Axios: 1 Big Thing: Spectrum Equity Shines $156M on VBA

VBA Axios

Spectrum Equity made a $156 million majority investment in cloud-based health benefits administration software company VBA.

Why it matters: The growth of self-insured plans is driving downstream complications for payers, spiking demand for administrative processing solutions, Aaron writes.

Details: Existing investor Arthur Ventures also participated in this growth equity round announced today.

  • Latham & Watkins and Triple Tree served as Spectrum's legal and financial advisers, respectively.

  • Spectrum declined to disclose financial and deal structure details.

What's next: Under Spectrum's helm, VBA will expand from its existing customer base of third-party administrators (TPAs) to government-sponsored plans and other payers, Spectrum managing director Jeff Haywood tells Axios.

  • "The company has been operating with a bootstrap mindset, with less than $10 million of outside capital to date," he says.

  • "They have not invested in a go-to-market strategy as much as they could have, so we want to develop that as well."

The intrigue: While VBA will primarily leverage organic growth, Haywood tells Axios the company could make an acquisition to add a product line or access a larger group of customers.

  • "We are optimistic about new platform opportunities to add by the end of this year and into next year," Haywood says.

How it works: VBA offers a secure, cloud-based software solution that is used by payers to support plan design, benefits administration and transaction processing.

  • The company helps payers with all aspects of their workflow, including member eligibility and enrollment, claim processing, adjudication, payment and member analytics.

  • The majority of its customers are TPAs, though "a lot of growth is coming from non-TPA payers," like commercial and government plans, and dental, vision and life insurance plans, Haywood says.

What they're saying: "VBA allows payers of all types to administrate and process claims and benefits," Haywood says.

  • "The company has good underlying macroeconomics," he adds, noting VBA was attractive because it serves a broad range of health care customers, instead of one vertical.

  • "At a time when increasing complexity of plan administration is straining current legacy systems, payers are turning to VBA to help them solve major challenges, from optimizing workflows to responding to customer needs," stated VBA CEO Michael Clayton.

The specific companies identified above do not represent all of Spectrum’s investments, and no assumptions should be made that any investments identified were or will be profitable. View the complete list of our portfolio companies. Spectrum is not responsible for the contents of any third party website linked above, and has not confirmed the accuracy of any information provided therein.