The digital health funding market has been way up and way down over the past five years. As this roller coaster starts to settle down, one thing is clear to Randy Bolyga: that the industry is shifting toward prioritizing profitability over aggressive expansion.
Bolyga is the CEO of medical software company RXNT, which he founded in 1999. The company began by selling electronic prescription software but has since grown to provide a full suite of tools for things like practice management, billing and scheduling.
RXNT is “a bootstrap company,” according to Bolyga. He began RXNT by taking out two $150,000 Small Business Administration (SBA) loans, and he paid them back within three years.
“We have been a cash-positive, no-debt company since then — and we’re up somewhere between $60-75 million in revenue this year and 50% EBITDA,” Bolyga declared.
He thinks one major reason for the company’s success is the fact that it has never relied on venture capital.
In the early 2000s when RXNT was fresh onto the health tech scene, many of the company’s competitors were going after venture capital and bringing in multi-million dollar funding rounds, Bolyga noted.
Many of these companies had “crazy burn rates,” he added. In other words, these companies were spending huge amounts of money very quickly — often tens of millions of dollars a year — in an effort to grow fast.
“That’s kind of the formula that VCs put in front of you,” Bolyga remarked.
He emphasized that healthcare is a complex, entrenched industry — and that success requires a strong understanding of workflows and customer needs.
Venture capital investors also often misunderstand the healthcare market, assuming an innovative feature is enough to win customers, Bolyga pointed out. He critiqued flashy AI tools that aren’t integrated into provider workflows, saying they will struggle to gain adoption.
He believes in a “tortoise over hare” approach — slow, steady and fiscally conservative growth. He said he has seen too many companies “crash and burn” because they chased rapid expansion without sustainable business models or a deep understanding of the market.
Bolyga did, however, acknowledge that venture capital can make sense for startups in niche markets that need rapid scaling — but he warned that it should be the exception, not the norm.
Overall, Bolyga sees an industry-wide shift from growth-at-all-costs to prioritizing profitability and sustainability. Even investors are now demanding more discipline and accountability on the spending side, with startups now having to show they can hit specific goals and build reliable revenue streams before pursuing big funding rounds, he said.
Photo: phive2015, Getty Images
