Recuro Health, a Dallas-based digital health company, may look at developing dealmaking relationships in a year as it looks towards an eventual exit, said Michael Gorton, founder.
The company, which has raised USD 70m in total funding, sees an exit happening within three to five years but may begin establishing investment banker and legal counsel relationships in 12 months to assist with its M&A strategy, said Gorton. Recuro wants to position itself to be ready when opportunities arise, he explained.
Founded in 2021 by Michael Gorton, the former founding CEO of Teladoc [NYSE:TDOC], Recuro Health offers a suite of virtual healthcare services including primary care, behavioral health and urgent care, according to the company. It has 2,500 corporate customers including brokers, third-party administrators, managed care organizations and insurance providers, he said.
Recuro would welcome investment banker and legal counsel approaches next year, he said. The company currently works with a local law firm, but in the event of an exit or Series C round, Recuro would hire a national law firm, he added. Finding potential acquisitions, for example, could spark a Series C round, he said. It has made three buys to date. Last year, Recuro acquired Competitive Health, an Irvine, California-based supplier of healthcare network access, and WellVia, an Irving, Texas-based virtual health provider. Terms were not disclosed for either transaction. In 2021, Recuro acquired MyLifeIQ, a Dallas-based biotechnology firm, for an undisclosed amount. Recuro is not looking at any deals right now, he said.
Recuro, which has annual recurring revenue north of USD 20m, expects to double its revenue and lives covered every year, he said. It is on target to reach six million lives by year-end, he said. Recuro is tracking towards being cash flow positive within 12 months.
While exit milestones are difficult to predict, Gorton said Recuro would like to grow from covering 3.5 million lives to covering 15 million to 20 million lives, a 5x growth rate, before exiting in the 2026 to 2028 timeframe, he said. Recuro would like to see a 5x to 10x revenue multiple at the time of an exit, he added.
Recuro had a post-money valuation on its USD 47m Series B round in April of USD 200m. Gorton anticipates valuation cycles to “be on our side of the fence,” by the time Recuro is ready to exit.
Potential suitors could include companies looking to dive deeper into healthcare such as Walgreens [NASDAQ:WBA], Best Buy [NYSE:BBY], Verizon [NYSE:VZ], Microsoft [NASDAQ:MSFT], Apple [NASDAQ:AAPL] or Samsung [NASDAQ: SSNLF], he noted.
Recuro’s mission is to transition the U.S. healthcare system from a reactive, disease-focused model to a proactive care approach, according to the company. Unlike other traditional virtual care solutions today, Recuro has created a Digital Medical Home to enable customized care that meets patients’ needs no matter their location or circumstance.
Its investors include ARCH Venture Partners, the Flippen Group, GPG Ventures, 4D Capital, among others.