ONE signs ANOTHER deal - the second in 8 days

The biggest initial investment we have ever made is Oneview Healthcare (ASX:ONE) - our Tech Pick of the Year for 2021.

ONE is a health tech company that provides hospital patients a “virtual care and digital control centre” at their bedside to deliver the best possible patient experience during their stay.

Health continues to be a focus of big tech like Apple, Google, Amazon. A global pandemic has seen significant growth in online, telehealth need and acceptance.

We invested in ONE because we liked its existing sales traction in hospitals around the world, on top of that we REALLY liked its newly launched cloud offering. ONE’s cloud offering could potentially accelerate its revenue using a “land and expand” sales strategy, as hospitals globally rush to digitise after the pandemic.

Today ONE announced their SECOND cloud deal in eight days - this time with Northern Health in Melbourne - another important proof point that ONE’s cloud strategy is working.

In the last 8 days we have seen that ONE is equally adaptable in public and private hospitals and materially increased speed to revenue from ONE’s new cloud offering.

Today’s announcement is pretty light on information and is silent on the number of beds signed in the new contract so we can’t make a back of the napkin revenue calculation like we did for last week’s deal.

What we DO know is that Northern Health has signed a contract for ONE’s Cloud Start product. Cloud Start is ONE’s new fast & easy to deploy basic version that allows hospitals to quickly see the value of ONE’s tech and then expand to more beds and more features, like integration to clinical apps (= more revenue).

Think of ONE’s Cloud Start like when you install an app on your phone and then start making in-app purchases because you like the app and want more features... 90% of the battle for tech companies is getting that app on your phone to start with...

So the key thing we are watching for next will be if Northern Health likes ONE’s Cloud Start product and decides to expand the number of beds OR purchase extra features.

This is important because if Northern Health likes Cloud Start enough to expand spending with ONE after initial signing, chances are that other hospitals around the world will too... and then we can start multiplying.

So IF ONE can prove that hospitals will spend more after adopting Cloud Start AND IF ONE can then get hundreds of hospitals on to the quick and easy Cloud Start product, then we think ONE’s valuation will be in the Billions of dollars instead of sub $200M where it is today...

OK, a quick cold shower needed after that prediction...

We’ve had two very positive early signs in the last week BUT we are still early in watching ONE’s cloud strategy unfold.

Today’s Cloud Start deal is very encouraging and the first step in many proof points we are looking for with ONE.

WATCH OUT FOR: More Cloud Start Deals... More Revenue expansion from existing deals:

QUICK REMINDER: What is ONE and why we invested

ONE is a health tech company that provides hospital patients a “virtual care and digital control centre” at their bedside to deliver the best possible patient experience during their hospital stay.

We called ONE our Tech Pick of the Year because its advanced patient experience technology was in the right place at the right time as hospitals around the world rush to digitise and adapt telehealth after COVID-19.

When we first invested in ONE, the key de-risking events we were looking for was for ONE to sign up contracts for its new cloud offering that was developed to make ONE easier to sell, install and use.

ONE’s cloud offering was launched on March 31st this year.

In the last 8 days we have see two cloud contracts announced by ONE - an expansion of an existing customers (Epworth) and signing of a new customer (Northern Health)

REMINDER: What is this “ONE Cloud offering” you keep talking about?

ONE has been selling enterprise software to hospitals for many years...

Selling tech to hospitals is like selling to governments, airports or utilities - it takes ages, even years - it's very hard to get your foot in the door as these are complex organisations and are resistant to change.

You have to deal with the CEO, IT department, stakeholders etc and it’s usually a 12 to 18 month sales cycle... so you might as well go big and try to sell a huge amount of tech to make the time and effort worthwhile, which makes the deals expensive for the organisations too.

BUT - if you manage to convince these organisations to buy your tech they become VERY long term ‘sticky’ customers (because they are resistant to change).

Prior to our investment, the fact that ONE already grinded out $7.8M of Annual Recurring Revenue from 9,259 hospital beds was one of the key reasons that attracted us to make such a large investment in ONE - they have proven they can execute complex enterprise sales to large hospitals.

Aside from investing in and writing about ASX stocks on the internet, a couple of us spent many years in tech startups. One of them is going very well - so we are confident that we know a good thing when we see it, which is why Next Investors invested so much in ONE and are holding for the long term.

ONE’s new cloud platform has removed the need for an on premise server and allows ONE to make new sales way faster and easier for hospitals.

It’s the equivalent of now being able to turn on a tap to get drinking water at your house instead of having to build your own water well and piping system in your backyard.

ONE’s new cloud platform allows them to launch a selling technique called “land and expand” and we will be watching closely over the next few months for early signs of success.

“Land and expand” basically means to LAND a customer by making a fast, small sale that is easy for the customer to execute (everyone loves fast and easy) and after the new customer sees how awesome the product is and they are happy, they can EXPAND it through their organisation (this is where the increased revenue comes in) - it’s a win-win for everyone.

To use the previous analogy, hospitals can now quickly and easily sample some delicious water out of a tap before they decide if they like it enough to use it everywhere - where before they had to build a water well to even test if they liked the water.

Today’s deal with Northern Health was a LAND deal.

Here is our ONE back story

On the 8th March 2021 we first invested in ONE as Tech Pick of the Year 2021 - read here.

A few days later we explained the 10 reasons why we chose ONE as our Top Tech Pick - read here.

We commented on ONE’s cloud offering launch and how they can now adopt a land and expand strategy.

In late April we analysed ONE’s most recent quarterly report - we are keeping a close on revenue growth and cost stability.

In May we covered a webinar given by a Top 10 US hospital on its use of ONE and the benefits it is getting - watch the webinar and read our take here.

What we are watching out for next

As mentioned earlier, the key reasons we invested in ONE are because its advanced patient experience technology was in the right place at the right time as hospitals around the world rush to digitise and adapt telehealth after COVID-19.

When we first invested in ONE, the key de-risking events we were looking for was for ONE to sign up contracts for its new cloud offering that was developed to make ONE easier to sell, install and use.

Here are the our investment milestones for ONE, we are long term holders waiting for key value adding events (like today's news) the key events are show below:

As per our current investment strategy we haven’t yet sold a share and are waiting for a few more cloud deals before we consider de-risking the investment and free carrying,