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Startup to acquisition: Experts explain what it took to make young NH companies ripe targets

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07/29/2018 | 04:05am EDT

July 29--Startup to acquisition: Experts explain what it took to make young NH companies ripe targets


New Hampshire Union Leader

July 28. 2018 11:03PM

Mike Welts, vice president of marketing at Plexxi, holds the company's hardware in Nashua in 2015, when the company received the Product of the Year Award from the New Hampshire High Tech Council. In May, Hewlett Packard Enterprise said it was buying Plexxi, which has about 100 workers. (DAVID LANE/UNION LEADER FILE PHOTO)

* Mike Cote's Business Editor's Notebook: PillPack went from startup to $1b sale in 5 years

Financial figures alone don't make an up-and-coming company ripe for acquisition.

"Sure, growth in revenue and in customer count is good and valued," said Matt Rightmire, managing director of Borealis Ventures, which invests in attractive Granite State companies, including Dyn, Newforma and Scribe -- all of which have been acquired by new owners since late 2016.

"Many times, though, it is about the creation of a product or service that is approaching the market in a different, more valuable way and gaining sufficient awareness among customers and the industry that this new way is better," Rightmire said.

"In other words, solve a problem, build the structure and the team to do it well and consistently at scale, and the industry will take notice," he said.

Within the past two years, New Hampshire has watched several companies that grew here get sold to well-known companies like Amazon and Oracle.

"Despite the overall trend in lower business starts, I think in many ways New Hampshire has developed a core of real innovative entrepreneurial activity that is greater than at any time in its past," said Dover economist Brian Gottlob.

Just this month, Inc. magazine posted a story praising Manchester's business community under the headline: "Oracle and Amazon are Investing in Manchester. Maybe You Should Be There Too."

Amazon announced in June it was buying PillPack, which pre-packages medications with the times to take them, reportedly for around $1 billion. Oracle announced in November 2016 it was buying Manchester-based Dyn, which helps move traffic on the Internet, reportedly for between $600 million and $700 million.

Each employs hundreds of workers in Manchester's Millyard.

Jeremy Hitchcock, a co-founder of Dyn, explained the company's success.

"We had a problem that we wanted to solve for ourselves and customers -- making high speed Internet more useful when we first started," Hitchcock said in an email. "When you build great companies, you have great options. If you get the customer value side right, the rest of it takes care of itself."

Hitchcock, who was the largest individual shareholder and on the board of directors when Dyn was sold, was asked about how a company knows when to sell itself.

"There's no easy answer on timing," Hitchcock said. "Great companies typically have multiple options all the time and some unsolicited offers have a special alignment around the future of customers and employees which is an accelerant to the mission."

Rightmire said business development is key to the state's healthy economy.

"We are big believers that successful acquisitions of New Hampshire companies are critical events to fuel the next chapter of the ecosystem," he said.

Plexxi's hardware and software products enable data to travel more efficiently through a system that reroutes traffic based on immediate needs, says the Nashua company, which has been acquired by Hewlett Packard Enterprise. (ALLEGRA BOVERMAN/UNION LEADER FILE PHOTO)

"First, it provides the next generation of entrepreneurs with tangible evidence that a successful startup can be built and scale here," Rightmire said.

"Second, companies that are successfully acquired often serve as the 'seed trees' for the entrepreneurs of the future," he said. "Individuals that have played a crucial role in one success many times go on to start something else.

That second point was echoed by Joshua Cyr, director of education and accreditation at Alpha Loft, which assists early-stage businesses.

He cited Cabletron Systems in Rochester, co-founded by former Gov. Craig Benson in the 1980s. The company spawned a web of people who went on to start or work at other New Hampshire companies.

Enterasys, one of four companies spun off from Cabletron in 2001, sold for $180 million in 2013.

Michael Welts, who once worked for Cabletron, served as vice president of marketing for Nashua-based Plexxi. In May, Hewlett Packard Enterprise said it was buying Plexxi.

"Plexxi has approximately 100 employees, and most work out of the Nashua office," HPE spokeswoman Kate Holderness said last week. "We have no changes planned for that office at this time and expect to continue to hire in New Hampshire."

Rightmire said angel investors are providing more early capital to technology companies than in the recent past.

"In terms of early stage technology startups, I expect we will continue to see more companies germinating, populated with high quality teams," he said.

Rightmire also said he expects "those technology companies that have established presences in New Hampshire through acquisition to continue to invest in support of those acquisitions, adding resources and people."

Cyr said he works almost exclusively with very young companies.

He said companies gaining assistance from Alpha Loft can take 10 years to produce a newsworthy breakthrough.

People wanting to start new companies need to understand three things: the value of their product, who their potential customers are and how will they make money.

"You're trying to solve someone's pain," Cyr said.

Cyr's advice is not to tell people specifically what they are trying to invent but to ask potential customers about their problems and what they need.

"No one tells you that your baby's ugly," he said.

Business Technology


(c)2018 The New Hampshire Union Leader (Manchester, N.H.)

Visit The New Hampshire Union Leader (Manchester, N.H.) at www.unionleader.com

Distributed by Tribune Content Agency, LLC.

© Tribune Content Agency, source Regional News

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Financials ($)
Sales 2019 30 776 M
EBIT 2019 2 716 M
Net income 2019 1 363 M
Debt 2019 9 003 M
Yield 2019 3,12%
P/E ratio 2019 14,42
P/E ratio 2020 11,44
EV / Sales 2019 0,95x
EV / Sales 2020 0,96x
Capitalization 20 213 M
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Spread / Average Target 23%
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Antonio Fabio Neri President, Chief Executive Officer & Director
Patricia Fiorello Russo Chairman
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Archana Deskus Chief Information Officer
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