A Buffalo-based firm that operates a private health insurance exchange system for small businesses has received $18.2 million in venture capital funding from two top firms, virtually doubling the private equity money that it has received in the last five years.
Liazon Corp. said Tuesday that it has closed on the additional investment led by Bessemer Venture Partners and Fidelity Biosciences, along with follow-up capital from existing investors Bain Capital Ventures and Buffalo-based Rand Capital SBIC.
The new money completes the company's second round of venture funding since 2007. Together with an initial $4 million investment to start the company and $12.7 million invested by Bain, Rand and others a year ago, the company has now raised $35 million.
"We were not actively looking to raise a large amount of money, but we had some folks in the market observing what we were doing and seeing the trend around more choice for employees and the conversation around health care reform," said Liazon co-founder and CEO Ashok Subramanian.
Liazon, which has already doubled revenues and tripled its employee base to 75 in the last year, said that it will use the cash to expand the reach of its Bright Choices benefits exchange to serve more companies nationwide, while also developing new products.
In particular, plans call for adding 100 to 150 jobs, with 75 percent of them in Buffalo. Subramanian said the company will be hiring technology workers, including six to eight software developers, as well as customer service positions, project managers and other technical roles. About 80 percent of the company's current employees are in Buffalo, with only some salespeople located elsewhere.
Founded in 2007 by Subramanian, chief strategy officer Alan Cohen and former executive Timothy Godzik, Liazon runs an online benefits "store" for small and midsize businesses. The exchange is designed to help employers save money on health care costs by setting predictable budgets while allowing employees to buy better coverage for health, dental, vision, life and disability benefits.
Specifically, the exchange gives employees access to an array of health care plans, health savings and flexible spending accounts, and other insurance benefits, as well as wellness,telemedicine and even pet insurance products and services. Employees and their families can buy the benefits that best meet their needs.
"The time has come for people, not companies, to choose their own benefits," Subramanian said in a news release announcing the investment.
The company, which already supports more than 2,000 businesses and tens of thousands of individuals nationwide, serves businesses with 10 to 5,000 workers, while also managing insurance programs for Chambers of Commerce, business associations and other partners. Local clients include Mod-Pac, Merchants Mutual Insurance Co., Evans Bancorp and the Buffalo Niagara Partnership.
Besides its offices in Buffalo, Liazon has operations in New York City and Waltham, Mass.
Subramanian said Liazon will now sell to larger companies, both in its current markets and other parts of the country. It has clients in 23 states but focuses much of its effort on New York, New Jersey, Pennsylvania, Connecticut, Maryland and California.
In addition, Liazon plans to push into the Southeast, including Georgia and Florida, as well as into other Western states.
All of its sales have come through direct face-to-face or telephone contacts through salespeople in Buffalo and New York City. But the company has been getting inquiries from insurance companies and brokers who want to resell its service on a private-label basis. And it already has relationships locally with Univera Healthcare and HealthNow New York.
So while it will continue direct sales, it will also develop partnerships with large national and regional carriers, including Hartford, Conn.-based Aetna, Minneapolis-based UnitedHealth Group, New York-based MetLife, Coventry Health Care of Bethesda, Md., and MVP Health Care of Schenectady. It's also negotiating arrangements with some large national or regional brokerage firms.
"Liazon is a true innovator in a space that has lacked innovation," said Stephen H. Kraus, a partner at Bessemer who has joined the Liazon board of directors.
Bessemer is a global venture capital firm with offices in California, Massachusetts, New York, India and Israel. More than 100 companies that it has funded have since gone public, and among its investments are LinkedIn, Allscripts, Skype, Staples and Yelp.
Bain Capital Ventures is the venture and growth affiliate of giant Boston-based private equity firm Bain Capital.
Fidelity Biosciences is part of money manager and financial services provider Fidelity Investments.