JULY 2019 • LONGISLANDPRESS.COM 9
HUNTING UNICORNS
EYEING BILLION-DOLLAR BABIES
BY CLAUDE SOLNIK
Softheon launched in 2000 with a
pretty good business model, helping
process payments over the Web for
giants such as Sony, Gillette, JC Penney,
J.P. Morgan Chase, and AOL. But
it soon saw a possible billion-dollar
opportunity in health care.
Softheon and Perot Systems won
a contract for “RomneyCare” in
Massachusetts, helping design
and operate the first health insurance
exchange that became the
model for the Affordable Care Act
(ObamaCare). Stony Brook-based
Softheon CEO Eugene Sayan says his
company today is the largest ACA
administration and payment processing
source in the nation, serving
nearly 40 percent of consumers who
receive health insurance on federal
and state-based exchanges. The company
has processed more than $10
billion in payments since the ACA
launched and currently serves more
than 20 million people.
“It’s had incredible organic growth,”
says Joseph Campolo, managing partner
at Ronkonkoma-based law firm of
Campolo, Middleton & McCormick,
LLP, and Softheon’s counsel. “It’s not
far-fetched to believe they will be a
unicorn in the future.”
If you think unicorns are mythic
creatures, you probably haven’t
been following finance. A unicorn
company is a private startup with a
valuation of more than $1 billion.
“It refers to emerging companies
with billion-dollar valuations,”
says Alon Kapen, partner in Farrell
Fritz’s corporate practice group and
head of its emerging companies and
venture capital practice group. “Lots
of companies are valued at multiples
of a billion dollars that have been
around for many years.”
It’s not easy to identify companies
with such a high valuation, because
private companies rarely publicize
financials.
Most officially become unicorns only
after much smaller funding rounds
at a ratio valuing them at $1 billion.
“Once the deal closes, they typically
provide data on their rounds,” Kapen
says.
Lyft, Uber, WeWork Labs and Airbnb
reached valuations of more than $1
billion long before they became a
glimmer in Wall Street’s eye. Softheon
hasn’t rushed to raise money
lately, as it grows organically.
“There’s no inventory, no cost of
goods,” Campolo says of firms like
Softheon with the potential to break
the billion-dollar barrier. “I think the
way health care is going, it’s probably
the number one field to produce new
unicorns.”
Softheon’s rapid growth came as the
company reinvented itself, tapping
into health insurance marketplaces
serving government employers, and
payment processing.
Venture capital funds, Kapen says,
have “raised enormous amounts
of money to invest in late-stage
companies and late-stage rounds of
funding.”
Companies in the past often went
public earlier, due to Securities and
Exchange Commission rules requiring
that they report to the SEC after
they have 500 or more shareholders.
That increased to 2,000, allowing
them to grow on the vine before being
plucked by public markets.
“Most are in Silicon Valley. A bunch
are in Manhattan and Boston,” Kapen
says of unicorns. “Crowdfunding
has attempted to address the geographical
disparity between Silicon
Valley, New York City and Boston,
and everywhere else.”
Listings of unicorns these days show
hundreds, with many in the United
States, as well as a large herd in
China.
“I have never seen so much money
out there and such high valuations
on companies,” Campolo says. “My
expectation is we’re going to see
more unicorns in the future, making
them less rare.”
Meanwhile, Softheon recently
signed a three-year agreement with
AARP to design and manage an
Internet-based health and wellness
platform to serve 38 million AARP
members.
As Campolo sees it, the value
threshold for this mythic monetary
beast may rise. Investors already
can hunt “decacorns” valued at $10
billion and “hectocorns” valued at
$100 billion.
“Five years from now, a billion-dollar
evaluation won’t be a unicorn anymore,”
Campolo says. “I think it’ll be
five billion at that point. That’s how
fast things are going right now.”
IN THE NEWS
“My expectation is we’re going to see
more unicorns in the future, making them
less rare,” says Joseph Campolo.
/LONGISLANDPRESS.COM
