On the morning of April 10, 2000, Bobby Frist and Jeff McLaren arrive at the downtown Nashville office of investment banking firm J.C. Bradford. Gathered with their wives, bankers, and other supporters, the two watch as shares of the company they co-founded 10 years prior start dancing across the electronic screens, changing hands on the public market for the first time.

An hour passes.

The CEO and president return to HealthStream’s offices. They announce the company’s public status to employees. They go back to work. It’s a day like any other.

Except on this day and the next one, with its shares hitting the market at $9, the little Internet company would raise $42 million. And in the days and weeks to follow, the bubble market that made the IPO possible would burst, causing valuations of big-idea-but-little-to-show-for-it technology ventures to plummet. Shares of HealthStream would dive from a post-IPO high of $10.13 to a low of 75 cents before the year’s end.

Now, 10 years later, the company sits at another key inflection point in its history. Increasing market acceptance of its product suite has helped HealthStream regain roughly half of its IPO value and reach a $100 million market capitalization.

And with a pair of new, key partnerships this summer, longtime leader Frist is plotting HealthStream’s continued march toward greater profit potential.

“I think we’re going to get there,” he said, “Get back to our Internet bubble valuation and get through it.”

‘Pop’

HealthStream’s IPO was one of the last before the dot-com bubble burst. The Nasdaq had peaked above 5,000 in March, dot-coms that had burned through their initial capital had begun to fold, and investors started selling shares and pulling out of once-promising ventures that were disappearing seemingly overnight.

“People the week of our IPO were beginning to get nervous about the idea of giving so much money to concepts that were unproven,” Frist recalled. “But we made it through right at the tail end of that and got our capital and started to deploy it against our ideas.”

The idea was, and still is, to help hospitals save time and money on required employee training by making coursework content available online. Subscribers take classes and complete exams at their own pace — without travel expenses and lost productivity for hospitals.

But with little content to sell to subscribers, and just a few hundred hospital subscribers to help lure content providers, growth was slow to come by. At first, HealthStream had to pay medical publishers up-front for their content and convert it into an electronic format at its own expense, all while building its software platform.

That first year, the company employed 30 in content development and conversion, compared to just a couple today, and it lost $20.2 million. The following year, it lost $19.5 million, though its revenues improved 40 percent.

It wasn’t until 2005 that HealthStream turned its first profit — $1.9 million — with 1.2 million subscribers to its learning platform.

Frist said taking “steady strides” has always been HealthStream’s strategy. The idea is that, with enough subscribers and content, the addition of more content and capabilities will drive more consumption. In the last three years, Frist said, he’s seen that spooling effect begin.

Getting noticed

Today medical content providers seek out HealthStream as a distribution channel. The company has 44 organizations providing content that reaches its more than 2 million subscribers, a number that grows by about 225,000 each year.

“It took us a year and a half to do our first million completions,” Frist said, referring to finished courses with HealthStream’s software. “We’ll do a million completions in 15 days now.”

Of course, HealthStream didn’t reach that completion rate in a matter of months or a few short years. So although the company surpassed the $100 million market capitalization mark in recent months — a minor milestone that may put the company on more investors’ watch lists — its steady growth will continue to keep institutional investors at bay, said Noble Financial analyst Vincent Colicchio.

“A lot of institutional investors, when they invest in a little company like this, they’re looking for a big bang for their investment dollars. They want to see something that can double or triple the stock. This has not been that kind of company,” he said. “It’s a steadily improving company, a good company, but not the type to provide the type of returns that professional investors are looking for in a micro cap.”

Frist, on the other hand, said HealthStream has seen increased investor interest of late – witness its stock, which has beaten the Nasdaq by 90 percentage points since the end of 2008. If his team can maintain its growth rate, he thinks it can get a breakthrough in the way the business is viewed and valued in the marketplace.

Capturing the market

Of the 5 million workers employed by America’s acute-care hospitals, 40 percent are HealthStream subscribers. Selling more content to those 2 million people is HealthStream’s most obvious growth opportunity.

For example, about 1 million people in hospitals each year receive CPR training. This year, HealthStream had 60,000 people complete the required didactic coursework through its online program. At $35 a pop, capturing all 1 million workers is a $35 million revenue opportunity.

Multiply that market opportunity by “hundreds of other opportunities that are just like that,” and the company has plenty of room to grow, Frist said.

Colicchio estimates HealthStream could generate $200 million in revenue from its learning business — compared to the $27 million it will generate this year — just by raising its prices through the addition of more content.

But Colicchio said HealthStream could expand its subscriber base, as well. He points to the company’s July partnership with the American Nurses Association, which will give HealthStream exposure to the organization’s 3 million members — a large number of potential users from just one deal.

Then there’s SimVentures, a recently launched joint venture with Norwegian simulation technology firm Laerdal Medical. It will develop and market software-as-a-service products for accelerating the development and distribution of simulation content, aid in the management of simulators and support the use of simulation training in health care curricula.

The joint venture, which is targeting early 2011 for its first product launch, is one example of the company’s strategy to grow by expanding its platform. That way, it can sell more capabilities, not just more content, to its subscribers.

But with SimVentures comes another possibility — international expansion.

International, vertical

Laerdal employs some 1,300 workers in 23 countries. According to Frist, Laerdal wants to see international distribution for SimVentures’ products, as well. It would be the first foray into international markets for HealthStream. If the experience proves favorable, it could prompt HealthStream to take the rest of its products overseas.

But that’s a longer-term strategy, far in the future, Frist notes. It’s one that HealthStream would need to develop slowly, he said, given challenges like language adoption that come with international expansion.

More near-term is HealthStream’s extension into new vertical markets. The company is eyeing the long-term care, surgery center, behavioral health and home care industries for its products. The collective 5 million to 6 million employees in those sectors would effectively double HealthStream’s potential subscriber base.

Already, the company has secured some anchor tenants in these new markets — HealthSouth in the rehab hospital arena and Psychiatric Solutions in the behavioral health market, Frist said. This summer it also introduced its course library for surgery centers.

Given these opportunities, Frist still sees the potential of a young company in his 20-year-old business.

“Even after all these years, in many ways you can see it feels like we’re just getting started,” he said.