Mainebiz

V O L . X X I I N O. V I I I A P R I L 1 8 , 2 0 1 6 26 A t a time when the state, the country and the world are sepa- rating into small and large, rich and poor, entitled and disentitled entities with a quickly disappearing middle class, two Maine fi nanciers and innovators are calling for what seems a tall task: build- ing a "middle class," or group of mid- sized, scalable Maine companies that can create and spin off new businesses and, more importantly, draw in skilled work- ers who will stay in state, around them. "Maine continues to experience a lack of scale in enterprises that are worthy of signifi cant investment," says Bob Martin, managing partner of Strategic Equity Partners LLC, a Brunswick-based consultancy that helps companies grow with projects like business plans, due diligence, turnarounds, interim leadership and obtaining funding. He also is on the board of the Maine Center for Entrepreneurial Development and is former president of the Maine Technology Institute. But there are some notable excep- tions that he says can serve as strong examples, citing two Portland-based companies, Putney Inc., which recently saw a $200 million exit, and Kepware Technologies, with recently was bought for $100 million. " ese are two signifi cant exits," says Martin. "By and large, most Mainers didn't have a clue about either company. Between both of them you've got almost a quarter of a million dollars worth of refi nancing that took place which will absolutely and signifi cantly distort the statistics on equity funding in the state of Maine." He added that both compa- nies were led by very serious, smart individuals focused on building their companies quietly and in markets that were largely outside the state. "And neither company falls into that sexy, early-stage venture stuff that most people think about when we do Maine Startup and Create Weeks and all this entrepreneurial stuff ," Martin says. "It's all generally serendipitous based upon the fact that we don't have enough scale in terms of the kinds of industries that are in demand in today's world in what you see in other areas." "We need to fund companies that are scaling to be mid-sized in the $20 million to $100 million revenue range," agrees John Burns, managing director of the Maine Venture Fund. "If we spawn a bunch of these we'll have natural clus- ters." He added that Maine probably has only 25 such companies now. "We need to grow the small, fi ve-person compa- nies to $5-10 million," he says. Putney, a veterinary product com- pany, in mid-March agreed to be sold to Dechra Holdings US Inc., an Overland Park, Kan., subsidiary of UK-based Dechra Pharmaceuticals Plc., for $200 million. Putney's net revenue was $49.6 million in 2015 and it had 63 employ- ees as of last November. Safeguard Securities Inc., which had a 28% pri- mary stake in Putney before the acquisi- tion and had invested $14.9 million in the fi rm since September 2011, expects to realize $58 million in initial cash pro- ceeds, almost a 3.9 times cash-on-return and a 42% internal rate of return. And in December 2015 Portland software development company Kepware said it was being bought by PTC Inc., of Needham, Mass., for $100 million. Kepware, founded by Corson "Corky" Ellis in 1995, develops software that lets disparate industrial machinery communicate. It posted $20 million in revenue in 2015 and sells its prod- uct in more than 120 countries, with most sales overseas. It employs at least 115 and has been growing quickly, but remains unknown to most Mainers. More money, targeted products Martin's and Burn's remarks bear out when looking at the state of Maine's innovation economy within the Maine Development Foundation's "Measures of Growth 2016" report released in mid- April. Maine's total percentage of gross domestic product spent for R&D in 2011, the most recent year available, was $535 million, which is about 1% of the state's GDP and about $1 billion short of the 3% benchmark, according to the report. at ranked Maine 21 st among U.S. states. However, the report said that Maine's total spending on R&D would reach 3% of the GDP by 2020. Maine's percentage of total R&D funding from the private sector, at 58%, also trailed the 81% nationally and 80% in New England. Universities and colleges had 27% of R&D spending. However, the 15% from Maine's nonprofi t sector was well above the 5% for New England and 2% for the country. P H O T O / T I M G R E E N WAY Innovators, want money? Scale up Startups in Maine need to more quickly become mid-sized companies B y L o r i V a l i g r a F O C U S Bob Martin, managing partner at Strategic Equity Partners LLC, outside the Wishcamper Center on the USM campus in Portland.

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