SurgiVision is a company we are following because it crosses two major themes we like, health technology and real VR. However, the company is more development stage than we expected. The ability to do surgery based on vision from MRI does seem inevitable, and their technology appears ready, but the pace of adoption is hard to forecast. Because the company wants to build a recurring revenue, supply-based business, their revenue and profit ramp will be elongated. This deal is a bit of a public/private transaction to give the company the expansion capital needed to go to market. As such, it’s going to be a risky one and will take time for fundamentals to begin to drive the stock. The company needs capital so there will be lots of pressure to get this deal done at whatever price the market will support.

Envestnet is another new financial services firm like Financial Engines (FNGN), Higher One Holdings (ONE) and Green Dot (GDOT). Simply put, their aim is to provide a wealth management platform for independent advisors that rivals the resources of captive wealth management firms. The development and maintenance of these platforms is a giant burden that many mid-market firms may not be able to shoulder on their own. This gives the company some opportunity to be the SaaS-based investment advisory solution for many firms. If so, this will take away the system/support “edge” for all except the very largest firms with proprietary products only available to their own advisors (like IPO shares for example.) It’s a competitive and fragmented space. Envestnet management sounds like acquisitions will be an important component of the growth strategy. Their recent partnership with FundQuest (BNP) is a good example of how Envestnet can carve out a position for their solution even with established financial advisory firms. Like Financial Engines, this is another company with a very visible and recurring revenue model. Envestnet has also been a profitable company for some years. Expects to be a 20%+ grower in revenue with slightly faster growth of EBITDA and profit.

Overall, I preferred Envestnet – which has a lousy name and is not as exciting a story but has a good business that architecturally fits with our long-term vision of financial services and cloud computing. Management came through very positively as well.

We will send out more analysis including our Intrinsic Value estimates to our email subscribers in the next few days.

[Disclosure: None]

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