VC Injects $20M Into Medem

Hoping to pump some much-needed credibility into the e-health information space, Medem recently raised $20 million in its first round of venture capital funding.

Private equity firm J.H. Whitney was the sole participant in the Series A round. The firm was also an early-stage investor in Metis LLC, a medical Intranet services organization founded by Ed Fotsch, the chief executive at Medem.

San Francisco-based Medem was created with a $6 million seed investment from a collection of seven medical societies, including the American Medical Association (AMA), the American Psychiatric Association (APA) and the American Academy of Pediatrics (AAP).

“We have a great working relationship with Ed,” said John Hockin, vice president at J.H. Whitney. “We’ve built a company from scratch with him before and had great success with it.”

What is curious about that history, however, is that Metis was purchased in 1998 by Healtheon, a branded organization that already operates a personal physician Web page program remarkably similar to what has been proposed by Medem.

“The physician office Web sites are going to be our main event,” Fotsch said. “Our goal is to have the best patient-physician product on the planet because we know that the Internet is not dying for another average health site, and because the papers are full of abuses in e-health.”

He added that he believes Medem’s association with, and access to exclusive content from, its founding medical societies will help push the fledgling firm above the established e-health fray.

“Almost all of the health information on the Web currently comes from third-party sources, so people really aren’t sure what information is reliable and what isn’t,” Hockin said. “We want to re-establish credibility when it comes to editorial content and re-establish the relationships patients had with their doctors before managed care came along.”

Medem will initially raise revenues through advertising and sponsorships, with plans to later receive a significant portion of its monies from physicians who maintain Medem-hosted sites.

The company is not currently in the venture capital market, but Hockin said that there is a strong possibility that an additional round will be raised sometime within the next year. He also said that the company was not opposed to an eventual public offering, even though the affiliated medical societies are non-profit entities.