Larry Augustin is a true Linux pioneer. His first company, VA Linux, was founded in 1993 to sell workstations running Linux and other open-source programs. The company rocketed to stardom with a 1999 public offering and a $9 billion valuation. That was the high point. Within two years, it was out of the hardware business and changed its name to VA Software. The $33 million company now provides open-source software and support.
These days, Augustin's timing looks better. His new company, Medsphere, is focused on small and midsize hospitals. Its software automates all of a patient's records, from lab tests to prescriptions. "It's a huge comprehensive system that covers all the clinical aspects of healthcare," says the 42-year old Augustin, who discovered the Aliso Viejo, Calif. outfit in 2002, while working as a venture capitalist for Azure Capital Partners.
The company's founders, brothers Scott and Steve Shreeve, were doctors doing their residency at a VA hospital in Salt Lake City. The hospital used a free government program, called VistA. When the Shreeves entered private practice, they missed the software and couldn't find anything like it. Under the Freedom on Information Act, the brothers petitioned the federal government for the source code. Six months later, a truck pulled up, dumping all of the source code for VistA on their front steps. The two stripped it down to essentials and listed it on the Internet as a free open-source program for hospitals.
When the brothers came to Augustin for funding, he soon saw the appeal, deciding to try his hand at building a company again. The software is ideal for hospitals with fewer than 300 beds -- about 80% of those in the U.S.
While hospital-management software is already available, it can cost millions of dollars, pricing many smaller facilities out of the market. Medsphere makes money by installing and supporting VistA, which is about a quarter of the cost of proprietary systems.
Medsphere has raised $13 million to date. It's being paid to roll out the software at seven hospitals in Oklahoma and three in Texas. "There's a lot more acceptance," says Augustin of open source today. "Ten years ago you had to be a lot more of an evangelist. You had to convince companies why they cared. Now they are coming to us."