NOTES

PAGE 1: CLEVELAND CLINIC MAIN CAMPUS, ~2008

Dr. Jain grew up in Indiana and says, “I always loved technology.” He started a small educational software company when he was in high school. He went to medical school and became a physician (internal medicine) at Cleveland Clinic, but he loved the possibility of having a positive impact on hundreds, thousands, etc. of patients through technology. He became Sr. Executive Director of IT at Cleveland Clinic. He talked with people at NIH and other government entities about his patient records idea(s), but he also knew he’d ultimately prefer to create a for-profit company. He knew that in order to commercialize he needed to move from a government project-type approach towards a for-profit, privately funded route.McHale was poking around Cleveland Clinic for a while looking for a technology or idea he could commercialize. Spinning out a technology would take (much) more than simply asking around and hoping someone would send a technology his way. It would take money, confidence, vision, energy, persistence, and probably most of all, hard-driving, deal-making experience and skills. According to Dr. Jain, McHale rode his motorcycle to at least one meeting and arrived carrying his helmet in one hand. McHale rides a Ducati motorcycle. The two prior companies McHale started were Everstream (co-founded with Lougheed) and McHale and Associates. Partly from the proceeds of sales of these companies, McHale formed a seed investing fund, 23Bell. McHale wanted to be actively involved in the companies in which his investment fund invested. Cleveland Clinic Innovations had spun off 30 companies in the early 2000s and had spun off five in 2008 alone. However, the commercialization office saw hundreds of invention disclosures (203, to be exact). Suffice it to say, much work goes into turning an invention disclosure into an operating company.Lougheed co-founded Everstream with McHale in 1999. At various points in his professional life, Lougheed has worked at Deloitte & Touche; National City Bank, where he worked with its online consumer banking group; and KeyBank, where he led the development of key.com. In addition to being co-founder of Explorys, he also is president and chief strategy officer there.

PAGE 2: AUSTIN VENTURES OFFICES // NBC STUDIOS // WASHINGTON, D.C., ~2011-2012

The Explorys team believed “cared-for lives” was an important phrase because it emphasized that these were more than data points—they were lives receiving care. By aggregating many lives receiving care, providers could understand their provision of care more holistically and offer it more efficiently. Explorys believed that in focusing on the critical mass of cared-for lives, they could offer customers a deep understanding of patient care throughout the US and opportunities for being more efficient. Thus, the $150 million in annual revenue consists of $3 per cared-for-life per year: $1 from providers who wanted vital information on trends and issues in patient care, $1 from payers, and $1 from pharmaceutical companies.According to research (& interviews), 23Bell led the initial investment round of $1 million in October 2009, the investment that successfully spun off the technology from Cleveland Clinic, which also participated in that round. In August 2010, Sante Ventures and Cleveland Clinic Innovations invested $2.55 million in Explorys as part of the company’s Series B round. Austin Ventures led the company’s $11.5 million Series C investment round in May 2011; other Series C participants were Flare Capital Partners, and existing investors Sante Ventures and Cleveland Clinic Innovations. In June 2012, Heritage Group provided “additional capital and strategic partnership” in a Series D round, with other participants including Austin Ventures, Sante Ventures, and Flare Capital Partners.

IBM Watson, IBM’s artificial intelligence technology, played against Jeopardy champions Brad Rutter and Ken Jennings in 2011. The performance showed the nearly unrivaled power (skill, speed, etc.) of Watson’s natural language search capability. After this win, IBM began commercializing Watson and decided healthcare would be one of Watson’s major applications. In late 2012, as part of a provision of the Affordable Care Act, the Center for Medicare Services established a hospital Value-Based Purchasing program that offered financial incentives to hospitals to improve their outcomes, quality of care and patient satisfaction. This program subjects a percentage of hospitals’ Medicare reimbursements to patient satisfaction and outcome quality measures such as hospital readmission rates. To track patient outcomes, quality of care, and satisfaction, hospitals would need much better access to their masses of patient records. This was (and is) an Explorys specialty.

PAGE 3: EXPLORYS OFFICES IN CLEVELAND, ~2012-2014 The database(s) Explorys built needed to comply with many rules and regulations, especially privacy laws. All records were painstakingly de-identified and scrubbed of personal information in many ways. Developing a database and protocols that checked all the privacy and other boxes was a Herculean task.Whereas EMRs help hospitals improve care of individual patients, Big Data helps hospitals close pervasive gaps in care for patient populations. Using a Big Data platform, hospitals can determine when, for example, readmissions are high or patients are missing vaccinations.IBM Chief Executive Virginia “Ginni” Rometty told executives in 2013 that she hopes Watson will generate $10 billion in annual revenue within 10 years. Watson can be used to help clinicians make better diagnoses. With Watson, IBM has developed the first large-scale, integrated clinical decision support system that can process both structured and unstructured information to suggest patient diagnoses. Watson’s artificial intelligence can answer two primary reasons for physician error: 1) premature diagnosis and 2) failure to consider all possible diagnoses. Watson can be the physician’s assistant to recall information in medical literature as well as help analyze the literature.

PAGE 4: EXPLORYS OFFICES IN CLEVELAND, 2015 Among other things, the co-founders appreciate the realities that come with IBM being well capitalized. It has about $140 billion in market cap. By one measure—patent awards--IBM is among the most innovative companies in the United States. Research shows that IBM was awarded an average of 21 patents per day in 2015 ytd (as of June) alone. Explorys is a founding member of Watson Health. The acquisition price is undisclosed to the public, but sources knowledgeable about the transaction have confirmed that it was not too far off the economic model shown on the slide.Cleveland is considered by some people to be the Hospital Capital of the World. It is headquarters of Cleveland Clinic, a top 5 healthcare institution, a force in healthcare venturing and commercialization, and an innovator in healthcare delivery and wellness, and is also the location of University Hospitals Case Medical Center, plus MetroHealth and Veterans Administration hospitals. These hospitals and others, plus the databases of IBM Watson & Explorys, are now helping the region grow into the title given it by (among others) the Explorys team--Healthcare Data Capital of the World!

George S. Dively Entrepreneurship Award

The George S. Dively Entrepreneurship Award is granted annually by the Harvard Business School Club of Northeastern

Ohio to an individual or company in the region.

The award’s criteria include that the company must achieve rapid growth, have solid financial metrics, and reach a position of significance in its market. Financial metrics include revenue

size, revenue growth, and profitability (Or, if not currently profitable, demonstration of rapid customer acquisition and a

profitable business model in the longer term).

George Dively, an HBS graduate and entrepreneur who led Harris Corporation to remarkable growth, endowed the award because he believed entrepreneurs were the future of American

business - he wanted to make sure that the Northeast Ohio business community celebrates its entrepreneurs and their

success.

Congratulations to Explorys for its entrepreneurial success, and for being named the Dively Award winner of 2015!

Graphic Corporate History printed & produced in 2015 by The Braun Group for Harvard Business School Club of Northeastern Ohio

© 2015 Bryn Adams and Rebecca Braun