’ll be able to work with larger providers who need millions of dollars in financing as opposed to the smaller businesses we’ve worked with so far that need hundreds of thousands of dollars.
Given our strong network in the SME lending world, we are exploring whether we can spin out this healthcare-specific lockbox banking infrastructure to other lenders to help de-risk their healthcare portfolios.
Final contracting phase with HealthRev Partners
We’re in the red-lining phase with HealthRev Partners, which is an RCM in home health. HealthRev Partners has been growing aggressively in home health and we’re excited to partner with them, as their CEO sees the value of qualifying all of their customers with a resting line of credit to fuel the growth of their clients while also providing a backup in case cash flow issues arise. We’re excited to give an update on this front in next month’s newsletter.
Learnings from independent pharmacist conference
Ethan attended NCPA’s annual convention in Orlando, which is the largest gathering of independent pharmacists. We went into the conference with the hypothesis that independent pharmacists need working capital, as they have large inventory and drug expenses that might put a strain on their cash flow.
Coming out of the conference we learned that our hypothesis was indeed correct with a few caveats: while independent pharmacists do experience cash flow issues due to bulk-purchasing of inventory and cash drags caused by insurance reimbursement delays, these pharmacies actually receive a decent portion of their revenue from cash pay. This is in contrast to the providers we have focused on to date (behavioral health, infusion therapy, and home health), who are almost entirely insurance driven.
The other important learning was the proliferation of acquisition financing in the independent pharmacy space given consolidation trends. There might be an opportunity to partner with lenders who offer acquisition financing but not working capital support to their portfolios.
Given our learnings from this conference, we have decided not to focus on the pharmacy space for now. While we’ve confirmed independent pharmacies have regular cash flow issues (much like all small businesses), it’s not as pressing as our other target verticals given the significant cash pay nature of pharmacies. In addition, the GTM motion we follow at Flychain (i.e. partnering with RCMs and EMRs) is less relevant in the pharmacy space, as these channel partners are not nearly as core to their day to day operations.
Key metrics
As a reminder, we’ve decided to track the following two metrics every month:
Principal
The principal represents the total amount of funds that our capital partners have advanced to our providers in the given month.
Number of providers actively financed
This represents the number of unique providers that we are actively financing in the given month.
Goals
We’ve set ourselves the goal of increasing the principal and number of providers actively financed by 30% month over month between June 2023 and June 2024. You can see our monthly goals detailed here.
Goal vs Actual for October 2023
Graphs since December 2022
Reflecting on goals
This month we set a new record for both principal and number of providers financed. While we fell just short of our goal, we are confident that we’ll be able to hit next month’s goal once we increase the lab services business’s credit limit to $1M.
To support our growth beyond that, we’ll need to focus 100% on getting the channel partnership with HealthRev Partners firing as quickly as possible. In addition, we’ll focus our efforts on continuing the channel partnership pipeline expansion plan detailed in last month’s newsletter, that is:
Attending more regional conferences.
Working with our newly hired virtual assistant to greatly increase our LinkedIn outreach to C-suite and partnership-level employees at target channel partners.
Signing referral agreements with healthcare super-nodes.
Individuals or organizations that are very well connected in the healthcare space that can give us warm intros to channel partners.
Continuing to grow our healthcare network.
Financials
Monthly burn
$50,000
Bank balance
$2,174,076.35
Runway
3.6 years
Asks
We’d love to be introduced to the following types of companies, which are ideal channel partners for us:
EMRs & Practice Management software
Revenue Cycle Management platforms and Billing platforms.
Other healthcare companies that are interested in offering working capital to their clients.
Healthcare providers (any vertical).
Feel free to circulate our partner page to anyone who might be interested in chatting with us.
Till next month!