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$1.3 billion deal leads acquisition-heavy Q4 for VDO-backed exits

January 04, 2018
By: Mark Skinner

Most of the baker’s dozen of fourth quarter exits SSTI reviewed for publicly-sponsored venture investments reveal local employment likely to remain in place after the deals close, regardless of the deal structure. During the past three months, companies that 20 venture development organizations (VDOs) had invested in participated in at least 10 acquisitions, with seven resulting in operating subsidiaries under the new parent firm. Also in the mix for the quarter are one initial public offering (IPO), one sale of intellectual property and one leveraged buyout. Several of the deal structures suggest that regionally-based funds might have made the difference for those startups making it all the way to exit. Reaching that coveted milestone can be a tricky path, as we discover in some of the stories below. SSTI gleaned the information from Crunchbase, Pitchbook and company websites.

Diion Technologies acquired Magaw, developer of a video laryngoscope system on Dec. 28, 2017, for an undisclosed amount. Based in Fort Worth, Texas, Magaw had 51 employees at the time of acquisition and is expected to continue as an operating subsidiary of Diion. Exiting investors in the deal include TECH Fort Worth, which provided the first external equity investment prior to 2012 through its accelerator/incubator program.

Connect Healthcare, a reputation management company focused on healthcare enterprises, became an operating subsidiary of Doctor.com on Dec. 13, 2017. Founded in 1992, the Decatur, Georgia, company had 27 employees at the time of the acquisition. The Advanced Technology Development Center was the sole exiting investor in the deal.

Previous SBIR grantee Practice, an interactive video learning platform developer based in Wyndmoor, Pennsylvania, became an operating subsidiary of publicly traded Instructure for $17.3 million on Nov. 22. Among the 14 selling investors were the Washington D.C. accelerator 1776, the Jefferson Education Accelerator, and Ben Franklin Technology Partners of Southeastern Pennsylvania.

Philadelphia-based Arcadian TelePsychiatry became an operating subsidiary of MYND Analytics with its Nov. 13, 2017 acquisition for an undisclosed amount of money. Arcadian TelePsychiatry offers a healthcare platform focused on mental health services. The sole investor exiting with the deal’s closure is Ben Franklin Technology Partners of Southeastern Pennsylvania, which provided two rounds of seed funding to the firm in 2015 and 2016.

The Advisory Board Company, a subscription-based technology and consulting services firm, became an operating subsidiary of Optum through a Nov. 1, 2017 acquisition priced at $1.3 billion. Headquartered in Washington D.C. with eight regional offices throughout the U.S., Chennai and London, the Advisory Board employed more than 3,800 employees at the time of the acquisition. Exiting investors because of the deal are Ann Arbor Spark and the Nashville Capital Network, both of which invested in a product development project for the Advisory Board Company in 2011 when it employed only 1,600 people and had a book value of $464 million.

MemberClicks acquired Carmel, Indiana-based Weblink through a leveraged buyout on Nov. 2, 2017. The company employed 112 people at the time of the acquisition. Among the selling investors at the time of the LBO was Elevate Ventures, which participated in a later-stage Series B2 round in 2015.

VCET, a Burlington, Vermont, incubator, was one of a dozen early investors in Bridj, a private shared-ride bus service to/from Boston, when the company went out of business in April 2017. In October 2017, the Sydney, Australia company, Transit Systems, acquired the technology for an undisclosed amount to implement the service in Sydney.

Occipital acquired the Gainesville, Florida, company, Paracosm, for an undisclosed sum on Oct. 25, 2017. Spun out of the University of Florida Foundation and employing 16 people at the time of its acquisition, the new operating subsidiary of Occipital had developed a handheld lidar scanner for construction use. Exiting investors included Space Florida, the University of Central Florida-Office of Research & Commercialization, and the Florida Institute for the Commercialization of Public Research.

On Oct. 12, 2017, OrthoPediatrics held its IPO under the NASDAQ ticker KIDS and raised $52 million. The orthopedic implant manufacturer received funding in 2009 from the Northeast Indiana Innovation Center and Elevate Ventures, which were exiting sellers with the IPO. It also received a $2 million grant from the state of Indiana in 2009. More than 60 people are reported to work for the Warsaw, Indiana, company.

Also on Oct. 12, 2017, Natel Energy acquired Upstream Tech for an undisclosed amount. Less than one year old when acquired, the Syracuse, New York, startup is developing fresh water conservation applications incorporating machine learning and satellite imagery. Two exiting investors include the Massachusetts Clean Energy Center and MassChallenge.

Workflex Solutions became an operating subsidiary of publicly traded NICE Systems with an acquisition for an undisclosed sum on Oct. 11, 2017. Based in Cincinnati, Ohio, the 40-employee Workflex offers SaaS intelligent employment technologies to optimize workforce management. Exiting investors with the deal include CincyTech, which had participated in several rounds of funding for the company since its founding in 2009.

The Houston Technology Center participated along with eight other investors in the leveraged buyout of London-based DataGenics by DrillingInfo, based in Austin, Texas. Closed on Oct. 4, 2017 for an undisclosed sum, DataGenics offers “software services for enterprise data management and business process automation intended to help organizations maximize data value through automation and data discovery,” according to Pitchbook.

Evergreen Enterprises of Virginia, a private-equity backed company based in Richmond, Virginia, acquired Baltimore-based Bambeco, an internet retailer of sustainably sourced home décor, on Oct. 1, 2017 for an undisclosed sum. Exiting investors with the deal include the Maryland Venture Fund and TCP Ventures, managed by TEDCO.

venture dev orgs