Keith Neilson: blown away by the size of the US healthcare market (pic: Terry Murden)
Edinburgh businessman Keith Neilson tells TERRY MURDEN how he has his finger on the pulse of the lucrative US healthcare market
Like many other offices these days there is plenty of elbow room for the handful of workers dotted around the expansive open plan floorspace at software company Craneware’s Edinburgh headquarters. Little evidence, in fact, that this is the hub of a business underpinning the financial performance of more than 2,000 hospitals and other healthcare institutions across the United States.
“It gets busier,” says the receptionist. “It depends what day you come in.” It’s a story told across the country since flexible working became the norm. Keith Neilson, Craneware’s founder and CEO, says it’s also the case that two-thirds of its 750 staff are in the US “where they are doing a lot of the face-to-face work with clients”.
Craneware is unusual by having its head office in Scotland but all of its business overseas. It provides software that enables the privately-run US health service to function more efficiently. It serves 40% of US hospitals which spend half a trillion dollars every year on operational and administrative costs.
Asked what they think of having a company from Scotland working to improve their balance sheets, Neilson says Craneware has two offices in the US and staff spread across the country. As for the report card, he tells a story of one hospital that would have been forced to close its labour ward if it had not made the savings generated by Craneware.
“We have returned $1.5 billion to the sector through improvements to their systems,” he says. “So we are making a difference. It isn’t sexy stuff, but we do get cool results.”
Next April, Neilson will mark 25 years since he set up the business with his friend from school days Gordon Craig who is also still at the company. He admits that this must make him a veteran of the technology sector. It certainly means he is one of the longest serving CEOs in any industry, which includes 16 years as head of what is a stock market quoted firm.
“I’m still passionate about the business and excited about starting the day,” he says, expressing no desire to step aside. The company is currently valued at £540 million on the Alternative Investment Market and, during a more bullish period, peaked at $1 billion, making it one of the Scottish unicorns that was never given the recognition it deserved.
Neilson’s interest in software goes back to his schooldays, dabbling in coding and creating his own game. He studied optoelectronics at Heriot Watt and joined a graduate enterprise programme that he really enjoyed and gave him a taste for running his own business. He applied for the graduate scheme at IBM only to be be told on the day of his interview that the scheme was being closed down. He ended up working for the firm as a contractor “which meant doing much the same thing”.
A recruitment business followed and the idea for Craneware came about while he was in the US with his American girlfriend, later his wife, attending a Thanksgiving dinner.
“I met a healthcare consultant and was blown away by the size of the market. I wrote it up for my MBA.”
The consultant was inputting data on the sector manually. Neilson wrote a software programme for her and a working partnership developed that saw her later join Craneware, that he and Craig launched in 1999.
‘We’re returning money to US hospitals’ says Keith Neilson (pic: Terry Murden)
They raised money from Bank of Scotland and the Lothian Investment Fund and set about targeting hospitals, winning contracts and building a decent revenue stream. The company, based in the Tanfield offices in Canon Mills, was floated on the AlM in 2007, when the consultant sold her stake and departed.
“You could say we owe her a debt of gratitude, but we also provided her with a healthy exit,” says Neilson.
Being on the AIM has given the company greater visibility, he says, though he has mixed feelings about the market’s ability to track the company’s progress.
“We have driven up revenue and Ebitda but the market cap is half its peak,” he says. “Some of it is within our control, but there is very little liquidity just now.
“A reason for being a public company is to get M&A capital but I am not sure the London market will supply that for a little while.”
He says the market needs to change to help small and mid-cap companies, including the regulations around research which is no longer so widely spread and leaves retail investors at a disadvantage.
The market also provided him with a lesson in dealmaking when in the summer of 2020 his attempt to buy a business was scuppered in the final minutes when it was snatched by a rival.
“The investment banker had been playing the two of us off each other,” he says. “It made me look a bit naive and I had to take it on the chin because our exclusivity had run out. But we eventually took business off them anyway.”
He was able to learn from that exercise a year later when he made a successful $400m (£282m) cash and shares swoop on Sentry Data Systems, a Florida-based provider of SaaS solutions which simplify the complexity of pharmacy procurement. It also provides business intelligence and consulting services.
It added a customer base of 10,000 hospitals, pharmacies and clinics, including more than 600 US hospitals.
“Sentry has been a great move for us,” says Neilson. “We were able to scale the business quickly.”
As for the UK, the company may not operate here, but he says it benefits indirectly from the US healthcare service.
“It has so much money flowing through it for new techniques,” he says. “Drugs are trialled in the US and then go into other countries. If we can help keep these US hospitals open then there is a global benefit.”
Occupation: CEO, Craneware
Education: Balerno High School,Heriot Watt University (degree in general science)
Career highlights: IBM (contractor), Checkpoint Securities (sales and marketing), ran a recruitment business; set up Craneware in 1999.
What was your first taste of business life?
When we were 10 or 11 years old me and Gordon (Craig) wrote computer games and sold them around the school and neighbourhood in Ratho. We learnt programming from lists of codes in a magazine.
Where did the name Craneware come from?
There are two stories. One is that I was in the Malt & Hops with Gordon watching the Karate Kid when there is a crane kick to win a fight. The other version is that it takes the first letters of Craig and Neilson. It’s probably a bit of both.
What do you find frustrating?
A lack of pace. I like people to be thinking and coming up with new ideas.
Ireland is setting up a sovereign wealth fund. Why can’t Scotland do that?
If you could invite anyone to a fantasy meeting or dinner party who would you choose?
Robert Burns, ‘he was a bit of a lad’
Billy Holliday, a poignant voice in the midst of huge cultural change in America
and to lighten things possibly Robin Williams and/or Billy Connolly