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A flurry of deals Several Oregon companies land lucrative new funding rounds
Thursday, July 29, 2010
By Erik Siemers
Portland Business Journal
When Elemental Technologies Inc. on Tuesday announces a new venture capital round exceeding $7 million, it will continue what has been a lucrative summer for Oregon technology companies.
Elemental, a Portland-based developer of video processing technology, will join Jive Software Inc., Puppet Labs Inc., Advanced Inquiry Systems Inc., Azuray Technologies Inc. and Home Dialysis Plus among Portland-area firms unveiling sizable new capital investments since mid-June.
Combined, the companies will have raised more than $107 million in venture capital and private equity, continuing what is shaping up to the state’s most successful year of fund-raising since 2007, when companies collected more than $302 million from venture capitalists.
According to the National Venture Capital Association, Oregon companies raised $106.8 million in the first two quarters of 2010, data that doesn’t include this week’s announcements from Jive and Puppet Labs that would add $35 million to the tally.
That’s a 135 percent increase from last year, when companies yielded just $32 million after two quarters, and the state’s highest first-half total since raising nearly $170 million in 2007.
The success is mirrored nationally, where the $11.4 billion in first half venture capital investments marks a 49 percent increase over 2010.
Emily Mendell, vice president of strategic affairs at the Washington, D.C.-based Venture Capital Association, said new investments are the product of an improved market for initial public offerings and acquisitions, allowing venture funds to cash in on previous deals.
"That translates into more room in the portfolio for new investment,” Mendell said.
Nationally, the market has been most favorable to clean technology and biotech, with software — particularly companies focused on social media or mobile technologies — not far behind.
That’s certainly played out in Oregon, where the list of Oregon-related companies to receive the largest sums are players in biotech ($50 million to Home Dialysis Plus), social media ($30 million to Jive) and semiconductor testing ($10 million to Advanced Inquiry).
"It’s a good thing for Oregon,” Mendell said. "You have a diversity of industries.”
The companies receiving looks from investors are leaders in their given fields of emerging technologies, said Christopher Lochhead, chief strategy advisor at Jive, the social networking software developer that employs more than 150 in Portland, where it kept its corporate headquarters before relocating to Palo Alto, Calif.
"I think what’s going on broadly is we’re at the beginning of a new innovation cycle in technology,” Lochhead said.
But that doesn’t mean that the market has suddenly become an easier one in which to raise capital.
Sam Blackman, CEO of Elemental Technologies, noted that the single commonality among the companies raising capital is that most have had success doing it before.
Elemental’s round, which could reach $9 million based upon Securities and Exchange documents filed by the company last month, will be its second major round of venture capital, following a $7 million Series A round two years ago.
"I haven’t found fundraising to be any easier right now,” Blackman said. "It’s very, very hard if you’re less well-known or have less of a track record to get funds right now.”
That’s why Blackman said new companies looking for capital are better off hunting for smaller amounts from angel investors. It’s a less-threatening environment, he said, where companies can hone their pitches before taking them to more scrutinizing money managers.
That’s the path Portland-based marketing software developer eROI Inc. is following.
CEO Ryan Buchanan until now has been the sole owner of eROI, but is now in the early stages of a $2 million capital raise.
Buchanan said the goal is to raise the initial $750,000 from angel investors over the next two months, which would enable his work force to grow from 41 to 50.
The remainder of the round would come from venture capital firms, institutional investors or larger angel groups, hopefully within the next nine months.
The round would be used to further develop the company’s recently launched e-mail marketing workflow platform, Switchbox.
With Switchbox, eROI’s revenue could grow from this year’s projected $4.5 million to $7.5 million next year. And Buchanan has recently assembled the company’s first board of directors, featuring an assortment of executives with a pedigree of developing profitable, high-growth software companies.
"It’s a really compelling story,” Buchanan said. "There’s been interest from VCs, but it’s a long process.”
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